New Coke and Downfall
Abstract
This paper gives overall information about the cola introduced in 20th century by coca cola. This paper also
discusses about its history and its failure. This paper also includes the reason of downfall of new coke
which put in stake the whole coca cola company. This case study deals with the problem with New coke
and the reasons behind those problems because of which new coke was a failure project.
This paper is divided into two parts. First part is the case study of new coke and the second part consist
of the purposed project plan which if followed might have prevented the downfall of new coke. So, the
second part deals with topics like purposed methodology, strategic project plan and justified method that
might have saved the product if implemented in its time.
Introduction
If you are claiming that you are “original” then it is concluded in itself, there can’t be new original. The
coca cola company with coke and its slogan “the original” introduced new kind of cola named “New coke”
in 1985[ref 1]. They introduced new coke and parallelly stopped producing the old cola. This decision of
one of the largest business company in the world took them in the verge of shutting down the whole
company. There were various flaws in the project because of which the new cola was not a success
product. Although new cola was better in taste than that of old coke but because of lot of flaws in their
project strategy, the project failed. One of the main reasons for their failure is that they focused in the
taste of product and poorly took consideration about their costumer’s sentiment while producing new
coke. But people liked the old coke than that of new coke because their sentimental value was attached
to the old coke. Coca cola company stopped production of old coke when new coke was introduced which
hurt the sentimental value of loyal customers. This was the main reason behind its failure. New coke failed
because of their marketing strategy. [ref 1]. Because of failure of new coke, they started producing old
coke only after 72 days of introducing new coke. Coca cola stopped their production of new coke in 2002
completely.
Background
Coca cola company was established in 1886 and they produced the original coca cola drink at that time.
At first coca cola was used as a product to get relief of headache and was placed at different drugstores
as a medicine. In 1984 coca cola company had 60% of the market share which reduced to 21.8% due to
new competitor in market, “Pepsi”. This information is included because Pepsi was also one of the main
reasons for the downfall of coca cola company when new coke was introduced. Pepsi indirectly forced
coca cola to introduce new drink or change something related to the drink because people started liking
Pepsi more than that of coke also coca cola lost their cokes taste to the Pepsis taste in taste testes. [ref
1]. In that situation it was obvious for coca cola to introduce new drink or do something in the formula so
that it can beat Pepsi. It was the first formula change done to coke after 1903 when cocaine was removed
from coca cola drink.
Then to beat Pepsi, coca cola started working in a new formula and this project was named as Project
Kansas. [ref 2]. Project Kansas was project dedicated in introducing new flavor of coke. It was secret
project commissioned by Coca-Cola’s senior executive. But higher management rejected the idea of
introducing the new flavor of coke because the company’s bottlers were already complaining about
addition in the production due to introduction to other flavor of coke (Diet Coke, Cherry Coke). Company
was also sued for their syrup pricing policies. So, it was hard for them to introduce “new coke” as new
flavored soft drink. (ref 2)
Timeline [ref 4]
1980
Time line of new coke started in 1980 when people started preferring Pepsi more than that of coke the
original. “Pepsi was better in taste than that of coke”, this statement was concluded when blind taste test
of Pepsi was done and was named as “The Pepsi challenge”. Pepsi own in case of taste over coke because
in Pepsi challenge, participants preferred Pepsi over Coke. This time Pepsi started to gain market share.
The public who started preferring Pepsi over Coke were people of young generation. This was also because
Pepsi put a slogan to its drink and it was “Drink for the new generation”. This slogan attracted the younger
generation people. People started preferring diet drinks over cola drinks being health conscious which
also decreased the marked share of coca cola. Although most of the diet drinks in market at that time was
of coca cola, people started drinking diet coke than the original drink. As the production of original drink
was more and coca cola had large market share because of their original coke, their market share declined.
Robert Goizueta also become CEO of the company in 1980’s.
1985
Series of events happened in coca cola company in 1985 because of which the company was in verge of
shutting down. It all started in April 23, 1985 when the production of original coke was stopped and New
coke started production and distribution in market. New coke seemed successful at first because of its
better taste. But, in long run people started rejecting the new coke and wanted the original one but the
production had already stopped. It was the point when coca cola company had great loss. They lost $4
million in the development of the product and lost $30 million in the unwanted product itself. After heavy
loss the original formula returned in July 11, 1985,79 days after the introduction of new coke. The original
coke was also named “Coca Cola the Classic.”
1990’s
Although new coke failed miserably, the production of new coke didn’t stop. It was produced parallelly
with the original coke. In 1992, New coke was named Coke II. CEO of the company, Goizueta said that he
never regretted about New Coke. Instead, he thew 10th year anniversary party of New coke in 1995. In
1997 people who said New Coke was a mistake were fired from the company.
2002
In 17 years of time, after introduction of new coke, the coca cola company did nothing on new coke to
make it better (Neither they changed the formula, nor they made any strategy on selling new coke
more). So, in July 2002 Coca-Cola Company stopped producing new coke.
2019
In May 21st 2019 Coca-Cola company announced about relaunching New Coke for limited promotional
run for third season of Stranger things (Web series). They produced 50,000 cans of New Coke.
Issues and their Reasons
New coke failed because of various reasons for example there were strong competitors in market which
good product, bad market strategy and so on. Here below is given brief explanation of reasons because
of which New Coke failed.
Cold war – Coke vs Pepsi
In 1980’s Pepsi and coca cola were in cold war with each other because they were the biggest soft drink
competitors in the market. People also started liking Pepsi more than that of coke. Pepsi came up with a
very good marketing strategy and that was they changed their slogan to “for new generation”. The taste
of Pepsi was also better than that of coke as it was sweeter than coke. With these two things Pepsi started
outselling coke in the market. The new generation people were more attracted towards Pepsi than that
of coke. So, Coca-Cola company had to do something to overcome this. As Pepsi tasted better, coca cola
company focused on creating new formula which was better in taste than that of Pepsi. This project was
also known as Kansas Project. They came up with “New coke” which was sweeter than that of original
coke and also taste better than Pepsi. But later on, it became biggest mistake of coca cola.
Poor market research
Market Research is one of the most important things to do before starting the development of the
product. But coca cola didn’t focus much on market research. They were just busy in creating a drink that
taste better than Pepsi. While doing market research they focused mostly on weather indivisibles like the
taste of new coke or not. As new coke was better in taste than that of coke original people liked new coke
more. But they didn’t consider doing survey on “would people like to buy coke in large quantity for families
or would you prefer suggesting new coke to friends and families.”. Everyone in the family might not like
the sweet taste of coke and might prefer the original one. If they had just considered this survey, would
have saved them from loss of millions of dollars.
Bad marketing strategy
Poor market research brings poor market strategy. It is written in most of the papers that New coke failed
only because of bad marketing strategy. They first introduced coca cola as the original. If the old coke was
original then there cannot be new original because for example if something is “real” then there cannot
be “new real”. They stopped production of the original coke and suddenly introduced new coke. People
at first seemed to like it but in long run wanted coke the original back. The company should have
presented new coke as a replacement rather than that they should have presented it as the additional
choice.
Bad development methodology
Coca cola company was eager to introduce new coke to the market. They failed in continuous iteration
between development and market testing of the product. They just developed the product at first and
then tested at last. The test here refers to market testing rather than taste testing. They didn’t consider
this iteration and started mass production.
Poor Product Testing Strategy
There were just two things that they did for testing the product. The one test includes the taste test in
which they won. It was the sip test (participants were given to take a sip of the product) in which they
won but they never conducted the home use test or to test whether they will drink at home for several
days. More test would have. The another test they conducted (after production) was to study the
response of indivisibles when they gave free cans around statue of liberty and Washington DC. IT seemed
success at first as sales went up to 8% over same period a year before. But this marketing strategy was
not enough to analyze the future of the new coke.
Taste vs Costumers
Coca cola company was over confident about their product as it tasted better than others. They lack in
considering the loyal Coke original costumers, when there is something for a long run then people will be
attached with its brand than the product itself. Just removing the original coke and replacing it with new
one hurt the sentiment of the people because they were attached to the original and suddenly now, they
cannot find it. Although new cock was better in taste than the old one, they failed when they unknowingly
tried to do something which would hurt the sentiments of their customers.
Supporting Documents and Rational outcome
Here below analysis of different research papers related to the downfall of new coke gives the mirror
image of how and why new coke became one of the biggest a failure project of 20th century.
In April 23rd 1985, in New York city’s Lincoln center new formula or new coke was introduced for the first
time. In this event Goizueta claimed that “it was simply the surest move ever made” supporting this
statement Keough, president of Coca-cola stated that “I’ve never been as confident about a decision as I
am about the one we’re announcing today.” These statements of those peoples turned upside
down.ref[6]
In one interview, a reporter asked the Goizueta(CEO of coca cola at that time) weather Diet coke will be
reformulated , assuming that new coke was a success to which Goizueta replied “No. And I didn’t assume
that this is a success. This is a success”. [ref 11] This kind of the over confidence from the CEO of the
company cost millions of dollar loss to coca cola company. Being over confident in the product that he
brought to the market assuming that it will be a sure hit was the biggest mistake from the CEO of the
company. Due to this over confidence, it seems like less priority was given to the market research and
preparing good market strategy. Just all the focus was driven to make new coke taste better than others
and win in the taste test challenge.”
In 1998 a theory was suggested by Ringgold which states that the organization would have gained success
in launching new coke if they had incorporated an examination of psychological reactance. Which means
that if company had studies about the psychological react of costumers on introducing new coke, they
might had gained success in lunching the product. [ref 8]
One of the most crucial error that the coca cola researchers made was that they took taste alone as the
testing subject. Although, at test 53% preferred new coke over old one but taste is not enough to decide
whether the product will be success or not. Costumers make purchase based on loyalty, habit and
nostalgia. But researches did not consider costumers sentiment in their research. [ref 5]
After the failure of New coke, the response from Pepsi was quite surprising, Pepsi gave day off to its
employees and declared victory in a newspaper with headline “After 87 years of going at it eyeball to
eyeball, other guy just blinked”. [ref 6]
In one of the conference president of coca cola company said that "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."[ref 6]. Which
illustrates that consumers were emotionally attached to the brand coke than that of the product itself.
They were loyal to their original coke. Change in the taste hurt loyal customers emotionally. By this
statement he made it clear that customers sentiment towards original coke should have been put more
into consideration while doing research.
Conclusion
After return of the original formula in July 11 1985, Coca-Cola classic was gradually gaining its popularity
back again. It was outselling both Pepsi and new coke. Coke had out sold Pepsi by twice in sales just in 6
months of return of old coke. There is conspiracy theory that suggest that coke stopped the production
of old coke and introduction to new coke was their strategy to beat Pepsi and increase their share value.
In response to which Keough said, “The truth is we’re not that dumb and we’re not that smart.” [ref 6].
Summarizing the history of new coke, the failure of new coke was one of the biggest failed projects in
history caused by poor decision making and bad choice of marketing strategy. And also, if they had
considered doing research on the emotional attachment of loyal customers towards the brand, it might
have been a great success. But they learnt their lesson and brought original drink back and now they are
one of the largest beverage companies in the world.
Part II
Introduction
New coke was introduced and distribution started to the public in 1985. Production of the coke original
halted at the same time the new coke was introduced to the market. But just after 79 days of the
introduction of new coke the coke original was restored again because of wide criticism of new coke and
huge demand of coke original in the market by the public. At this point new coke was considered as one
of the biggest failure projects of all time. Various criticism programs were organized by the loyal customers
of coca cola original for stopping the production of coca cola original. The new coke project failed because
of various reasons like poor marketing strategy, cold war between coke and Pepsi, lack of risk
management technique, lack of enough market research, poor testing technique and more focus on
product than that of customers.
This all could have been prevented if a better project management technique was used for the project. It
is quiet surprising to know that one of the business giants of all time (coca cola company) didn’t considered
many crucial and required project management steps while making new coke. But from research, what
came into insight is that they were eager to make product better in taste than that of other beverages like
Pepsi so that they can be in no 1 position in market. This rush from one of the biggest beverage company
of all time lead them to the downfall.
New coke might have been a success if they had followed agile project management technique. Agile
project methodology can be defined as the project management technique in which there is gradual
increment between steps, followed by iteration between steps until desired outcome is achieved. Agile
method is mostly used in software development project but is very beneficial in other types of projects as
well. Clients are one of the most crucial elements in this kind of methodology as requirements are defined
by the client’s and continuous consulting with the clients about the change in requirements help in
yielding of better result. There are various steps in agile methodology and they are mainly, requirement
gathering, analysis of requirement gathered, Design, testing, production and customer feedback. And
after completion of the project the requirements are changed according to the customer feed back and
again those requirements are analyzed, designed, tested and in cooperated in the product. In this way in
form of cycle Agile methodology works. Agile methodology would have been best in case of new coke
because there would have been continuous interaction with customers for gathering requirement. New
coke failed because coca cola lacked many crucial things while gathering requirement form its customers.
Here below figure shows the agile project development approach. [figure needed]
Rational
As previously mentioned above, New coke failed of various reasons like poor marketing strategy, bad
decision making, rivalry, poor choice of product testing strategy. Less market research, no proper
development methodology and so on. Stopping the production of old coke and suddenly introducing new
coke one of the biggest marketing blunder done by the company. Just focusing on improving the taste of
the product and not considering the study of customers sentiment towards old coke was caused due to
lack of proper market research technique. IT seems that the iteration while producing new coke, was only
done in making taste of the coke better than Pepsi. Just taste test challenge is not enough to define
weather the product will be success or not. So, the selection of poor project management technique was
also one of the reasons of failure of new coke. Cold war between coke and Pepsi and the ego of coke to
outsell Pepsi by making a drink that taste sweeter than Pepsi was also one of the reasons of failure. They
tried to copy what Pepsi did instead of doing research on what they could do on their own to outsell Pepsi.
So, rivalry among two giants was also one of the main reasons of downfall.
All of things because of which new coke failed could have been controlled if proper project management
technique was used. Better marketing strategy technique that incorporates the emotional attachment of
costumers towards coca cola would have been used. Proper market research technique and decisionmaking systems should have been implemented. There was great flaw in product testing technique, they
must have tested or done survey on would people like new coke on long run and would refer it to friends
and family or not. So other tests should have been included. Agile methodology would have been best for
this project because it would incorporate various steps needed and iteration between those steps with
continuous feedback from customers.
Purposed Justification
1980’s Pepsi started gaining more popularity in public. Pepsi beat coke in the sip taste challenge or the
Taste test challenge. People of new generation started liking Pepsi more than coke whereas coke was
preferred by adults and old people. Pepsi started outselling coke in the market. Looking at this, coke want
to create some thing that taste better than Pepsi in thought that people will again start liking coke if it
tasted better. Just thinking coke will be no 1 if it tasted better made coca cola to start preparing new
formula without good market research, more requirement gathering and analysis. Because of lack of good
project management technique new coke failed miserably.
Coca cola must have conducted good market research for requirement gathering before starting to create
new formula. They should have considered doing survey to know weather they should even produce new
kind of coke or not, should they produce new coke along with old coke or just produce new coke or just
produce old coke. If this survey had been done new coke might have been a success. They should have
incorporated customers emotion while doing the test or should have tested weather people would like it
in long run or not. Production of old coke should not have been stopped; it should have been produced
parallelly with new coke. There was nothing wrong with the old coke. Company must have focused on
making great marketing strategy to increase sales of the coke original because at last, they again had to
bring back old coke. “If isn’t broke don’t fix it”. [ref 6]. They should have focused on making themself
better by looking at their own statistic rather than looking at the statistic of rival.
Methodology
Agile methodology is the purposed methodology for this project. With iteration between various steps
and continuous interaction of company with its customers for feedback and requirement gathering,
agile methodology is purposed for this project. Market research, surveys, research on testing techniques
will help in gathering the requirement. Analysis of those requirement will help in estimating time, cost,
scope, designing procedure, testing procedure and actual requirement of the clients. Then the product
can be designed being based on that information gathered. This testing will be conducted to ensure
quality of the product and to know has it met the requirement of the clients or not. If not then it will
again be sent to improve quality of product. After getting the desired product according to the
requirement of clients, production in small quantity will be started and would be sold in some location
for awhile to know the client reaction. If client like it in long run then mass production will start if not
again the product is transferred to analysis phase to tally weather it has meet all the requirement or not.
After mass production, in periodic order feedback from clients will be taken to know new requirement
and to integrate it in the product.
Purposed final strategy
Here below are given the strategies if have been used by coca cola for new coke project, the project
would have been successful.
Proper Market Research
Market research is one of the important factors for successful project. The main aim of market research
is to gather all the requirement needed for the project. Poor market research was one of the main
reasons for the failure of new coke.
There are various ways of doing market research and among them one is survey. Survey is the way of
collecting data from sample population to gather requirement and information on particular subject. It is
one of the best research methods. Questionnaire is one of the ways of doing survey in which sample
population are provided with different questions and asked to answer them. Afterwards analyzing those
answers the requirement and information are gathered. In case of new coke, the questions should be like
a) Would you like to drink coke if it’s formula will change?
b) Would you like coke to be sweeter like Pepsi?
c) If new flavor of coke is introduced, should it replace the original one or should it be an additional
choice?
d) Would you prefer Pepsi or coke as a family drink?
These kinds of questions would be asked to the sample population from various location to actually
know what customers want. This market research strategy should have been used. This kind of survey
helps in identifying the risk factors of the project and the make plan accordingly to avoid those risk
factors.
Compete with yourself
One of the huge mistakes that Coca-Cola company did was it tried to do something which it was not. For
the sake of beating Pepsi in taste and in overall sales they tried to make a drink that was sweeter than
before and also better than Pepsi. They thought that doing so will make them beat Pepsi and increase
their sales but vice versa happened. They had already a drink which was loved by many people. Instead
of copying Pepsi (in case of taste), they should have focused more on creating ideas to sell the product
which they already had. Coke original was not a bad product but just lost its sales in the market because
of its competitor.
They should have ignored what Pepsi did to sell their product instead they should have made strategies
for selling their product more than that of Pepsi. Better advertisement, new slogans, new schemes could
have raised the sales of coke original. As Pepsi sold its main product sweeter, coke followed the same
and replaced its original product with new sweeter product. Instead, they should have added new coke
as additional option.
Bad Marketing strategy
As mentioned previously as well, New coke is considered as one of the biggest marketing blunders of all
time. It failed because of its marketing strategy. The main slogan of coke was “The original” and when the
production of old coke stopped and new coke started then one question arouse in many mid if coca cola
claimed that old coke was the original then there cannot be new original. So, it is considered as marketing
blunder. So be saved from this questioning what coke should have done is that they should not have
stopped the production of old coke. Stop in the production of old coke, make demand of old coke more
but there was not any supply of it. It hurt the sentimental values of loyal customers who were emotionally
attached to the old coke.
Survey should have been done before mass production of new coke. It should at first have been
introduced in just certain locations which had more old coke favoring people. Then again, the questions
like below should have been asked to them. Although set of questions from above and here seem same
but above is asked for requirement gathering and blow is asked after design.
a.
b.
c.
d.
Do you like the taste of new coke?
Would you refer it to your friends and family?
Would you prefer new coke or old coke more?
Should new coke be a replacement drink or should it be a additional choice.
Thus, emotional attachment of loyal customers should have been considered before preparing
marketing strategy.
Proper Project Development Methodology
Agile method should have been used as project development methodology. It is the iterative development
process. In this kind of methodology, there is direct contact with its customers for their feedbacks and
suggestions which is used as a requirement gathering center for iterative development of project. There
is iteration between testing and development phase until objective is not complete. And after that it
moves to the further step. This method of project development would have been best for new coke
project. Customers feedback was most important for them to make marketing plans about lunching new
flavored coke. They focused more on producing new formula which would taste better and gave less
attention to customer’s feedback towards replacing the product. Agile method would have solved this
problem.
Proper Product Testing
Taste test was not just enough for Coca cola company to assume that new coke would be a success. They
should have conducted many other kinds of test to finally assume that product could be a success. They
should have done home test as well. Which mainly deals with if people will suggest a product to their
family and friend for long run. This could have been conducted by releasing product in certain locations
and after a while taking customers feedback on would they refer the product to their family and friend in
long run. And also, at creating formula they should have created many other formulas and make sample
population drink different formulas for different period of time and ask them which one of the formulas
would they prefer for their family and friends.
Product comes after Customers
While Product is produced, it must always answer yes to the question “Does it meet all the requirements
of customers?”. Product are always made for the customers, not customers are made for the product. In
Nepali we have a saying “Customers are like god.” So, from this statement we can know the value of
customers. Customers should be asked what do they want in their new product. And the giants like coca
cola with millions of customers should have asked this question to their customers and from their valuable
feed back should have produced the product. And using agile method continue to test and develop the
formula until all the requirements are meet. A survey could have solved this problem.
Conclusion
Thus, good marketing strategy would give success to a product but if neglected even big business giants
like coca cola have to bear the loss in millions. Proper development methodology like agile with advantage
of getting feedback from customers for their product development could have took new coke to success.
Market research is also one of the most crucial things before starting production. In spite of great loss of
time, effort and money Coca cola company raised like never before. They surely learnt a lesson from this
failure.