Click here to listen to Great Business Stories episode on New Coke
This is the story of New Coke, one of the biggest product launch blunders in modern business history that rocked America in mid-1985. Some articles refer to it as an early example of the culture wars, and there is some truth to that. However, for me, the story of New Coke is where one of the most successful CEOs of the 20th century took a huge risk that went terribly wrong, yet ultimately turned out relatively well for the company.
It's a lesson in the necessity of taking risks and how to handle the fallout when those risks don't pan out. It's also a lesson in how mistakes can be made when people become blinded by data and how fierce competition can distract us and often lead us to look at the wrong problem.
While we don't have time to delve into the complete history of Coke or Pepsi, each deserving of their own episode, it's crucial to understand the significance of the Coke brand in American heritage, as Coke is very much woven into the fabric of American culture.
Most of us know that Coke was created in 1886 by John Doc Pemberton in Atlanta, but under Pemberton, it was just a local tonic sold to pharmacies in the city. After Pemberton's death two years later, local businessman Asa Candler bought it for $2,300. Candler was a remarkable marketer and grew the brand with the help of a deal he made with two businessmen who set up bottling factories across the country. By 1910, there were Coke bottlers in over 350 towns and cities throughout America, giving Coke an unmatched reach and visibility.
The real growth, however, came when Candler sold Coke in 1919 for $25 million (equivalent to about $900 million today, according to measuringworth.com), and Robert Woodruff took over. Woodruff would go on to run Coke for nearly five decades, and under his watch, Coke grew to become perhaps the most recognisable brand worldwide.
Woodruff developed the Coke-Santa link to counter low sales during the cold winter months, forged close ties with various presidents, allowing Coke to avoid sugar rationing during World War II, and secured government funding to build overseas bottling plants to supply US soldiers during the war, laying the foundation for Coke's international business.
Woodruff also promoted the mythology of Coke's secret formula – that only two people in the company ever know it at any one time and that it's locked away in a vault. Unlike any other consumer product, Coke's formula was always a significant part of the product's heritage, adding to its mystique and uniqueness.
Pepsi, on the other hand, had none of Coke's mystique or worldwide success for the first 70 years of its existence. Up until the late 1950s and early 1960s, Coke had a 60% share of the soft drinks market, while Pepsi had about 10%.
However, massive societal changes in the USA were about to have a significant impact. The suburban population doubled between 1950 and 1970, and the importance of small-town grocery stores with limited stock dwindled, replaced by large supermarkets offering a wider range of soft drinks, including private-label brands. By the late 1970s, own-brand soft drinks accounted for 20%-40% of supermarket soft drink sales.
As a result, Coke's market share dropped from 60% in the 1950s to under 24% by the late 1970s. Pepsi, on the other hand, started growing in 1963 when Donald Kendall became CEO and launched the successful "Pepsi Generation" advertising campaign.
Under Kendall's watch, Pepsi launched Diet Pepsi in 1964, 18 years before Diet Coke, and was the innovator, introducing 2-litre bottles and lightweight plastic bottles.
In the 1960s and 1970s, Coke became known for being bureaucratic, slow-paced, and conservative, focusing more on international markets. The idea of bringing out another drink with the Coke name was unthinkable.
Throughout this period, Pepsi ate into Coke's market share. Before the Pepsi Generation launch, Coke outsold Pepsi 6 to 1. Within 12 years, it was less than a 2-1 margin – in 1975, Coke sold 1.1 billion cases in the USA, while Pepsi sold 775 million.
During this period, while Coke did have some advertising successes, most notably the iconic 1971 hilltop ad "I'd like to buy the world a Coke," overall, their marketing was conservative, focusing on homespun, good old American values, while also sponsoring major sporting events like the Olympics and World Cup.
In contrast, Pepsi's generation ads focused more on youth and people who wanted to identify as youthful, active, and young at heart.
In 1975, Pepsi launched one of the most iconic and successful campaigns ever – the Pepsi Challenge. Pepsi filmed members of the public doing a blind taste test between Coke and Pepsi, in which Pepsi won, allowing them to rightfully boast that people preferred the taste of Pepsi.
It was a bold, confrontational, and hugely impactful strategy. The Pepsi Challenge was first tested in Dallas, their worst-performing market, where Pepsi had only a 6% market share, with Coke and Dr. Pepper dominating. However, within 12 months, Pepsi had increased its market share to 14% in Dallas – an 8% jump – and they decided to roll out the campaign nationwide.
The impact was significant – within three years, sales of Pepsi had increased by almost 30%. By 1978, Pepsi was selling just under 1 billion cases per year in the USA, while Coke's sales remained stagnant at 1.1 billion.
While it's impossible to attribute the 30% rise solely to the Pepsi Challenge, as the Pepsi Generation campaign continued simultaneously and was also very effective, the Pepsi Challenge and Pepsi Generation campaigns continued to run in the 1980s, and Coke was very worried about losing their number one spot in the USA to Pepsi. Indeed, while Coke retained the top spot by the slightest of margins, their position was mainly due to McDonald's and Hardee's serving Coke.
When it came to supermarket sales, where consumers actually had a choice, Pepsi was outselling Coke by the 1980s.
Coke was in trouble – they needed new leadership, new ideas, and a big change. That change came in the form of Roberto Goizueta, a Cuban native who had graduated from Yale with a degree in chemical engineering and moved back to Cuba to work in a Coke bottling plant, quickly rising through the ranks.
However, once Castro came into power and nationalised all businesses, Goizueta managed to flee Cuba and started working for Coke in the USA, where he again quickly rose through the ranks to become their youngest VP at age 35 in 1966. He caught the eye of Robert Woodruff, who, although no longer running the company, was still very much involved in the business.
While in charge of Coke's Technical Division, Goizueta developed a centralised/decentralised strategy whereby all technical processes would be fine-tuned and standardised in Atlanta, and trained technicians would be sent around the world to Coke's bottlers to ensure they all employed the same standards. This was a significant change for the time and had a big, positive impact on Coke's business, marking Goizueta as a future leader to Woodruff, although he was not considered a potential heir by others within Coke or in the business community or media.
By the late 1970s, Coke's CEO J. Paul Austin's health was declining, and Woodruff realised they needed radical change to take on Pepsi. There were a handful of top executives in the running, and up to this stage, in Coke's nearly 100-year history, every CEO had not only been American but also a native Georgian.
It was a big surprise to many when Woodruff recommended Goizueta for the role. However, one man who didn't seem surprised was Don Keough, a senior Coke executive favoured by the bottlers to become the next CEO. Keough made a deal with Goizueta before Austin's successor was named – if Keough got the job, he'd make Goizueta his number two, and likewise, if Goizueta got the top job, he'd make Keough his number two.
It ended up being a good deal for both of them, as under their stewardship, Coke flourished.
When he came to power, Goizueta stressed that everything would be up for examination and change if necessary, stating, "no sacred cow in the way we manage our business, including the formulation of any or all of our products."
Goizueta moved very fast – one of his first actions was to meet with the bottlers, as he felt they had been neglected and many of them, now third-generation bottlers, had lost interest in the business. He offered to buy up any bottler who wanted to sell, invested in new machinery, and then resold these factories to the more ambitious bottlers who wanted to expand their operations.
He implemented the centralised/decentralised strategy he had used for the technical division across the entire Coke operations, including accounts, procurement, and branding. This resulted in huge cost savings, with one of the most significant being the green light given to bottlers to replace sugar with the much cheaper high fructose corn syrup.
Next, he did what previous Coke bosses had thought sacrilege – he launched a new drink under the Coke brand, Diet Coke, in 1982. It proved to be a huge success, becoming the third best-selling soft drink in the USA within three years, behind regular Coke and Pepsi.
In 1982, Goizueta also bought Columbia Studios for $750 million, a strange tie-in. The idea was that Coke's huge profits would provide the studio with a buffer for any movies that didn't succeed, while Coke would profit from the blockbusters. Goizueta's main aim was to diversify Coke so that up to 25% of its revenues came from its entertainment business. Initially, this strategy seemed good, with Columbia producing some huge blockbusters under Coke's ownership, including Tootsie, Gandhi, and The Karate Kid, as well as some notable flops like Ishtar.
Ultimately, having a movie studio was not a good fit for Coke, but they managed to sell it in 1987 for $3 billion, realising a healthy profit. The purchase also underlined Goizueta's appetite for risk, as he is quoted saying, "If you take risks, you may fail, but if you don't take risks, you will definitely fail – the greatest risk of all is to do nothing."
In his first few years, Goizueta's sweeping changes had a significant and positive impact on the bottom line and share price. Within five years of being in charge, Coke's stock price had nearly tripled.
Yet, as Coke was nearing its centenary, Pepsi continued to nip at its heels. Beverage Digest, a widely followed industry newsletter, stated that in 1984, Coke held a 21.7 percent market share in the USA compared with 18.8 percent for Pepsi.
The Pepsi Challenge campaign continued to provoke Coke, challenging and taunting them, telling the world that most people preferred Pepsi. While Pepsi never gave an exact figure, they stated that over 50% preferred Pepsi in these taste tests. Even when Coke did their own in-house blind taste tests, they were getting the same results – on average, Pepsi was preferred by 58% vs. 42% who preferred Coke, a significant 16% margin.
Coke started to doubt the taste of their product, asking if it was time to consider changing the formula. After all, Coke had more shelf space, twice as many vending machines, was served by the biggest restaurant chains, and spent $100 million more than Pepsi every year in marketing, yet Pepsi was catching up.
The Pepsi Challenge had been taunting Coke executives for years, and the groundwork that led to the eventual introduction of New Coke was started by Goizueta just a few months after taking over as CEO.
However, it took until 1984 for the chemical engineers to find what they believed was a taste that could resoundingly beat Pepsi. Their in-house taste tests were unequivocal – this new formula was a winner, consistently beating both Pepsi and Coke.
Goizueta tasked his top marketing people to undertake extensive research, and the project was named "Project Kansas," after a famous photo that hung on the walls in Coke's HQ of Pulitzer Prize-winning journalist and editor of a Kansas newspaper, William Allen White, sitting and drinking a Coke.
Project Kansas was a huge undertaking, with the Coke team comparing it to the Normandy invasion in internal documents. While that's a bit of a stretch, the resources, research, and preparation that Coke invested into this project were immense, involving over 200,000 people in taste tests, extensive surveys, and focus groups.
The people in Coke's ad agency, McCann Erikson, had to work in secrecy, working normal hours in the ad agency's building, then leaving in the evening to reconvene in a secret location where security guards manned the entries, and no documents were allowed out of the building.
Before launching, they had to consider whether to have New Coke as the sole Coke product or introduce it as a new product while retaining old or regular Coke. After much deliberation, they decided to discontinue old or regular Coke altogether, another big decision. It's one thing to bring out a new cola drink but discontinuing a drink that millions of people loved was a big move.
There were a few reasons for doing this:
- The bottlers let it be known that they were not interested in adding another product to an already bloated line. Coke had just added Diet Coke, Caffeine-Free Diet Coke, Caffeine-Free Coke, and Cherry Coke. The top brass was also pushing for the addition of Diet Cherry Coke and Minute Maid Orange Soda. These new products increased bottler costs tremendously.
- They were worried that a new Coke would simply cannibalise the sales of old/regular Coke, which would, in turn, allow Pepsi to become America's number-one cola.
- A new Coke would invite "invidious comparison" between the two Cokes in the media and the public that would ultimately hurt the sales of both brands.
- And which brand would McDonald's choose? What problems could this cause?
Of course, there were other issues to overcome.
How would they market New Coke?
Throughout its 100-year history, Coke had been marketed as "the real thing" and "Coke is it." They had harnessed the mythology of their secret formula, and it was this unique cola, the real thing, the Coke of the secret formula, that was the best cola there was, and that was part of its heritage.
How were they going to overcome this?
Also, just the year before launching New Coke, they had a nationwide TV campaign fronted by Bill Cosby where he more or less derided Pepsi and other colas for their sweeter taste, yet New Coke was markedly sweeter.
These were big obstacles to overcome, and they proved to be significant stumbling blocks when it came to New Coke's launch. But for the launch, they went with a pretty good tagline: "The best just got better."
The day before the big launch, April 22nd, Goizueta and Keough met with their US bottlers and told them that they would be launching New Coke the following day. They got a standing ovation; the bottlers were thrilled that Coke was taking such a huge step that they believed would counter Pepsi's growth.
And so, on April 23rd, 1985, Goizueta and Keough announced the introduction of New Coke at a press conference held at the Lincoln Center in New York.
The launch did not go well. When you watch it, you can see how nervous Goizueta is when he announces it. Keough comes across as a more polished performer. It's a bit surprising as Goizueta was normally a very confident and funny guy, so I guess the enormity of the moment just got to him a bit. However, this wasn't the real problem. The real issue is that many of the journalists had been forewarned about this by none other than Pepsi.
Apparently, Roberto Enrico, the young CEO of Pepsi, had gotten wind of New Coke from an insider who was codenamed "Deep Palate," and this allowed Pepsi to prepare.
Initially, Enrico was threatened by the arrival of New Coke. If it could beat Pepsi at their own challenge, what could he do? However, he and his key executives soon saw New Coke for what it was: an admission that Pepsi had won the war. Pepsi had forced Coke to change its mythical formula. Coke threw out 100 years of heritage, history, and mythology. They sweetened their product to take on Pepsi, or in the words of Enrico, "Coke blinked."
And so, in the days preceding the press conference announcing New Coke, Pepsi's PR team contacted lots of the journalists who would be attending and prepped them with talking points and questions that they could ask Goizueta and Keough, all focused around the fact that Coke had sweetened their product as a result of the threat from Pepsi.
While Goizueta and Keough tried to stick to their message that "the best just got better," journalists peppered them with questions about the sweetness of New Coke. Goizueta never once mentioned that New Coke was sweeter, despite the fact that it obviously was. To do so would be to admit that this was all about the Pepsi Challenge. Instead, he used words like "bolder," "rounder," and "more harmonious." But all you had to do was take one taste of New Coke to realize that it was much sweeter.
So, from the get-go, and with a little bit of help from Pepsi, the media had their minds made up. Coke had caved. Pepsi ran a full-page ad in the New York Times on the very same day of New Coke's big launch declaring that "The Other Guy Blinked." Pepsi also held their own celebration event on the same day, declaring that "Victory is Sweet," a great line given the circumstances. They even gave their staff the day off to celebrate their victory.
Enrico then went on national news shows that same day, repeating the lines that victory was sweet and that the other guy had blinked.
It was not a good start for New Coke. However, initial research showed very positive recognition of New Coke. In fact, 96% of the adult population was aware of New Coke. To put that in context, more people knew about New Coke than knew who the president of the USA was. And initial sales results fell very much in line with Coke's research. In the first few weeks, sales of New Coke increased by 8%.
However, the good news didn't last long for Coke. Their head office was getting thousands of calls every day from Coke drinkers around the country who were totally opposed to New Coke. Organisations were formed, people started demonstrating, and bottles of New Coke were being poured out on the streets.
And what you have to realise here is that this was 1985, and while there was no social media, this was a time in America when news had become the battleground for TV channels. CNN had launched the first 24-hour rolling news station in 1980, and since then, there had been a proliferation of news on TV, with local and national stations vying for viewers. Many scholars mark the 1980s as the beginning of a slide in the quality of American journalism.
New Coke was the perfect story for journalists and reporters: a corporate giant, indeed an American institution, changing its famed product, a product that was a symbol for America all around the world, an outraged public, tens of thousands of complaints, and protests on the street.
Coke was expecting some backlash, but they never expected it to get so heated and so large.
Also, at the same time, Pepsi had the highest ever increase in sales. Their sales in May were 14% higher than the previous May. Pepsi were really hitting Coke hard. They were quick to bring out ads where actors playing disgruntled Coke drinkers asked why Coke changed their formula without asking them. Then, after taking a drink of Pepsi, the actor exclaimed, "Now I know why."
Added to this, the initial sales increase started to flatten out, but most importantly for Goizueta was that he started getting blowback from the bottlers. This was vital because when Goizueta took the CEO role, he made a point of paying more attention to the bottlers. They were Coke's eyes and ears on the ground, and when he took over, Goizueta promised that he would take their feedback seriously.
Within two months, Goizueta decided to reverse the decision. When you take into account the fact that Coke and its bottlers had over $30 million worth of New Coke syrup, the fact that this had been one of the biggest, most expensive and public product developments and launches, the fact that all of the research still pointed to New Coke being preferred over Pepsi and original Coke by most drinkers, and the fact that this would be one of the biggest, if not the biggest, climb downs in corporate history, you realise that this was a huge decision. But it was the right decision. In his Goizueta's words: "If you make a decision that doesn't pan out, then you move quickly to change it."
The speed at which they reversed their decision was pretty remarkable. It took just 76 days for Coke to hold a second press conference and hold up their hands. They admitted that they underestimated the level of passion from their loyal customers.
They didn't discontinue New Coke. Goizueta still wanted to see if New Coke could do well. Instead, they renamed old or original Coke as Classic Coke. Goizueta wanted to give New Coke a fighting chance at least, but it never took off. It was eventually discontinued in 2002. There had been such a groundswell of appreciation that original Coke was back that their head office received tens of thousands of letters and phone calls expressing customers' gratitude.
McDonald's changed back to original or Classic Coke, and while Pepsi momentarily overtook Coke as the US's number one beverage as a result of the New Coke debacle, by 1986, Coke was back in the top spot and has never relinquished it since then.
Indeed, while overall cola sales have decreased, as you'd expect with the huge levels of competition in the soft drinks market, Coke is still the number one soft drink in the USA and worldwide by quite a considerable margin. The latest figures I have from the USA put Coke's market share at 17.4%, Diet Coke comes in second place at 9%, and Pepsi is third at 8.9%.
It should be noted that, as always, there were many conspiracy theories around New Coke. The most prominent one was that this was all planned. Coke deliberately removed original Coke in the expectation that it would cause a groundswell of support for the drink, so that they would increase sales when they brought it back.
But in a memorable line from Keough, and a line that I think can be used to debunk a lot of silly conspiracy theories, Keough said: "We're not that dumb, and we're not that smart."
Before we examine the reason why Coke bounced back so quickly and how Goizueta fared after such a huge mistake, let's look at how they got it wrong.
Coke had spent millions on research, and not just on taste tests but also on focus groups and surveys. What's interesting is that in both the focus groups and the surveys, the data suggested that about 10-12% of Coke drinkers would be unhappy if Coke replaced the existing Coke with New Coke.
But more interestingly, the data also showed that in focus groups where you had maybe 10 or 12 people, while only one person initially voiced dissatisfaction if old Coke was replaced, this person's objections were taken up by other people in the focus group, leading to four or maybe five people voicing similar objections. In other words, in a group, one person's objections can be amplified and will influence other people who will agree with those objections and jump on board. It's a phenomenon that we're more familiar with now called social influence. In other words, all it takes is for a few people to get all enraged about something, and then other people pile in, and it can spread like wildfire.
In the case of New Coke this resulted in thousands of people protesting across the country. Some of these, in fact, I believe a lot of these were genuinely aggrieved Coke drinkers who just couldn't believe that the Coke taste they loved was being taken away from them. I can sympathise with these people because back in the day, I was an avid Coke drinker.
But as Tim O'Malley points out in an excellent article that he wrote for Mother Jones about New Coke, there were also a loud cohort who were objecting for other reasons. Some because they just didn't want change; for them, it was a culture war thing. Others were just out to get their faces on the news and raise their profile. Combined, these objectors fanned the flames, and the increasingly competitive news media lapped it up, spread it, and amplified the feelings of the objectors, and this, in turn, through social influence, led to more and more people objecting to the change.
In fairness, I think that it's hard to blame Coke for overlooking this element of the research, so I'm willing to give them a pass on this one. However, I think where you can blame Coke is for a few other things, mainly to do with the taste tests.
First of all, taste tests have proven to be unreliable. In a taste test, you're sipping just a small amount of a drink. Malcolm Gladwell, in his book Blink, goes into great detail about this, but basically, a sip test will favour a sweeter drink, but it has no impact on how we taste drinks when we're sitting at home drinking a large glass or can.
The other phenomenon that Gladwell talks about is sensation transference, and the nub of this point is that a product is not just what we taste; the packaging is part of the product. People make unconscious evaluations about a product based on its appearance. In other words, we also taste with our eyes, and I know people might scoff at this idea, but it has actually been proven. So testing a product without testing the package is not a reliable way to test it.
Blind taste tests are indeed irrelevant, and Coke should have been aware of this, considering the idea of sensation transference was developed in the 1940s. In fact, Coke did know about the fallibility of sip tests. When they started coming under pressure from the Pepsi Challenge, they initially countered it by pointing out that sip tests weren't a reliable way to test taste. Apparently, they had their own research showing that when consumers did at-home tests, drinking a few glasses of the products, Coke came out on top.
Moreover, the data from the sip tests themselves should have made it clear that the results weren't a true reflection of people's buying habits. As already mentioned in this article, when Coke did their own internal testing to verify if people preferred Pepsi, their results showed that 58% of people preferred Pepsi. If Pepsi was preferred by that many more people over the 10 years of the Pepsi Challenge from 1975 to 1985, then Pepsi would have overtaken Coke well before 1985.
The big mistake Coke made was focusing on taste and not questioning their image. When it comes to soft drinks, image is a hugely important factor, as evidenced by Red Bull's success.
Throughout the 60s and even before the Pepsi Challenge in 1975, Pepsi had been slowly but surely eating away at Coke's market share. In the 1950s, Coke outsold Pepsi by 6 to 1. By 1975, 12 years into the Pepsi Generation campaign, Coke was selling 1.1 billion cases in the USA against Pepsi's 775 million. The Pepsi Generation campaign, which focused on baby boomers and youth, was an excellent strategy and a great example of lifestyle marketing. It had a huge impact on Pepsi's sales, albeit more subtly than the Pepsi Challenge.
When Pepsi introduced the Pepsi Challenge in 1975, they didn't drop the Generation campaign. The Generation campaign continued to be very successful, while the Pepsi Challenge was more visible and in-your-face, definitely taunting Coke.
So let's Coke's image and relevance. Our research kept mentioning how conservative and bureaucratic Coke was in the 60s and 70s and that everything changed with Goizueta. While Goizueta was a breath of fresh air and made sweeping organisational changes, when we look at the advertising campaigns for Coke and Pepsi in 1984, we see that Coke was represented by Bill Cosby – middle-aged, middle-class, middle-of-the-road Dr. Huxtable. In contrast, Pepsi had Michael Jackson, the biggest, hottest star in the world at the time, for whom they had signed for a record fee and spent over $7 million on two ads.
It's surprising that Coke couldn't see that Pepsi might have had the jump on them in terms of relevance and that Pepsi's Generation campaign, which had been ongoing for 22 years, might have been a major factor in their growth. The issue was one of image, not taste.
Some of this might have to do with Goizueta's background. He was, after all, a chemical engineer, not a marketer, so he was more inclined to view the declining Coke sales as a product problem rather than an image problem. He had already spearheaded the change from using sugar to high fructose corn syrup, so changing Coke wasn't new to him.
Also, he had overseen the successful launch of Diet Coke, which had a considerably sweeter taste and had beaten Pepsi in their own blind taste tests before launching. This convinced him that the sweeter taste of Diet Coke was what people wanted.
It's also important to consider that Goizueta had been in the job for four years and had made a lot of big decisions, most of which had worked out. He was lauded by shareholders and the business press, so he was very much emboldened by this point.
But he got it wrong. Coke had a relevance and image problem, not a taste problem.
So, if the Pepsi Challenge and Pepsi's New Generation ad campaigns had been so successful up to this point, why did they stop being successful after the New Coke fiasco?
The first factor that contributed to Classic/Original/Regular Coke winning back the number one slot and ensuring Pepsi never regained it was definitely down to Goizueta. He realised his mistake and quickly rectified it, just 76 days after the launch of New Coke, despite the public embarrassment it would undoubtedly cause him and the $30 million lost in syrup. When he made the announcement, the Coke story was still relevant enough to make headlines, so all this huge negative publicity turned into good news. There was an outpouring of goodwill and gratitude that original Coke was back.
Moving quickly and decisively while Coke was still in the news was a good move by Goizueta.
More importantly, the whole New Coke debacle actually played into the Coke mega-brand strategy that Goizueta had devised and launched in 1982 with the launch of Diet Coke. Before Goizueta's appointment, the feeling at Coke was that there could only ever be one Coke drink. The belief was that bringing in more Coke products under the Coke brand name would dilute the brand.
Goizueta thought differently. He believed that the Coke brand should be used to full effect, and his Coke mega-brand strategy was to launch several new drinks under the Coke brand, starting with Diet Coke. By 1985, there were seven types of Coke: Classic, New Coke, Diet Coke, regular and diet Cherry Coke, and regular and diet caffeine-free Coke. The image of Coca-Cola is the image of all seven products combined. In effect, more Coke products equals more shelf space, equals more ads with the Coke brand being front and centre, equals more recognition, equals a broader customer base, equals the Coke brand just being bigger than ever before.
In 1981, Coke did a survey of 16,000 people. 36.3 percent of those surveyed said they either drank Coke exclusively or preferred it, compared to about 33.5 percent for Pepsi. That breakdown was consistent for the next four years. But the year after the New Coke debacle, 54.6 percent of the respondents said they either drank Coke exclusively or preferred it. Pepsi got a 27 percent score.
While it's hard to say for certain all of the different elements that led to such a big turnaround, the prospect of losing original Coke definitely re-energised the brand and helped increase sales. When coupled with Goizueta's long-term mega-brand strategy, it's clear why Coke got back its number one spot and has maintained it ever since.
Coke was right not to fire Goizueta. He had built up considerable credit before the New Coke fiasco, and he went on to become one of the greatest CEOs of the 20th century in terms of shareholder value. When he took over in 1980, Coke's market cap was $4.3 billion. When he retired in 1996, it was an incredible $152 billion.
There are a lot of lessons to take from this, but the main one is that you should never, under any circumstances, abandon your most loyal fans. Never abandon your base.
If you're going to take a big risk like Goizueta did, it always helps if you've got a lot of credit in the bank.
And finally, when you realise that a decision is a mistake, you admit it, take responsibility, and then correct it as quickly as possible.
Sources
Book: The Real Coke, The Real Story by Thomas Oliver
https://web.archive.org/web/20191211062459/http://www.coca-colacompany.com/stories/coke-lore-new-coke
https://www.motherjones.com/food/2019/07/what-if-weve-all-been-wrong-about-what-killed-new-coke/
https://www.youtube.com/watch?v=Tz-47sI-AYM
https://www.youtube.com/watch?v=2dDk76kwjXg
https://www.youtube.com/watch?v=4YB3MkLsdJc
https://www.youtube.com/watch?v=T-8mKTAkYa4
https://time.com/3950205/new-coke-history-america/
https://web.archive.org/web/20060515214006/http://members.lycos.co.uk/thomassheils/newcoke.htm
https://www4.ntu.ac.uk/library/document_uploads/125898.docx
https://www.nytimes.com/1995/04/11/business/company-news-ten-years-later-coca-cola-laughs-at-new-coke.html
https://www.nytimes.com/2015/02/25/business/donald-r-keough-who-led-coca-cola-through-new-coke-debacle-dies-at-88.html?searchResultPosition=19
https://www.youtube.com/watch?v=rX6d88VD7lw
https://www.youtube.com/watch?v=ToYfRlEDY_E
https://www.nytimes.com/1997/10/19/us/roberto-c-goizueta-coca-cola-chairman-noted-for-company-turnaround-dies-at-65.html
https://www.wsj.com/articles/former-pepsico-ceo-roger-enrico-dies-at-71-1464882478
https://www.upi.com/Archives/1984/11/06/Pepsi-Coke-turn-to-corn-syrup/2049468565200/
https://www.upi.com/Archives/1984/11/06/Pepsi-Coke-turn-to-corn-syrup/2049468565200