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New Coke: A Legendary Marketing Mistake

By Alex Planes - Apr 23, 2013 at 11:33AM

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Learning from the market's past to understand its present.

On this day in economic and business history...

April 23, 1985 was one of the most infamous days in marketing history. Children who were not yet born remember it. Retirees reminisce about it. Comedians harvest jokes from it to this day. That day, Coca-Cola (KO 0.59%) introduced the world to "new Coke."

Coke was losing ground in the 1980s. By 1983, its flagship fizzy brown drink was outsold in supermarkets by the upstart Pepsi (PEP 0.98%) and its brilliant "Pepsi Challenge" campaign. Coke CEO Roberto Goizueta was ready to take a chainsaw to the company's core business if it meant winning over the youthful Boomer generation, and he had come into the corner office with experience tweaking Coke's iconic formula for regional tastes. A massive but highly secretive project began under the name "Project Kansas," with initially positive results. However, a small but highly vocal minority of Coke's top-secret taste-testers remained adamantly opposed to the notion of a different Coke. These complaints would come back to haunt Coke when it went ahead with the launch despite objections.

The launch was highly publicized but not exactly smooth. Goizueta had to fend off questions that Pepsi insiders had apparently fed to the assembled reporters, and at times he stumbled badly in explaining the company's rationale and even the new flavor profile of the reformulated Coke. Despite the launch hiccups, new Coke became national news within the week -- and then the anger started rolling in.

Thousands upon thousands of calls and letters poured into Coke headquarters, deriding the change and pining for the classic Coke flavor. Southern Coke drinkers, long the bastion of Coke's popularity, were most offended by the change. They protested in a variety of ways, from booing ads on Southern sports stadiums to pouring new Coke out in the streets in disgust. By summertime, when soft-drink sales usually rise to their peak, new Coke was rather flat. Coke had run into a familiar scourge of Internet marketing more than a decade before such a thing existed: The angry minority had moved the majority and become an insurmountable problem.

Coke reversed its promotion of new Coke within three months of the launch, returning the original formula to stores around the world as "Coca-Cola Classic." Coke Classic surged into the lead against Pepsi as millions of Coke drinkers embraced it like an old friend. So rapid was the shift, and so marked was the public's embrace of the original, that rumors persisted for years that Coke had staged the entire thing as an elaborate marketing stunt.

New Coke hung around with the revised flagship Coke branding until 1992, when it was rebranded as "Coke II." This unpopular variety hung around until 2002, although you would have been hard-pressed to find it years before its final discontinuation.

What's the lesson? Well, that depends on what angle you want to take. Maybe companies shouldn't mess with success. Maybe consumers just need to be reminded of why they like a brand so much in the first place. Maybe companies should pay more attention to the vocal minority, and maybe they shouldn't promote a huge change without trying it on a more limited public basis first. New Coke has been the subject of so many business and marketing school essays that you're bound to find all these arguments and more. It was that big, and it was that botched.

Whatever the lesson, Coke learned it quickly. The company joined the Dow Jones Industrial Average (^DJI 1.76%) a mere two years after the new Coke fiasco, and by that point its annual revenue had grown by 18% since 1984, the year before the new Coke launch. That hardly resembles a business brought low by bad marketing choices.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,212.96 (1.76%) $575.77
The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$64.68 (0.59%) $0.38
Pepsico, Inc. Stock Quote
Pepsico, Inc.
PEP
$171.77 (0.98%) $1.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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