Who dares wins - success through intelligent risk
A Coca-Cola Great Britain case study

Page 4: Strategic change in the 1980s

The 198Os heralded an era of change for Coca-Cola. On the 8th of July 1982 diet Coke was launched in the United States, starting a new period in which Coca-Cola was prepared to take risks by bringing in new products in the soft drinks sector. Within a year it had become the largest selling low-calorie soft drink in America.

In April 1985 the Company took the ultimate risk. It removed market-leading Coca-Cola from the US market and introduced New Coke. The decision was made after extensive marketing - for example by canvassing 190,000 consumer opinions and taste-tests of various Coke formulations. The launch was spectacular in that within 24 hours more Americans were aware of the birth of New Coke than had known about man's first steps on the moon in 1969. However, the market reaction did not match the research. Within days, several opinion poll showed that consumers overwelmingly preferred the original taste Coca-Cola to the new Coke. There were floods of complaints across America.

So what went wrong?

In this case, blind testing did not tell the full story. Coca-Cola had minimised the 'product' risk, but completely under-estimated the brand risk. Consumers told the company that they were going to buy the new Cola, but they were thinking more hypothetically. As a result, the company overread the research.

Consumers wanted to remind the company that their favourite soft drink belonged to them. It was more than a drink, it was a brand that was an integral and an inseparable part of their lives! Chairman CEO Roberto C. Goizueta can laugh about it today, he might even make the same decision again based on the research that was used. But few executives would have taken the risk that he and his company took.

The Coca-Cola Company listened and then dared to replace its winning formula. It was now daring enough to admit it had been wrong to do so. They meant to change the dynamics of sugar colas in the US, and they did exactly that albeit not in the way they had planned. In the end, the company learned that in order to maintain the interest and the respect of its consumers, it would have to continually differentiate its brands in ways that offered highly relevant value.

The original Coca-Cola reappeared as Coca-Cola Classic to regain the top slot as the USA's leading soft drink, while the new formula, today known as Coke II, remained on the market bringing in additional sales and gaining extra market share. By 1994 Coca-Cola USA core sugar colas volume had grown 29 per cent since 1985. The company's share of U.S. soft drink sales, which had been declining, climbed from 39 per cent to 41per cent. Today, The Coca-Cola Company stands at more than $75 billion - better than eight times what it was on April 23, 1985.

Core business

Since the 198Os the company has focused on its core business. In particular it recognises that it needs to face its past mistakes with honesty, and that the culture of the organisation needs to be based on openness. and intelligent risk- taking. The evnts of 1985 changed forever the dynamics of the soft drinks industry and the success of The Coca-Cola Company. Goizueta characterised the new Coke decision-then and now as a prime example of taking intelligent risks.

Mr Goizueta emphasized that every single one of the best people at the Company has taken some significant risks in moving the business forward. And every one of them has endured risks that failed. With the benefit of hindsight, you start to learn that the perception of risk is often based on faulty assumptions. Sometimes if you look at the decision in a different way, what appears dangerous at first is not really such a risk after all. But it is important to remember that intelligent risks are based on honesty, careful calculations and anticipated results. They are not gambles made on a whim or determind by a toss of a coin.

The Coca-Cola Company is committed to re-inventing itself for successive generations of consumers. In product terms this means offering a range of new drinks to provide a wide repertoire of refreshment - choice, variety, excitement, and fun. The company has recently launched a variety of new drinks in the United States and, of course, Fruitopia in the United Kingdom. The launch of Fruitopia and OK Soda (in the United States) in 1994 were based on 'pre-search' - not selling what you can make, but making what you can sell. Fruitopia is a line of all natural fruit juice drinks which offers variety, taste and refreshment, with a range of flavours including Passion Fruit Lemon Affinity and Blackcurrant Babylon. Fruitopia and OK Soda reflect The Coca-Cola Company's emphasis on creating value by actively meeting consumer needs with new products. These new products will support existing brands and help to generate growth for the organisation.

At the same time Coca-Cola has up-dated its advertising approach. Instead of focusing on classic commercials such as the seventies 'I'd like to teach the world to sing.' - there are now a variety of commercials under the umbrella theme 'Always Coca-Cola.' The adverts are different and designed to meet the mood of programmes that people are watching and hence target different audiences. The organisation has also been prepared to take risks in other areas related to the promotion and distribution of its soft drinks. For example, Coca Cola has become the number one sponsor associated with football, music, T.V shows and films in the UK. The ITV diet Coke Movie Premieres constituted ITV's first ever programming- strand sponsorship.

Coca-Cola Great Britain | Who dares wins - success through intelligent risk

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