New Coke Case Study

THE NEW COKE

1. What is the relevant history of the business discussed in the case?

The history starts when Goizueta became a CEO in Coca-Cola in 1981. Bold and aggressive, Goizueta ensured Coke's position as the world's most-recognizable brand product while making the Atlanta-based company one of Wall Street's most valuable. Goizueta's vision was to sell Coke in the whole world. Coke's success under Goizueta was to a large extent propelled by a globalization vision. In 1982, after a year into the top job, he introduced Diet Coke, which became an immediate success and now is now the No. 3 soft drink in America.

However, the problems begin due to its main competitor “Pepsi-Co”, which was aggressively trying to win the market share and fighting with tooth and nail for every restaurant chain, every supermarket display, and every vending machine opportunity, and more with the “Pepsi Challenge”. To deal with this situation, Goizueta changed the formula in 1985, only to revive Coke "Classic" three months later, because of many problems originated in the consumers.

Many analysts believe the error was due to poor market research. Although in the early 1980s Coca Cola was still the main soft drink, it was slowly reducing its market share because of Pepsi. For nearly 15 years, Pepsi had successfully launched the "Pepsi Challenge," a series of televised taste tests that showed consumers preferred the sweetest taste of Pepsi. At the beginning of 1985, even though Coca Cola led the general market, Pepsi was leading the way in the share of sales in supermarkets with a 2% difference (It does not look like much, but 2% of the gigantic US$ 64 million soft drink market represents $ 1.28 billion in sales).

Coca Cola needed to do something to stop the loss of its market share, and it seemed the solution would be a change in its flavor.

The company started the largest new product research project in the company's history. It devoted more than two years and $ 4 million to research before creating a new formula. It performed around 200,000 taste tests. In blind tests, 60% of consumers preferred New Coke over the old Coca Cola, while 52% chose New Coke over Pepsi. The investigation showed that New Coke would be a winner and the company launched it with confidence. So what happened? This will be discussed and analyzed later, being first necessary to know the external and internal environment of Coca Cola at that time.        

1. ANALYSIS PESTEL

1. POLITICAL

• Long growth period for the United States
• Macroeconomic policy, with reduction of taxes
• Firm and Orthodox monetary policy
• Health policies with the objective of obtaining health and control in the problems of obesity.

1. ECONOMIC

• United States the largest economy in the world
• Strong domestic consumption market

1. SOCIAL

• Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. Since many are reaching an older age in life they are becoming more concerned with increasing their longevity. This will continue to affect the non-alcoholic beverage industry by increasing the demand overall and in the healthier beverages. The demand for carbonated drinks decreases and this pulled down the revenues of Coca Cola.
• Protest groups emerged around the United States.
• Collective hysteria: The company had already received 400, 000 calls from angry customers. A psychiatrist, whom they had hired to analyze the messages, commented that many talked about the disappearance of Coca Cola, as if it were the death of a loved one.
• Advertisements of the new drink were announced at sporting events. And even Fidel Castro commented that the New Coke was a debacle, symbol of the decline of American capitalism.

1. TECHNOLOGICAL

• Company’s R&D departments also use advanced technologies to create and enhance new products.  Customized technologies using naturally-occurring systems help company to deliver great-tasting beverages.
• Deborah Anderson of Boston University Medical Center and her colleagues received the Chemistry Award in 1985 for a study published in the New England Journal of Medicine, which found that Coca-Cola kills sperm.
• The Palm was introduced, a tool used through a Software, exclusively designed to carry out the commercialization of the products in an organized way and without duplicating the tasks.
• Leaders in the world in scientific research.
• First developing country of patents.

1. LEGAL

Legal aspect focuses on the effect of the national and world legislation. The Coca Cola Company receives all the rights applicable in the nature of their business and every inventions and product developments are always going into the patented process.

1. ENVIRONMENTAL

The Coca-Cola system’s environmental commitments are focused on the areas in which they have the most significant opportunities to make a difference – water stewardship, sustainable packaging and energy management and climate protection. Coca-Cola vision is to advance a packaging framework in which their packaging is no longer seen as waste, but instead as a valuable resource for future use.