Coca-Cola Corporation

Americans have long accepted Coca-Cola as a component of their culture and a global brand. Since John Styth Pemberton, a pharmacist who served in the American Civil War, created the well-known beverage, it has been linked to the liberation of America from numerous political struggles. When Asa Griggs Candler took over the business from John Styth in 1892, the beverage—originally created as a headache remedy—became known as a refreshment. Later on, he gave it to Robert Woodruff, who later bought it for just $25 million. Woodruff ensured that quality controls were made and that the syrup formula was retained. Sales became a service rather than a force and this made the company grow in volume.

Although this was the case, competition thrived with its main rival, Pepsi and it has remained that way till now. After a series of adverts and hostile competition with Pepsi, the company grew in significance rivaling Pepsi by 2 to 1. The best cultural attachment made through adverts was the Coca-Cola Santa Claus of 1931 which even engraved the product into the hearts of American youths even more. It even went to war in 1940 with the GIs (Fournier 3) and even president Eisenhower ordered that ten bottling firms be established in Africa and Italy to aid in the distribution of the product. As a result, the drink became a household name and part of American success in the war and the world at large. No one wanted to be separated from the drink since it symbolized American history of war success and democracy (Fournier 3). But the unthinkable happened in 1985 when a new product called New Coke was introduced in the market to outwit what people used to call Classic Coke. From the beginning purchases were good and market share grew since people wanted to see how it tasted. The New Coke as it was referred to, was much tastier, bolder and was anticipated to rival the Classic Coke in the market. As a result of this Pepsi took advantage of this shortfall to state that it is their high level of competition that has made Coke to change its formula and allow Pepsi to be a success in the market. At this point in time, Pepsi was the main drink in the United States offering the same flavor for almost a century when Coca-Cola had tinkered. Over 8,000 petitions were sent to the headquarters and protests were all over the nation from cartoonists, musicians and even the press over the awful formula of the New Coke.

The company responded with an attitude of ‘let’s wait and see’ because they had the feeling that, things would change in future. But then three months down the line, sales began to slump and securities began to show a drop. Pepsi share in the market begun to grow to indicate that Coke had faltered in the highest degree. It forced the company executives on July 11 the same year to reintroduce the old coke after realizing that market share was growing in favor of Pepsi and that no one was interested in the new Coke.

In terms of market share, 3 months after the reintroduction of the Old Coke, the Classic coke was beating the new Coke by 9 to 1 in the market. It showed how emotionally attached were the Americans over the classic Coke. By the end of 1989 Classic coke had 19.9% market share while the new Coke had dropped to 0.9%. By 1990 the same trend went even further where the new Coke could only manage 0.7% in the market while the classic retained 19% share and this was 5.8 percent in 1985 (Fournier 36). No one was interested in the sweeter, tastier, smooth or even rounder product. All they were interested in is the product which spoke to their souls, history and culture, the Classic brand of coke.

Alternatives

Price reduction- Coke would have introduced the new Coke at a price that beats off competition from Pepsi and the old Coke. The approach should have been conducted first as a pilot project in markets that are less competitive such as Africa and China and the proceeds could be used to fund for more improvement in the product using the old Coke formula.

The results of having a product that matches the lifestyle, culture, and history of America can be challenging. But that should have been their focus from the time they were developing and introducing the new product in the market.

The best alternative after all these have been considered was to introduce the new product in the competitive American market simultaneously alongside the old Coke. The approach would be to ensure that product response is monitored and that the old Coke is not removed from the shelves of American supermarkets for good. In this approach, they would have captured both the old and the young who preferred the sugarless products and those who looked out for sweeter Coke drinks, respectively. Their biggest let down was to remove the old Coke from the market which questioned their credibility and intentions, especially from their diehard customers.

Critical Issues

The issue affecting the best alternative is the motivation behind introducing the new Coke by the executives of the company. From the beginning, their arrogant attitude over the old Coke was a letdown and they needed a lot of convincing to win credibility of the market. Culture and history attached to the old Coke remained also a challenge to maneuver and this proved their biggest shortfall. Above all, competition from Pepsi during the period was their biggest challenge to introducing the new Coke, therefore, they just had to reintroduce the old one later.

Conclusion

From the time the old formula was invented, the intention of Coca-Cola was to retain a market share of refreshment and to be a dominant household name in the market. But over a long time the company faced competition from Pepsi and this forced it to look for alternatives. Strategic options were employed and the best ones led to success stories over the years. But of them all, the introduction of new Coke in 1985 and the immediate call-up of the old one was their biggest shortfall in history. In this regard, it would have been wise if the management considered a low-cost product that was much tastier and one which matched the history of America. The introduction should have been conducted simultaneously alongside the old Coke rather than removing it completely from the market. Their decision of not retaining the old coke in the market at the time of introduction of new Coke made reception of the new one a failure and therefore they had to retrace their roots.

Work Cited

Fournier, Susan. Introducing New Coke. Harvard Business School, 2001. Print