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Just after World War II, the market share for the Coca-Cola Company's flagship beverage was 52%[citation needed], and in 1983 it had shrunk to under 24%[citation needed] in the face of competition from Pepsi-Cola. Pepsi had begun to outsell Coke in supermarkets[citation needed]; Coke maintained its edge only through fountain sales.[citation needed]
Market analysts believed baby boomers were likely to purchase more diet drinks as they aged and remained health- and weight-conscious. Therefore, any future growth in the full-calorie segment had to come from younger drinkers, who at that time favored Pepsi and its sweetness by even more overwhelming margins than the market as a whole.[1]
When Roberto Goizueta took over as CEO in 1980, he pointedly told employees there would be no sacred cows in how the company did its business, including how it formulated its drinks.[2]
[edit] Market research
A glass bottle of New Coke.
Coca-Cola's most senior executives commissioned a secret effort named "Project Kansas," headed by marketing vice president Sergio Zyman and Brian Dyson, president of Coca-Cola USA, to test and perfect the new flavor for Coke itself. It took its name from a famous photo of that state's renowned journalist William Allen White drinking a Coke that had been used extensively in its advertising and hung on several executives' walls.[3] The company's marketing department again went out into the field, this time armed with samples of the possible new drink for taste tests, focus groups, and surveys.
The results of that were strong - the high fructose corn syrup mixture overwhelmingly beat both regular Coke and Pepsi. Then tasters were asked if they would buy and drink it if it were Coca-Cola. Most said yes, they would, although it would take some getting used to. A small minority, about 10-12%, felt angry and alienated at the very thought, saying that they might stop drinking Coke altogether. Their presence in focus groups tended to skew results in a more negative direction as they exerted indirect peer pressure on other participants.[4]
The surveys, which were given more significance by standard marketing procedures of the era, were less negative and were key in convincing management to move forward with a change in the formula for 1985, to coincide with the drink's centenary. But the focus groups had provided a clue as to how the change would play out in a public context, a data point that the company downplayed but which was to prove important later.[5]
Management also considered, but quickly rejected, an idea to simply make and sell the new flavor as yet another Coke variety. The company's bottlers were already complaining about absorbing other recent additions into the product line in the wake of Diet Coke. Many of them had sued over the company's syrup pricing policies. A new variety of Coke in competition with the main variety could, if successful, also dilute Coke's existing sales and increase the proportion of Pepsi drinkers relative to Coke drinkers.
Early in his career with Coca-Cola, Goizueta had been in charge of the company's Bahamian subsidiary. In that capacity, he had improved sales by tweaking the drink's flavor slightly, so he was receptive to the idea that changes to the taste of Coke could lead to increased profits. He believed it would be "New Coke or no Coke",[6] and the change must take place openly.[4] He insisted that the containers carry the "NEW!" label, which gave the drink its popular name.[7]
Goizueta also made a visit to his mentor and predecessor as the company's chief executive, the ailing Robert W. Woodruff, who had built Coke into an international brand following World War II. He claimed he had secured Woodruff's blessing for the reformulation, but even many of Goizueta's closest friends within the company doubt that Woodruff truly understood what Goizueta intended.[8][9] Goizueta always said he had.
[edit] Rollout
One of Coke's ads to promote the flavor change.
Many of New Coke's problems developed during the rollout. Archrival Pepsi was able to undermine the public relations push, and Coke's own executives, particularly Goizueta, did not impress the media.

[edit] Marketing response by Pepsi
Coke let the media know on April 19, 1985 that a major announcement was planned for the following Tuesday, April 23, concerning a change in the product. While its press release did not explicitly say so, many recipients correctly guessed it meant a change in the flagship brand's formulation. So, too, did officials at PepsiCo, who had expected a major move but not something so drastic.[4]
Despite a negative reaction by top Pepsi executives to a smuggled[citation needed] preview six-pack of the new flavor, they nevertheless concluded it was a serious threat. Roger Enrico, then director of North American operations, wasted no time taunting Pepsi's older rival. He declared a companywide holiday and took out a full-page ad in The New York Times proclaiming that Pepsi had won the long-running "cola wars".[9][10] Since Coke officials were preoccupied over the weekend with preparations for the big day, their Pepsi counterparts had time to cultivate skepticism among reporters, sounding themes that would later come into play in the public discourse over the changed drink.[11]
The next day Pepsi gave every employee the day off in celebration of their "victory" over Coca-Cola, claiming their successful brand forced the drastic change for Coca-Cola.
[edit] Official launch
New Coke was introduced on April 23, 1985. Production of the original formulation ended that same week.
The press conference at New York City's Lincoln Center to introduce the new formula did not go over very well. Reporters present had already been fed questions by Pepsi,[11] which was extremely worried that New Coke would erase all its gains. Also, Goizueta's description of the new taste, given his background as one of the company's flavor chemists, was less than impressive:
" [It's] smoother, uh, uh, yet, uh, rounder yet, uh, bolder ... it has a more harmonious flavor.[12] "
Goizueta defended the change by pointing out that the drink's secret formula was not sacrosanct and inviolable. (As far back as 1935, Coca-Cola sought kosher certification from an Atlanta Rabbi, and made two changes to the formula so that the drink could be certified kosher [and, incidentally, Halal and vegetarian] and also Kosher For Passover.[13])
Goizueta and president Donald Keough toasting New Coke.
But Goizueta also refused to admit that taste tests had in any way led the company to make the change (which he called "one of the easiest decisions we have ever made"[14]) to avoid giving Pepsi any credit,[15] yet gave no other real reason for the change, further alienating reporters who had already heard from Pepsi representatives in advance on this very issue.[11] A reporter asked whether Diet Coke would also be reformulated "if this is a success," Goizueta curtly replied, "This is a success" taking aback many reporters.[citation needed]
The emphasis on the sweeter taste of the new flavor also ran contrary to previous Coke advertising, in which spokesman Bill Cosby had touted its less-sweet taste as a reason to prefer Coke over Pepsi.[16]
Nevertheless, the company's stock went up on the announcement,[17] and market research showed that 80% of the American public was aware of the change within 48 hours.[18]
[edit] Early acceptance
While it is widely believed today that the new drink failed almost instantly, this was not the case. The company, as it had planned, introduced the new formula with big marketing pushes in New York (workers renovating the Statue of Liberty were symbolically the first Americans given cans to take home[18]) and Washington, D.C. (where thousands of free cans were given away in Lafayette Park). Sales figures from those cities, and other regions where it had been introduced, showed a reaction that went as the market research had predicted. In fact, Coke's sales were up 8% over the same period the year before.[19]
Most Coke drinkers resumed buying the new drink at much the same level as they had the old one. Surveys indicated, in fact, that a majority liked the new flavoring.[20] Three-quarters of the respondents said they would buy New Coke again.[19] The big test, however, remained in the Southeast, where Coke was first bottled and tasted.
[edit] Backlash
Despite New Coke's acceptance with a large number of Coca-Cola drinkers, a vocal minority of them resented the change in formula and were not shy about making that known - again just as had happened in the focus groups.[21]
Many of these drinkers were Southerners, some of whom considered the drink a fundamental part of regional identity. They viewed the company's decision to change the formula through the prism of the Civil War, as another surrender to the "Yankees"[21]. Company headquarters in Atlanta started receiving angry letters expressing deep disappointment and anger at executives. Over 400,000 calls and letters were received by the company.[17] A psychiatrist Coke hired to listen in on phone calls to the company hotline, 1-800-GET-COKE, told executives some people sounded as if they were discussing the death of a family member.[22]
They were, nonetheless, joined by some voices from outside the region. Chicago Tribune columnist Bob Greene wrote some widely reprinted pieces ridiculing the new flavor and damning Coke's executives for having changed it. Talk show hosts and comedians made light of the switch. Ads for New Coke were booed heavily when they appeared on the scoreboard at the Houston Astrodome.[18] Even Fidel Castro, a longtime Coke drinker, contributed to the backlash, calling New Coke a sign of American capitalist decadence.[23] Goizueta's own father expressed similar misgivings towards his son; the only time the younger man recalled him ever agreeing with Castro, the man whose revolution had driven him and his son, nearly penniless, to America a quarter-century before.[24]
Pepsi took advantage of the situation, running ads in which a first-time Pepsi drinker exclaimed "Now I know why Coke did it!"[25] However, Pepsi actually gained very few converts over Coke's switch, despite claiming a 14% sales increase over the same month the previous year, the largest sales growth in the company's history.[19] The most alienated customers simply refused to buy New Coke rather than switch to Pepsi.[26] Coca-Cola's director of corporate communications, Carlton Curtis, realized over time that they were more upset about the withdrawal of the old formula than the taste of the new one.[27]
Gay Mullins, a Seattle retiree looking to start a public relations firm with $120,000 of borrowed money, formed the organization 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 also filed a class action lawsuit against the company (which was quickly dismissed by a judge who said he preferred the taste of Pepsi[28]), while nevertheless expressing interest in landing Coca-Cola Company as a client of his new firm should it reintroduce the old formula.[29] In two informal blind taste tests, Mullins either failed to distinguish New Coke from old or expressed a preference for New Coke.[30]
Still, despite ongoing resistance in the South, New Coke continued to do well in the rest of the country.[21] But executives were uncertain of how international markets would react. Sergio Zyman, the company's chief marketing officer, heard doubts and skepticism from his relatives in Mexico, where New Coke was slated to be introduced later that summer, when he went there on vacation.
Goizueta publicly voiced a complaint many company executives had been making in private as they shared letters the company had received thanking them for the change in formula, that bashing it had become "chic" and that, as had happened in the focus groups, peer pressure was keeping those who liked it from speaking up in its favor as vociferously as its critics were against it. Donald Keough, the company's president and chief operating officer, reported overhearing this exchange at his country club outside Atlanta:
"Have you tried it?"
"Did you like it?"
"Yes, but I'll be damned if I'll let Coca-Cola know that."[31]
[edit] Company dissatisfaction
Some Coca-Cola executives had quietly been arguing for a reintroduction of the old formula as early as May.[32] By June, when soft drink sales usually start to rise, the numbers showed the new formula was leveling among consumers. Executives feared social peer pressure was now affecting their bottom line. Some consumers began trying to obtain old Coke from overseas, where the new formula had not yet been introduced, as domestic stocks of the old drink were finally liquidated.[33] Over the course of the month, Coca-Cola's chemists also quietly reduced the acidity level of the new drink, hoping to assuage complaints about the flavor and allow its sweetness to be better perceived (ads pointing to this change were prepared, but never used).[34]
In addition to the noisier public protests, boycotts and bottles being emptied into the streets of southern cities, the company had more serious reasons to be concerned. Its bottlers, and not just the ones still suing the company over syrup pricing policies, were expressing concern. While they had given Goizueta a standing ovation when he announced the change at an April 22 bottlers' meeting at Atlanta's Woodruff Arts Center, glad the company had finally taken some initiative in the face of Pepsi's advances,[18] they were less enthusiastic about the taste.[34][35] Most of them saw great difficulty having to promote and sell a drink that had long been marketed as "The Real Thing", constant and unchanging, now that it had been changed.
The twenty bottlers still suing Coca-Cola had even more sport with the change in their legal arguments. Coca-Cola had argued in its defense when the suit was originally filed that the formula's uniqueness and difference from Diet Coke justified different pricing policies from the latter - but if the new formula was simply an HFCS-sweetened Diet Coke, Coca-Cola could not argue the formula was unique. Bottlers, particularly in the South, were also tired of facing personal opprobrium over the change. Many reported that some acquaintances had stopped speaking to them, or had expressed displeasure in other emotionally hurtful ways. On June 23, several of the bottlers took these complaints to Coca-Cola executives in a private meeting.[36] With the company now fearing boycotts not only from its consumers but its bottlers, talks about reintroducing the old formula moved from "if" to "when".
[edit] Reversal
Coca-Cola executives announced the return of the original formula on July 10, less than three months after New Coke's introduction. ABC News' Peter Jennings interrupted regular programming to share the news with viewers. On the floor of the U.S. Senate, David Pryor called the reintroduction "a meaningful moment in U.S. history".[34]
The new product continued to be sold and retained the name Coca-Cola (until 1992, when it was officially renamed Coca-Cola II), so the old product was named Coca-Cola Classic, more commonly Coke Classic and later just Coke. Many who tasted the reintroduced formula were not convinced that the first batches really were the same formula that had supposedly been retired that spring. This is partially true because Coca-Cola Classic differed from the original formula, as all bottlers who hadn't already done so were using high fructose corn syrup instead of cane sugar to sweeten the drink.[37]
"There is a twist to this story which will please every humanist and will probably keep Harvard professors puzzled for years," said Keough at a press conference. "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 original Coca-Cola felt by so many people."
The company gave Gay Mullins the first case of Coke Classic.[18]
[edit] Aftermath
By the end of the year, Coke Classic was substantially outselling both New Coke and Pepsi, putting the company back into the number-one position it has enjoyed ever since. Six months after the rollout, Coke's sales had increased at more than twice the rate of Pepsi's.[38]
New Coke's sales dwindled to a three percent share of the market, although it was doing quite well in Los Angeles and some other key markets.[38] Later research, however, suggested that it was not the reintroduction of Classic Coke, but instead the less-heralded rollout of Cherry Coke, that can be credited with the company's success that year.[39]
Coke spent a considerable amount of time trying to figure out where it had made a mistake, ultimately concluding that it had underestimated the public impact of the portion of the customer base that would be alienated by the switch. This would not emerge for several years afterward, however, and in the meantime the public simply concluded that the company had, as Keough suggested, failed to consider the public's attachment to the idea of what Coke's old formula represented. While that has become conventional wisdom in the ensuing years, some analyses have suggested otherwise.
This populist version of the story served Coke's interests, however, as the whole episode did more to position and define Coca-Cola as a brand embodying values distinct from Pepsi than any deliberate effort to do so probably could have done. Allowing itself to be portrayed as a somewhat clueless large corporation forced to back off a big change by overwhelming public pressure flattered customers (as Keough put it, "We love any retreat which has us rushing toward our best customers with the product they love the most."[40]). Bottles and cans continued to bear the "Coca-Cola Classic" title until 2009 when the company announced that it would discontinue the use of "Classic" to avoid confusion with the younger generation.[41]
While in the short term the fiasco led Cosby to end his advertising for Coke, saying his commercials that praised the superiority of the new formula had hurt his credibility, no one at Coca-Cola was fired or otherwise held responsible for what is still widely perceived as a misstep, for the simple reason that it ultimately wasn't (in contrast with Schlitz beer's disastrous change to a cheaper formula in the early 1970s, which was also based on market research into product taste yet unquestionably detrimental to the company in the long term). When Goizueta died in 1997, the company's share price was at a level well above what it was when he had taken over 16 years earlier and its position as market leader even more firmly established. At the time Roger Enrico, then head of Pepsi's American operations, likened New Coke to the Edsel.[42] Later, when he was himself PepsiCo's CEO, he modified his assessment of the situation, saying that had people been fired or demoted over New Coke, it would have sent a message that risk-taking was strongly discouraged at the company.[43]
In the late 1990s, Zyman summed up the New Coke experience thus:
Yes, it infuriated the public, cost a ton of money and lasted only 77 days before we reintroduced Coca-Cola Classic. Still, New Coke was a success because it revitalized the brand and reattached the public to Coke.[44]
New Coke continued to do what it had originally been designed to do: win taste tests. In 1987, The Wall Street Journal surveyed 100 randomly selected cola drinkers, the majority of whom indicated a preference for Pepsi, with Classic Coke accounting for all save two New Coke loyalists. Given a chance to try all three in a blind test, New Coke slightly edged out Pepsi - yet many drinkers reacted angrily to finding they had chosen a brand other

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