On this day in 1985,
Coca-Cola pulled one of the biggest blunders in history. Ok, maybe I exaggerate. But the blunder they pulled was enormous. The
company announced that it was changing the formula of its flagship
product. What was meant as an update to
a venerable product turned into one of the greatest episodes of managerial
incompetence that generations of future college students will study every which
way. The 1980’s were the Cola War years
in which Pepsi decided it would go after Coke like never before. Pepsi started gaining market share (they had
actually gained market share throughout the 1970’s), and Coke blinked. They decided they needed to do something big
to hold off Pepsi and revitalize the Coke brand.
People were furious at
Coca-Cola’s decision. They became even
angrier when they got a taste of the “New Coke.” The company was inundated with angry phone
calls. CEO Roberto Goizueta received an
angry letter addressed to “Chief Dodo, The Coca-Cola Company.” Protest
groups sprang up, the most notable of which was The Old Cola Drinkers of
America, led by a man named Gay Mullins. Shortly after its release, one poll of
soda drinkers showed that only 13% liked the taste of New Coke.
Just 79 days later, on
July 11, 1985, Coca-Cola reversed its decision and announced it would bring
back its old formula under the name “Coca-Cola Classic.” It turned out to be a
stroke of genius. People celebrated the
return of the old formula, and the Coke brand was revitalized.
Why did Coke change the
formula in the first place? As mentioned
above, Pepsi had gained market share versus Coke for 15 consecutive years. Coke conducted blind taste tests all over the
country, and over 200,000 people participated. The results of the taste tests
convinced Coke executives that they needed to change to a sweeter formula
because that is what consumer preferred.
Why did the formula change backfire?
The company simply did not realize the loyalty of its customers.
In the old “Coke vs
Pepsi” battle, I have always been a Coke guy.
I am also a big believer in not messing with a good thing. And the business lesson here is keep in touch
with your customers. Gain their loyalty,
and maintain it. Find out what makes them prefer your product. The marketers
and the taste testers could not measure that loyalty. Plus, they did not appreciate the mess that
can be created when you fix something that is not broken.
Ultimately, Mr. Goizueta
would go on to become a legendary CEO, turning Coke into the world’s most
valuable brand before his death in 1997.
He, along with his sidekick, Donald Keough, took full advantage of the
Communist collapse of the late 1980’s and early 1990’s to beat Coke into
Eastern Europe and Asia. Their blunder
also revitalized the Coke brand in the United States. In short, Coke reasserted its dominance over
Pepsi. But, Mr. Goizueta was also quite
stubborn and never could admit that changing the formula in 1985 was a huge
mistake. Hopefully, he learned something from it.
And as for Mr. Mullins
who led the protest group, The Old Cola Drinkers of America? He received the first cans of Coca-Cola
Classic that rolled off the assembly line in 1985.
Now, if we could only go
back to glass bottles. Coke was not
meant to be consumed from aluminum cans or plastic anything. Coke should only be consumed from glass
bottles, or glasses containing Coke dispensed from a fountain. But that’s the next fight.
