NEW COKE: A CLASSIC BRAND FAILURE (CASE STUDY)

Think of a brand success story, and you may think of Coca-Cola. Indeed, with nearly one billion Coca-

Cola drinks sold every day, it is the worlds most recognised brand. Yet in 1985 the Coca-Cola

Company decided to terminate its most popular soft drink and replace it with a formula it would market

as New Coke. To understand why this potentially disastrous decision was made, it is necessary to

appreciate what was happening in the soft drinks marketplace.

In particular, we must take a closer look at the growing competition between Coca-Cola and Pepsi

Cola in the decades prior to the launch of New Coke. The relationship between the archrivals had not

been a healthy one. Although marketing experts have believed for a long time that the competition

between the two companies had made consumers cola conscious, the firms themselves rarely saw it

like that. Indeed, the Coca-Cola company had even fought Pepsi Cola in a legal battle over the use of

the word cola in its name and lost. Outside the courts though, Coca-Cola had always been ahead.

Shortly after World War II, Time Magazine was already celebrating Cokes peaceful near conquest of

the world. In the late 1950s, Coke outsold Pepsi by a ratio of more than 5 to1. However, during the

next decade Pepsi repositioned itself as a youth brand. This strategy was a risky one as it meant

sacrificing its older customers to Coca-Cola, but ultimately it proved successful. By narrowing its

focus, Pepsi was able to position it brand against the old and classic image of its competitor. As it

became increasingly seen as the drink of the youth Pepsi managed to narrow the gap.

In the 1970s, Cokes chief rival raised the stakes even further by introducing the Pepsi Challenge -

testing consumers blind on the difference between its own brand and the real thing. To the horror of

Coca-Colas long standing company president, Robert Woodruff, most of those who participated

preferred Pepsis sweeter formula. In the 1980s Pepsi continued its offensive, taking the Pepsi

Challenge around the globe and heralding the arrival of the Pepsi Generation.

It also signed up celebrities likely to appeal to its target market such as Don Johnson and Michael

Jackson (this tactic has survived into the new millennium with figures like Britney Spears and Robert

Williams (providing more recent endorsements). By the time Roberto Goizueta became chairman in

1981, Cokes number one status was starting to look vulnerable. It was losing market share not only to

Pepsi but also to some of the drinks produced by the Coca-Cola company itself, such as Fanta and

Sprite. In particular the runaway success of Diet Coke was a double-edged sword, as it helped to

shrink the sugar cola market. In 1983, the year Diet Coke moved to number three position behind

standard Coke and Pepsi, Cokes market share had slipped to an all-time low of just 24%.5

Something clearly had to be done to secure Cokes supremacy. Goizuetas first response to the "Pepsi

Challenge" phenomenon was to launch an advertising campaign in 1984, praising Coke for being less

sweet than Pepsi. The television ads were fronted by Bill Cosby, at that time one of the most familiar

faces on the planet, and clearly someone who was too old to be part of the Pepsi Generation. The

impact of the effort to set Coca-Cola apart from its rival was limited. Cokes share of the market

remained the same while Pepsi was catching up. Another worry was that when shoppers have the

choice, such as in their local supermarket, they tended to plumb for Pepsi. It was only Cokes more

efficient distribution that kept it ahead. For instance, there were still considerably more vending

machines selling Coke than Pepsi. Even so there was no getting away from the fact that despite the

proliferation of soft drink brands, Pepsi was winning new customers.

Having already lost on taste, the last thing Coke could afford was to lose its number one status. The

problem, as Coca- Cola perceived it, came down to the product itself. As the Pepsi Challenge had

highlighted millions of times over, Coke could always be defeated when it came down to taste. This

seemed to be confirmed by the success of Diet Coke which was closer to Pepsi in terms of flavour.

So, in what must have been seen as a logical step, Coca-Cola started working on a new formula. A

year later they had arrived at New Coke. Having produced a new formula, the Atlanta based company

conducted 200 000 taste tests to see how it fared. The results were overwhelming. Not only did it taste

better than the original but people preferred it to Pepsi as well. However if Coca-Cola was to stay

ahead of Pepsi-Cola it couldnt have two directly competing products on the shelves at the same time.

It therefore decided to scrap the original Coca-Cola and introduce New Coke in its place.

The trouble was that the Coca-Cola Company had severely underestimated the power of its first

brand. As soon as the decision was announced, a large percentage of the US population immediately

decided to boycott the new product. On the 23rd of April 1985, New Coke was introduced and a few

days later the production of the original Coke was stopped. This joint decision has since been referred

to as the biggest marketing blunder of all time. Sales of New Coke were low and public outrage was

high at the fact that the original was no longer available. It soon became clear that Coca-Cola had little

choice but to bring back its original brand and formula.

We have heard you, said Goizueta at a press conference on 11 July 1985. He then left it to the

companys chief operating officer to announce the return of the product. Keough admitted: "The simple

fact is that all the time and money and skill poured into consumer research on the new Coca-Cola

could not measure or reveal the deep and abiding emotional attachment to the original Coca-Cola, felt

by so many people. The passion for original Coca-Cola - and that is the word for it, passion - was

something that caught us by surprise. It is a wonderful American mystery, a lovely American enigma,

and you cannot measure it any more than you can measure love, pride or patriotism". In other words,

Coca-Cola had learnt that marketing is much more than the product itself. The majority of the tests

had been carried out blind, and therefore taste was the only factor under assessment. The company

had finally taken Pepsis bait and, in so doing, conceded its key brand asset: originality.

When Coca-Cola was launched in the 1980s it was the only product in the market. As such, it invented

a new category and the brand name became the name of the product itself. Throughout most of the

last century, Coca-Cola capitalised on its original status in various advertising campaigns. In 1942,

magazine adverts appeared across the United States declaring The only thing like Coca-Cola is

Coke-Cola itself. It is the real thing. By launching New Coke, Coke-Cola was therefore contradicting

its previous marketing efforts. Its central product hadnt been called new since the very first advert

appeared in Atlanta Journal of 1886, billing Coca-Cola as the "New Pop Soda Fountain Drink,"

containing the properties of the wonderful Coca plant and the famous Cola nuts.

In 1985, a century after the product was launched the word people associated with Coca-Cola was

new. This was the company with more allusions to US heritage than any other. Fifty years previously,

the Pulitzer Prize winning editor of a Kansas newspaper, William Allen White had referred to the soft

drink as the sublimated essence of all America stands for - a decent thing, honestly made, universally

distributed, and conscientiously improved with the years. Coca-Cola had even been involved in the

history of US space travel, famously greeting Appollo astronauts with a sign reading Welcome back to

earth, home of Coca-Cola.

To confine the brands significance to a question of taste was therefore completely misguided. As with

many big brands, the representation was more significant than the thing represented, and if any soft

drink represented new it was Pepsi, not Coca-Cola (even though Pepsi is a mere decade younger). If

you tell the world you have the real thing you cannot come up with a new real thing. To borrow the

comparison of the marketing guru Al Ries, it is like introducing a new God." This contradictory

marketing message was accentuated by the fact that, since 1982, Cokes strap line had been Coke is

it. Now it was telling consumers that they had got it wrong, as if they had discovered that Coke wasnt

it, but rather New Coke was instead. So despite a tremendous amount of hype which surrounded the

launch of New Coke (one estimate puts the value of New Cokes free publicity at over US$10 million),

it was destined to fail.

Although Coca-Colas market researchers knew enough about branding to understand that consumers

would go with their brand preference if the taste tests were not blind, they failed to make a connection

that these brand preferences would still exist once the product was launched. Pepsi was, perhaps

surprisingly, the first to recognise Coke-Colas mistake. Within weeks of the launch, it ran a TV ad with

an old man sitting on a park bench, staring at a can in his hand. "They have changed my Coke, " he

said clearly distressed. "I cant believe it,"

However when Coca-Cola re-launched its original coke, redubbed Classic Coke for the US market,

the media interest swung back in the brands favour. It was considered significant enough to warrant a

newsflash on ABC News and other US networks. Within months Coke had returned to the number one

spot and New Coke all but faded away. Ironically, through the brand failure of New Coke, loyalty to

the real thing intensified. In fact, certain conspiracy theorists have even gone as far as to say the

whole thing had been planned as a deliberate marketing ploy to reaffirm public affection for Coke.

After all, what a better way to make someone appreciate the value of your global brand than to

withdraw it completely?

Of course, Coke-Cola has denied that this was the companys intention. Some critics will say Coca-

Cola made a marketing mistake, some cynics will say that we planned the whole thing, said Donald

Keough at the time. The truth is we are not dumb, and we are not that smart. But viewed in the

context of its competition with Pepsi, the decision to launch a New Coke was understandable. For

years, Pepsis key weapon had been the taste of the product. By launching New Coke, the Coca-Cola

Company clearly hoped to weaken its main rivals marketing offensive.

Adapted from: Kennedy, E. 2011, New Coke: A Classic Brand Failure.

Questions

1.1 Change within an organisation depends on three main dimensions. Discuss these

dimensions, and identify and discuss which types of organisational changes were

applicable to Coca-Cola in their efforts to introduce New Coke. Substantiate your

choices.

1.2 If you were the Change Manager at Coca-Cola, please identify and describe the

change strategy(ies) you would implement to make New Coke a success. It is

imperative that you do further reading on the strategy(ies) of your choice and that

you provide practical application of your strategy in terms of New Coke.

1.3 New Coke was a failure. With reference to the case study and New Coke in

particular, discuss:

1.3.1 The factors that could have made the change to New Coke a success

1.3.2 The factors that lead to change management failure and

1.3.3 The organisational resistance factors that might have impacted on the

success of New Coke and

1.3.4 The individual resistance to changing to New Coke.

8

1.4 Different people and departments were involved in strategizing, developing,

producing and distributing New Coke. They were all key role players in the

change process. Which analysis of all the possible people and departments that

were involved. How does one assign change management roles to these people/departments.

Describe their responsibilities in this change issue.