That Time Coca Cola Tried To Change Their Recipe

When it comes to cheap soft drinks, taste matters, and these preferences can be extremely personal.

Having a soft drink you prefer is easier sometimes than truly explaining why you prefer it, as there are a lot more factors than taste that go into any purchasing decision.

This is a lesson the Coca-Cola Company would learn the hard way when they tried to change what had up to that point been seen as constant and unchanging and saw how much it affected both people and their bottom line.

This is the story of New Coke.

 

Cola Wars: A New Hope

To understand why Coke would change a product sold on its tradition, it is important to understand a century-long battle on store shelves between two of the biggest soft drink companies in the world.

The Cola Wars, as they would become known, started in the early 1900s, but at that point Coca-Cola was unassailable and Pepsi went bankrupt twice, albeit because of circumstances it couldn’t control.

The instability in the marketplace following the First World War caused the first bankruptcy in 1923 and the Wall Street Crash and Great Depression caused the second in 1931. However, after this Pepsi lowered their prices and started to claw back market share.

Coca Cola had 60 per cent of the soft drink market share in 1945, but by 1983 this had plummeted to less than a quarter, partly caused by Coke’s older audience, a renewed interest in diet drinks and Pepsi’s highly innovative marketing campaigns which snagged a younger audience.

The Pepsi Challenge, launched in 1975, found that Pepsi was preferred by people in blind taste tests, which actually enabled Pepsi to outsell Coke in supermarkets. Only their existing deals with vending machines, McDonalds and other fast-food restaurants let them keep their edge.

To compete with Pepsi, CEO Roberto Goizueta decided to think radically about how they would change their business.

 

The Fatal Flaw Of Market Research

Unlike classic Coke, the development of a new flavour was going to be undertaken with the help of considerable market research, as well as taking advantage of new artificial flavourings and sweeteners that were not available when the original formula was made.

The new Coke flavour was much sweeter, and in blind taste tests was much preferred to classic Coke and even Pepsi. However, in the South of the United States, where Coca-Cole came from and was more popular than anywhere else, there were some interesting results.

Whilst it narrowly won a taste test, and whilst most taste testers said they would buy the new drink as Coca-Cola, although with a little getting used to, there was a vocal minority who were particularly angry at the thought and said they would refuse to buy it.

Whilst Coke’s formula had been changed a few times in the past to get rid of cocaine and make it suitable for vegetarians, this was a far more significant change, one that Mr Goizueta was exceptionally keen and confident about.

However, the people vocally upset about the potential change would soon be proven very right.

 

The New Backlash

The common story about New Coke is that was an immediate and obvious failure. However, Coke’s stock went up when the new flavour was announced on 23rd April 1985, and sales increased 8 per cent compared to the year before in cities such as New York, Washington DC, Miami and Detroit.

However, the press conference announcing the switch, much like the focus group tests, showed the unease and concern that would ultimately prove prophetic.

Pepsi had fed questions to the journalists and reporters, which led to some rather curt replies by Goizueta which would prove rather ironic.

He claimed the drink’s formula was not sacred, did not admit the role of focus testing and stated outright that the drink was a success the day it launched.

Most people who drank Coke liked the new flavour and bought it at the same level they had the old one. However, much like in the taste tests, the people who did not like that it had changed were exceptionally upset and angry at the change.

A psychiatrist paid by Coke to listen in to their hotline (1-800-GET-COKE), would later say that some of the callers talked of the drink’s change the same way they would talk about a death in the family.

The public backlash was quick and intense, although Mr Goizueta and Coke president Donald Keough would later claim that peer pressure played a role in stopping people from supporting it.

However, given that celebrities, political leaders (including Cuban Prime Minister Fidel Castro), and even Coca Cola’s own bottlers were part of the backlash, Coca-Cola reversed their decision on 11th July 1985.

The people who loved Coke were elated by the return of what was then named Coke Classic, and one executive noted that the joyful calls and letters to the company were so extreme that they spoke as if the company had cured cancer.

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