A CASE STUDY ON NEW COCA COLA IN US MARKET

BY

ANKITA AGARWAL

SUJATA RAMTEKE

INTRODUCTION

• On April 23, 1985, Coca-cola launched a sweeter version of the soft drink named ‘New Coke’, withdrawing its traditional 99 year old formula.

• Though the initial market response to New Coke was satisfactory, things soon went against Coca-Cola.

• Because of consumer protests to New Coke and a significant decline in its sales, Coca-Cola was forced to revert back to its original formula.

BACKGROUND NOTES

• The original Coke was developed by John Pemberton in 1886.

• It was based on a combination of oils, extracts from coca leaves & various others additives including caffeine.

• On may 8,1886 coke was released in the market.• The first advertisement of the coke appeared in “Atlanta

Journal” on may 29, 1886.• Pemberton spend huge amount on advertising

& sell 50 gallons of syrup at $1 per gallon

• To make the drink popular it was served free

for several days – after this, drink got acceptance.• After the Pemberton’s death, his friend “Asa Candler” &

a wholesaler druggist acquired stake in the company.• Positioning of coke:- In 1895 coke was advertised as a

drink which relieved one of mental & physical exhaustion & cured headache.

• Repositioning of coke:- later coke was repositioned as a refreshment drink.

• It was found that coke contain caffeine in it, in a huge amount which is injurious to health. Due to which it was criticized & a case was registered against coke, which was settled outside the court & coke agreed to reduce amount of caffeine by 50% in coke.

• In 1991 company was sold to Ernest Woodruff, who took a major decision of establishing foreign department to make coke popular overseas.

• By soft drink sales in the US had risen to 200 drinks per capita,& coca cola’s market share had risen to 41% against Pepsi 24%.

• In 1970 Pepsi advertisement budget exceeded coca cola’s.• Due to the rise in Pepsi sales coca cola market share declined.• 1978 Pepsi was found to be beaten coca cola in supermarket

sales because of its dominance in vending machine.

COMETITOR

THE RATIONALE

• Goizueta’s ‘focus strategy’ could not stop the decline in Coca-Cola’s market share, which fell from 24.5% in 1984.

• Coca-cola’s distribution wider than Pepsi, which had enabled it to be the leader in the soft drinks industry yet in 1984 Coca-cola’s overall market share had dropped from 9.8% in the early 1970 to 4.9%.

• This became a major cause of worry for the top management of coca-cola.

• During the middle of 1983, the idea of reformulating 99-year old Coke formula struck Goizueta.

• The purpose was to increase Coca-Cola’s market share as well as to defend its position as the market leader.

• A thorough market research was conducted which included interviews with about 2,00,000 consumers.

• In some cases, response was contradictory.• After Blind taste test it was discovered that many people

preferred Pepsi to Coke because Pepsi was sweeter.• Coca-Cola felt that the sweeter taste would appeal more to

teenagers and youth, it decided to launch a sweeter version of Coke, the taste would be similar to Pepsi.

• Coca-Cola also conducted a Focus group research that revealed that many people were willing to try New Coke.

• Both the surveys (Focus group and Survey research) indicated consumer dissatisfaction and their results were contradictory to each other.

• Coca-Cola ignored it and decided to launch New Coke based on results of the blind taste tests.

The launch and its aftermath

• Coca Cola launched new coke in April 1985 with the punch line “Catch the Wave”. This change in coke’s formula was publicized through the TV and news papers. The announcement reached more than 80% of the American population within 24hr.

• The initial response to the product was encouraging with distributors reporting a fairly wide acceptance of it. Analyst come up with a reason that people had not tasted the new coke so, there is curiosity to taste the new coke that is why the sales went up initially.

• Slowly consumer found that its taste is similar to that of Pepsi and the sales starts declining, and distributors began to accept less stock of new coke, later they did not stock any because of poor consumer response. A majority of Coke lovers criticized the company’s act of changing the 99 year old formula.

• Some old coke lover said that original coke had a unique taste that was stronger than new coke. One of the coke lover also said that company has spoiled the 99 year old soft drink and betrayed the nations trust. By the end of May 1985, the scenario had worsened with consumer response at its lowest

New Coke what went wrong?

• Analyst attributes the failure of new coke to several factors.

• Some felt that Coca Cola has failed to understand the consumer’s emotional attachment with coke. The attachment with the brand was so strong that one of the coke lover went to the extent of wishing his bones and ashes to be preserved in coke cans after his death. But after the launch of new coke, he said he did not want to be associated with coke anymore.

• Another consumer said God and Coke is the two important things in his life.

• Pepsi saw opportunity.

Analysts also felt that people had a high regard for Coca Cola because of its innovative ideas, excellent products launch and the importance it accord to people and the environment. Also, Coca-cola was the pioneer in recycling plastic bottles.

• Some analyst felt that the findings of the market research group were erroneous and late. The research is either in an inappropriate manner or was interpreted incorrectly.

• According to analyst the research could not have measured the type of consumer feelings that were evoked from reformulation. Coca cola carried out individual interview first then undertook the focus group testing.

What went right?

• Coke chose to move forward in response to real market pressure, rather than defending their existing products.

• They had their best R&D & flavor people design the new product.

• Extensive taste testing and veteran approval were sought, and all pointed to them having a better product.

The result: 

• There was initial acceptance and the product did well it’s first weeks, sales up 8% compared to previous year.

• However public outrage grew, with groups protesting New Coke (especially strong in the south).

• By June ‘85 there was enough public pressure and complaints from bottling suppliers that Coke execs were under pressure.

• In July ‘85 Coke brought Classic Coke back to the market.

New Coke after Coke Classic

• In the short run the reintroduction of old Coke saved Coke's sales numbers and brought it back in the good graces of many customers and bottlers.

• A plan to market two Cokes where such plans had been completely off the table mere months before. Classic Coke didn't need much help, with a "Red, White and You" campaign showcasing the American virtues many of those who had clamored for its reintroduction had pointedly reminded the company it embodied.

• "The Best Just Got Better" could no longer be used.

•Thank you…..