New Coke
New Coke was the unofficial name of a reformulation of the soft drink Coca-Cola, introduced by the Coca-Cola Company in April 1985. It was renamed Coke II in 1990 and was discontinued in July 2002.
By 1985, Coca-Cola had been losing market share to diet soft drinks and non-cola beverages for several years. Blind taste tests suggested that consumers preferred the sweeter taste of Pepsi, Coca-Cola's main competitor, so the Coca-Cola recipe was reformulated. The American public reacted negatively, and New Coke was considered a major failure.
Within three months, the Coca-Cola Company reintroduced the original formula, rebranding it "Coca-Cola Classic", resulting in a significant sales boost. This led to speculation by some that the New Coke formula had been just a ploy to stimulate sales of the original Coca-Cola, which the company has always vehemently denied. The story of New Coke remains influential as a cautionary tale against tampering with an established and successful brand.
Background
After World War II, Coca-Cola held 60 percent of the market share for cola. By 1983, it had declined to under 24 percent, largely because of competition from Pepsi-Cola. Pepsi had begun to outsell Coke in supermarkets; Coke maintained its lead only through venues such as soda vending machines and fast food restaurants, especially McDonald's.Market analysts believed baby boomers were more likely to purchase diet drinks as they aged and became health- and weight-conscious. Growth in the full-calorie segment would come from younger drinkers, who at that time favored Pepsi by increasing margins. Meanwhile, the overall market for colas steadily declined in the early 1980s, as consumers increasingly purchased diet and non-cola soft drinks, many of which were sold by Coca-Cola. This further eroded Coca-Cola's market share. When Roberto Goizueta became Coca-Cola CEO in 1980, he told employees there would be no "sacred cows" in how the company did business, including how it formulated its drinks.
Development
Coca-Cola's senior executives commissioned a secret project headed by marketing vice president Sergio Zyman and Coca-Cola USA president Brian Dyson to create a new flavor for Coke. This project was named "Project Kansas", from a photo of Kansas journalist William Allen White drinking a Coke; the image had been used extensively in Coca-Cola advertising and hung on several executives' walls.The sweeter cola overwhelmingly beat both regular Coke and Pepsi in taste tests, surveys, and focus groups. The southeastern United States, one of Coca-Cola's strongest and most reliable markets, narrowly preferred the new flavor; this preference widened once the testers revealed the new taste was also a Coca-Cola product. One bottling company threatened to sue the company if it did not put the drink on the market.
Asked if they would buy and drink the product if it were Coca-Cola, most testers said they would, although it would take a while for them to get used to it. About 10–12 percent of testers felt angry and alienated at the thought and said they might stop drinking Coke. Their presence in focus groups tended to negatively skew results as they exerted indirect peer pressure on other participants.
The surveys, which were given more significance by standard marketing procedures of the era, were less negative than the taste tests and were key in convincing management to change the formula in 1985, to coincide with the drink's centenary. However, the groups had provided a clue as to how the change would play out in the public, a finding the company downplayed. Management rejected an idea to make and sell the new flavor as a separate variety of Coca-Cola. The company's bottlers had already been complaining about absorbing other additions into the product line following the introduction of Diet Coke in 1982; Cherry Coke was launched nationally, almost simultaneously with New Coke during 1985. Many bottling companies had sued the company over syrup pricing policies. A new variety of Coke in competition with the main variety could also have cannibalized Coke's sales and increased the proportion of Pepsi drinkers relative to Coke drinkers. Early in his career with Coca-Cola, Goizueta had been in charge of the Bahamas subsidiary. He had improved sales by tweaking the drink's flavor slightly and so was receptive to the idea that changing the flavor of Coke could boost profits. He believed it would be "New Coke or no Coke", and that the change must take place openly. He insisted that the containers carry the "New!" label, which gave the drink its popular name.
Goizueta made a visit to his mentor and predecessor as the company's chief executive, the ailing Robert W. Woodruff, who had built Coca-Cola into an international brand following World War II. Goizueta claimed he had secured Woodruff's blessing for the reformulation, but many of Goizueta's closest friends within the company doubted that Woodruff fully understood Goizueta's intentions. Woodruff died in March 1985, a month before New Coke was launched.
Launch
New Coke was introduced nationwide on April 23, 1985. Production of the original formulation ended later that week. In many areas, New Coke was initially sold in original Coke packaging; bottlers used up remaining cans, cartons and labels before new packaging became widely available. Old cans containing New Coke were identified by their gold colored tops, while glass and plastic bottles were given red caps, instead of silver or white, respectively. Bright yellow stickers indicating the change were placed on the cartons of multi-packs.The press conference at New York City's Lincoln Center to introduce the new formula did not go well. Reporters had already been fed questions by Pepsi, which was worried that New Coke would erase its gains. Goizueta, Coca-Cola's CEO, described the new flavor as "bolder", "rounder", and "more harmonious", and he defended the change by saying that the drink's secret formula was not sacrosanct and inviolable. As far back as 1935, Coca-Cola sought kosher certification from Atlanta rabbi Tobias Geffen and made two changes to the formula so the drink could be considered kosher. Goizueta also refused to admit that taste tests had led the change, calling it "one of the easiest decisions we've ever made". When a reporter asked whether Diet Coke would also be reformulated "assuming is a success," Goizueta curtly replied, "No. And I didn't assume that this is a success. This is a success."
The emphasis on the new formula's sweeter taste also ran contrary to previous Coca-Cola advertising, in which spokesman Bill Cosby had touted the original Coke's less-sweet taste as a reason to prefer it over the sweeter taste of Pepsi. The Coca-Cola company's stock went up immediately after the announcement, and market research showed 80 percent of the American public was aware of the reformulation within days of the change.
Initial success
Coca-Cola introduced the new formula with marketing pushes in New York City, where workers renovating the Statue of Liberty for its centenary in 1986 were given free cans, and Washington, D.C., where thousands of cans were given away in Lafayette Park. As soon as New Coke was introduced, the formula was already available at McDonald's and other drink fountains in the United States. Sales figures from those cities and other areas where it had been introduced, such as Miami and Detroit, showed a reaction that went as the market research had predicted. In fact, Coke's sales were up 8 percent over the same period as the year before.Most Coke drinkers resumed buying the new Coke at much the same level as they had the old one. Surveys indicated that the majority of regular Coke drinkers liked the new flavoring. Three quarters of the respondents said they would buy New Coke again. The big test, however, remained in the South, where Coca-Cola had been created and bottled.
Backlash
Although New Coke had been accepted by many loyal Coca-Cola drinkers, many more resented the change, as had happened in the focus groups. Many critics were from the southern US states, some of whom considered Coca-Cola part of their regional identity. Some viewed the change through the prism of the Civil War as a surrender to the "Yankees" as PepsiCo, the manufacturer of Pepsi, is based in Purchase, New York.In a Chicago Tribune story about reaction in the South, a professor at the University of Mississippi observed that "changing Coca-Cola is an intrusion on tradition" and thus would not be well received in that region. An Alabama resident wondered why the company had introduced the new flavor in New York; elsewhere in the state an Anniston Star columnist, noting Goizueta's Cuban origins, insinuated that the flavor change was a communist plot. The Atlanta Journal-Constitution found a majority of patrons at The Varsity, a popular local restaurant in that city, favored the old formula. "Why didn't they test anybody here?" the co-owner asked.
The company received over 40,000 calls and letters expressing anger or disappointment, including one letter, delivered to Goizueta, addressed to "Chief Dodo, the Coca-Cola Company". Another letter asked for his autograph, as the signature of "one of the dumbest executives in American business history" would likely become valuable in the future. The company hotline, 1-800-GET-COKE, received over 1,500 calls per day compared to around 400 before the change. A psychiatrist whom Coke had hired to listen in on calls told executives that many people sounded as if they were discussing the death of a family member.
There were critics of New Coke from outside the region. Chicago Tribune columnist Bob Greene wrote some widely reprinted pieces ridiculing the new flavor and expressing anger at Coke's executives for having changed it. Comedians and talk show hosts, including Johnny Carson and David Letterman, made regular jokes mocking the switch. Ads for New Coke were booed heavily when they appeared on the scoreboard at the Houston Astrodome. Even Fidel Castro, a longtime Coca-Cola drinker, contributed to the backlash, calling New Coke a sign of American capitalist decadence. Goizueta's father expressed similar misgivings to his son, who later recalled that it was the only time his father had agreed with Castro, whose regime he had fled Cuba to avoid.
Gay Mullins, a Seattle retiree looking to start a public relations firm with $120,000 of borrowed money, formed the Old Cola Drinkers of America on May 28 to lobby Coca-Cola to either reintroduce the old formula or sell it to someone else. His organization eventually received over 60,000 phone calls. He filed a class action lawsuit against the company, while nevertheless expressing interest in securing the Coca-Cola Company as a client of his new firm should it reintroduce the old formula. In two informal blind taste tests, Mullins either failed to distinguish New Coke from old or expressed a preference for New Coke.
Despite ongoing resistance in the South, New Coke continued to do well in the rest of the country, particularly in the west. However, the executives were uncertain of how international markets would react. They met with international Coke bottlers in Monaco; to their surprise, the bottlers were not interested in selling New Coke. Zyman also heard doubts and skepticism from his relatives in Mexico, where New Coke was scheduled to be introduced later that summer, when he went there on vacation.
Goizueta stated that Coca-Cola employees who liked New Coke felt unable to speak up due to peer pressure, as had happened in the focus groups. Donald Keough, the Coca-Cola president and chief operating officer at the time, reported overhearing someone say at his country club that they liked New Coke, but they would be "damned if I'll let Coca-Cola know that".