In the 1980s, the Atlanta-based company, Coke, was losing its market share to rival Pepsi and in order to win back consumers who were swayed away by Pepsi’s popular taste test “experiments,” TV advertisements in which blindfolded consumers voted in favor of Pepsi over Coke. Coke made a disastrous effort to modify its famous formula and introduce NewCoke, a sweeter version of the classic billion-dollar recipe.
NewCoke failed big time, and the sales of Pepsi briefly rocketed. But Coke’s response to the crisis offers a lesson in managing innovation gone wrong. The company apologized to the 4,00,000 customers who wrote letters of complaint, the company shipped its old formula to stores as “Coca-Cola Classic,” and gradually but steadily reduced NewCoke’s distribution. By the time the hated new formula disappeared for good, consumers had all but forgotten that it had ever existed.
Today if you have to look at who’s on the top, well surprisingly it’s Coke, and Diet Coke and Pepsi fighting for second place.
Americans are contributing to a new challenge by reduction of the intake of soda, with volume dropping by 1.4 billion cases since 2004, and more of nearly everything else—energy drinks, green juices, flavored waters, artisanal iced teas. In these new categories, Coca-Cola has yet to replicate the brand magic that has sustained its sales for decades.