Coca-Cola (Coke) vs. Pepsi, the old vanguard of tradition vs. the new upstart vying for the soft drink crown. This story has been told many times throughout literature, history and pop culture, it’s essentially a battle of old vs. new, or innovation vs. tradition.
Pepsi introduced Diet Pepsi in 1964, it took Coke until 1982 for it to come out with Diet Coke. Coke wasn’t a company that was comfortable with change.
After World War II, Coke had 60% of the soft drink market share. In 1983, that market share percentage had declined to under 24%. The decline in sales came mostly from the efforts of Pepsi, it had outsold Coke in supermarkets. Pepsi also started an effective advertising campaign called “The Pepsi Challenge.” The advertising campaign featured a blind taste test, where participants overwhelmingly choose Pepsi over Coke. Though Coke was reluctant to change, it had to do something. The response was a secret project called “Project Kansas.” The soft drink concocted during Project Kansas was sweeter and overwhelmingly beat Coke and Pepsi in taste tests, surveys, and focus group. 10-12% of testers in the south felt angry and alienated at the thought of a New Coke, and threatened to stop drinking Coke altogether.
Coke launched New Coke on April 23, 1985, and ended production of the original later that week. The new flavor was described as bolder, rounder and more harmonious than the original by Coke executives. They quickly made New Coke available at McDonald’s and other drink fountains around the United States. Sales figures show, Cokes sales were up 8% over the previous year. Most Coke drinkers bought the New Coke at the same level they bought the previous one. Surveys showed that most regular Coke drinkers liked the new flavoring, and 3/4 said they would buy New Coke again.
Coke is headquartered in Atlanta, Georgia, and is considered a Southern mainstay. Southerners didn’t like the New Coke. The company received over 40,000 calls and letters expressing anger or disappointment over the change. The Coke hotline got over 1,500 calls a day expressing frustration with the change. Talk show hosts like Johnny Carson and David Letterman made regular jokes, mocking the switch. Fans booed New Coke ads when they appeared on the scoreboard at the Astrodome. Fidel Castro even got in on the fun, he called New Coke a sign of American capitalist decadence. There was even an Old Cola Drinkers of America group formed in protest of the new drink.
By mid- June sales numbers of the New Coke were leveling. Cokes bottlers complained about promoting and marketing a new product that differed from “The Real Thing,” they usually sold. Coke executive Donald Keough visited a restaurant in Monaco and the owner proudly announced the serve real Coke, he meant the original and not New Coke.
On July, 11 1985, Coke announced the return of the original formula, a mere 79 days after they introduced New Coke. New Coke continued to be sold, and they changed the name to Coke II in 1992. The original was renamed Coke Classic, some complained the new old Coke didn’t taste the same, this was because during the reintroduction all Coke in the United States switched from cane sugar sweetener to high fructose corn syrup.
By the end of 1985, Coke Classic was substantially outselling both New Coke and Pepsi. Six months after the rollout, Coke’s sales had increased at more than twice the rate of Pepsi’s. New Coke’s sales had dwindled to just 3% of the market. An untold part of this story is that by introducing Cherry Coke and the reintroduction of Coke Classic is what really led to Coke’s sales success in 1985. By the late 90s, Coke II could only be found in a few scattered markets and they discontinued Coke II in 2002. In 2009, Coke removed the word classic from its packaging.
In 2019, Coke announced a reintroduction of New Coke in limited quantities as a tie in promotion for the 3rd season of the Netflix show Stranger Things. Ironically, the new reintroduced drink got friendlier reviews than it did in 1985.
So why did New Coke fail?
1. South vs. North
The Southern United States is a traditional culture that holds on to its traditions and rights tightly. The United States had to fight a Civil War before southerners let go there right to enslave African Americans. It also had to pass landmark Civil Rights legislation, before southerners let go of their rights to Segregation and the right to treat African Americans as second-class citizens. Southerners don’t take kindly to Northerners changing their traditions.
When Coke introduced New Coke, Southerners took the move as another sign that Northerners were trying to change another Southern tradition. Coke is headquartered in Atlanta, and they announced the New Coke in New York City, Southerners took the announcement as a sign of northern intrusion. New Coke did not do well in the testing phase in the South, and these complaints only grew louder when New Coke was introduced.
2. The bias of taste test
Malcolm Gladwell described how blind taste tests are systematically biased in his book Blink. Gladwell described how sweeter drinks will always beat the less sweet options because of participants just taking a sip of each drink. The tests do not reflect what people will actually buy to drink at home.
If Coke had Gladwell as a consultant back in 1984 and the benefit of hindsight, he could have advised Coke to ignore the Pepsi Challenge and focus on introducing new flavors like Cherry Coke and that decision will help it regain its market share. Next time you hear about a product beating another in a taste test, be aware of the systematic bias in the testing.
3. Americans hate change.
Ultimately, Coke underestimated the public reaction of the consumer base, and how the switch would alienate it and that they wouldn’t embrace the new product.
Most Americans hate change. We have one political party, where they base their entire platform on keeping the status quo and conservative viewpoints. Our former President, whole campaign platform was Make America Great Again. Let’s look past the fact that the time Conservatives refer to in the slogan was not great for Minorities but traditions sell in America. Look at the amount of people who still view electric cars as taboo or scary and proudly embrace their gas guzzling, pollutant sewing vehicles. Take no further look than the Karens, who yearn for the days they could shop in peace without being hassled by store clerks or security about wearing masks for the sake of Public Health.
Americans hate change and if it’s going to occur, it has to happen by force or a slow steady campaign to change opinions like LGBTQ rights did. I was a young tyke when the New Coke fiasco occurred but im guessing that it was older Americans who threw a hissy fit over the change.
The business lessons that can be learned from this story; is that Coke tried to be creative to change its ever shrinking sales, quickly pivoted when the new product wasn’t embraced and also didn’t put all its eggs in one basket as it also introduced Cherry Coke. If you’re an American company that has a product that is a classic or traditional item, don’t try a sudden change to it or otherwise it could end up like New Coke.
