WEBVTT 00:00:00.000 --> 00:00:03.540 April 23, 1985. If you were around then, you 00:00:03.540 --> 00:00:05.360 probably remember exactly where you were. Oh, 00:00:05.379 --> 00:00:07.480 absolutely. And if you weren't, you've almost 00:00:07.480 --> 00:00:10.619 certainly heard the legend. It is a date that 00:00:10.619 --> 00:00:13.300 lives in what the Coca -Cola company itself now 00:00:13.300 --> 00:00:16.660 calls marketing infamy. It's a great phrase. 00:00:16.839 --> 00:00:20.300 And it really is the Kennedy assassination of 00:00:20.300 --> 00:00:23.940 the consumer packaged goods world. That's a great 00:00:23.940 --> 00:00:26.019 way to put it. Everyone remembers the shock. 00:00:26.239 --> 00:00:29.239 It was the day the Coca -Cola company... did 00:00:29.239 --> 00:00:32.200 the unthinkable. Right. They held this massive, 00:00:32.259 --> 00:00:35.280 glitzy press conference at Lincoln Center in 00:00:35.280 --> 00:00:37.700 New York City. All the lights, all the cameras, 00:00:37.880 --> 00:00:39.939 and announced they were scrapping the formula 00:00:39.939 --> 00:00:42.299 for the most popular soft drink in history. I 00:00:42.299 --> 00:00:44.500 still find this story hard to wrap my head around, 00:00:44.619 --> 00:00:46.719 even after going through all these stacks of 00:00:46.719 --> 00:00:48.600 files we have here. Do what? We were talking 00:00:48.600 --> 00:00:50.960 about Coca -Cola. It had been around for 99 years 00:00:50.960 --> 00:00:53.380 at that point. Century, almost. It wasn't just 00:00:53.380 --> 00:00:55.859 a soda. It was, I mean, it was an icon. It was 00:00:55.859 --> 00:00:59.189 Americana in a bottle. And they just... decided 00:00:59.189 --> 00:01:00.990 to change it. They didn't just change it. I think 00:01:00.990 --> 00:01:02.630 that's the key distinction we need to make right 00:01:02.630 --> 00:01:05.409 up front. They erased it. They stopped production 00:01:05.409 --> 00:01:08.109 on the original formula immediately. Immediately. 00:01:08.290 --> 00:01:10.609 This wasn't a line extension like Diet Coke, 00:01:10.790 --> 00:01:14.069 which was new, or Cherry Coke. This was a replacement. 00:01:14.310 --> 00:01:17.569 So the old stuff was just gone. Gone. The new 00:01:17.569 --> 00:01:21.049 stuff. That was it. And that is what we are unpacking 00:01:21.049 --> 00:01:23.430 today. We're looking at the launch of New Coke. 00:01:23.920 --> 00:01:25.980 Which, as you pointed out, was technically just 00:01:25.980 --> 00:01:28.939 called Coke on the can. Right. The new was just 00:01:28.939 --> 00:01:31.340 on the corner, but everyone called it New Coke. 00:01:31.739 --> 00:01:34.140 And we're looking at its absolutely spectacular 00:01:34.140 --> 00:01:37.700 historic failure. But the mission here isn't 00:01:37.700 --> 00:01:40.319 just to point and laugh at a big corporate blunder, 00:01:40.400 --> 00:01:42.950 is it? Maybe a little. I mean, don't get me wrong. 00:01:42.969 --> 00:01:44.989 It is fun to laugh at big corporations when they 00:01:44.989 --> 00:01:47.049 trip over their own shoelaces. Of course. But 00:01:47.049 --> 00:01:48.870 we want to get to the bottom of how this happened, 00:01:48.950 --> 00:01:51.030 because looking at the documents, this wasn't 00:01:51.030 --> 00:01:54.049 like a snap decision. Not at all. The mission 00:01:54.049 --> 00:01:58.450 is to understand how a company with essentially 00:01:58.450 --> 00:02:01.849 unlimited resources, the smartest marketing minds 00:02:01.849 --> 00:02:05.349 in the business, and mountains, I mean, literal 00:02:05.349 --> 00:02:08.169 mountains of data could make such a colossal 00:02:08.169 --> 00:02:10.849 mistake. Here's the twist we're going to get 00:02:10.849 --> 00:02:14.069 to by the end of this deep dive. Right. Why this 00:02:14.069 --> 00:02:16.409 failure might have actually been the single most 00:02:16.409 --> 00:02:18.909 important success in the company's history. I 00:02:18.909 --> 00:02:20.770 love a good counterintuitive twist. It's like 00:02:20.770 --> 00:02:22.909 a business thriller where the victim turns out 00:02:22.909 --> 00:02:25.689 to be the winner. Exactly. So we're digging into 00:02:25.689 --> 00:02:28.189 historical accounts. We've got the actual market 00:02:28.189 --> 00:02:30.830 research data from the early 80s. And we're looking 00:02:30.830 --> 00:02:33.449 at all the retrospectives on the Cola Wars. We 00:02:33.449 --> 00:02:35.740 are. And I think we need to frame this correctly 00:02:35.740 --> 00:02:38.379 from the start. This isn't just a business story. 00:02:38.500 --> 00:02:40.479 It feels bigger than that. It is. If you look 00:02:40.479 --> 00:02:43.180 at it closely. It's a story about psychology. 00:02:43.639 --> 00:02:46.659 It's about regional identity, specifically the 00:02:46.659 --> 00:02:49.479 deep -seated pride in the American South. And 00:02:49.479 --> 00:02:53.240 it's about the massive, often ignored gap between 00:02:53.240 --> 00:02:55.719 what people say they want in a survey. And what 00:02:55.719 --> 00:02:57.960 they actually want in real life. Precisely. So 00:02:57.960 --> 00:02:59.939 let's get into the why, because the assumption, 00:03:00.060 --> 00:03:02.000 I think, for most people looking back at the 00:03:02.000 --> 00:03:04.400 80s is that Coke was king. Right. That's what 00:03:04.400 --> 00:03:06.930 everyone thinks. I always picture the 80s as 00:03:06.930 --> 00:03:09.490 the era of Coke dominance. Like, wasn't Coke 00:03:09.490 --> 00:03:12.050 always on top? Why would you ever mess with perfection 00:03:12.050 --> 00:03:15.449 if you were winning? That is the nostalgia talking. 00:03:15.629 --> 00:03:17.770 It's the Mean Joe Green commercial effect. Oh, 00:03:18.050 --> 00:03:21.129 I loved that ad. We all did. We remember the 00:03:21.129 --> 00:03:23.409 ad, so we assumed the business was healthy. But 00:03:23.409 --> 00:03:25.789 the reality of the early 1980s was very, very 00:03:25.789 --> 00:03:29.330 different. Coke was a brand in crisis. A crisis? 00:03:29.629 --> 00:03:31.960 Really? Oh, yeah. If you look at the internal 00:03:31.960 --> 00:03:34.719 memos in the annual reports from 1983 and 1984, 00:03:35.139 --> 00:03:38.379 they paint a pretty grim picture for the executives 00:03:38.379 --> 00:03:41.120 down in Atlanta. Grim how? I'm looking at the 00:03:41.120 --> 00:03:42.879 chart here. And they still had the lead, didn't 00:03:42.879 --> 00:03:44.659 they? They had the lead, but look at the trend 00:03:44.659 --> 00:03:48.439 line. That's what terrifies a CEO. Let's look 00:03:48.439 --> 00:03:51.500 at the post -World War II era. In the late 40s 00:03:51.500 --> 00:03:54.020 and 50s, Coke had something like 60 % of the 00:03:54.020 --> 00:03:55.680 market share. I think it's 2%. They were the 00:03:55.680 --> 00:03:58.340 default. If you said soda, you meant Coke. But 00:03:58.340 --> 00:04:00.879 by 1983... What was it then? That number had 00:04:00.879 --> 00:04:03.639 plummeted to under 24%. Wow. Okay, I knew it 00:04:03.639 --> 00:04:06.699 had dropped. But from 60 to 24, that is a free 00:04:06.699 --> 00:04:08.580 fall. That's losing more than half your empire. 00:04:08.900 --> 00:04:11.819 It is a hemorrhage. Yeah. And the main culprit 00:04:11.819 --> 00:04:14.520 was Pepsi. The Pepsi Challenge. Pepsi had been 00:04:14.520 --> 00:04:17.759 hammering away at them for a decade with the 00:04:17.759 --> 00:04:21.439 Pepsi Challenge. In fact, by the early 80s... 00:04:21.629 --> 00:04:24.529 Pepsi was actually outselling Coke in supermarkets. 00:04:24.550 --> 00:04:27.009 Wait, hold on. Pepsi was outselling Coke in stores. 00:04:27.129 --> 00:04:29.569 I did not realize it had gotten that bad. I thought 00:04:29.569 --> 00:04:32.810 Coke always had the edge. It had the edge in 00:04:32.810 --> 00:04:35.750 overall volume, but you have to dissect where 00:04:35.750 --> 00:04:39.329 that volume comes from. Coke dominated vending 00:04:39.329 --> 00:04:42.389 machines and fountain sales. Specifically, their 00:04:42.389 --> 00:04:45.569 exclusive deals with fast food giants like McDonald's. 00:04:45.629 --> 00:04:47.430 Right. If you go to McDonald's, you drink Coke. 00:04:48.080 --> 00:04:49.899 You don't have a choice. That's what they call 00:04:49.899 --> 00:04:51.779 a forced choice market. And I'm not going to 00:04:51.779 --> 00:04:53.740 walk out of a McDonald's just because they don't 00:04:53.740 --> 00:04:55.620 have Pepsi. I'll just take the Coke. Exactly. 00:04:55.819 --> 00:04:58.360 But if you took away the restaurants and the 00:04:58.360 --> 00:05:00.199 vending machines and just looked at the free 00:05:00.199 --> 00:05:02.459 choice market. People in a grocery aisle. People 00:05:02.459 --> 00:05:05.000 standing in a grocery aisle looking at two bottles 00:05:05.000 --> 00:05:06.899 and deciding which one to put in their cart. 00:05:07.060 --> 00:05:09.579 Coke was losing. Coke was losing. They were losing 00:05:09.579 --> 00:05:12.019 the battle for the consumer's preference. So 00:05:12.019 --> 00:05:14.319 they were winning on distribution muscle, but 00:05:14.319 --> 00:05:17.220 losing the heart and I guess the palate of the 00:05:17.220 --> 00:05:19.339 drinker. Precisely. And the demographics were 00:05:19.339 --> 00:05:22.579 even more terrifying for them. How so? I was 00:05:22.579 --> 00:05:25.279 reading through the analyst reports from 83 and 00:05:25.279 --> 00:05:29.459 they were looking at the baby boomers. As the 00:05:29.459 --> 00:05:32.699 boomers aged, they were moving toward diet drinks 00:05:32.699 --> 00:05:36.600 or coffee or juices. So the full sugar cola market 00:05:36.600 --> 00:05:39.180 was shrinking. It was. So the future of that 00:05:39.180 --> 00:05:41.680 market. was the youth market and let me guess 00:05:41.680 --> 00:05:43.879 the kids were drinking pepsi the kids were drinking 00:05:43.879 --> 00:05:46.160 pepsi of course they were pepsi had successfully 00:05:46.160 --> 00:05:48.399 positioned itself as the drink of the new generation 00:05:48.399 --> 00:05:50.620 they had michael jackson lighting up the screen 00:05:50.620 --> 00:05:53.819 sometimes literally sometimes literally yes they 00:05:53.819 --> 00:05:57.279 had lionel richie they had energy and youth coke 00:05:57.279 --> 00:06:00.620 felt It felt like your parents' drink. Exactly. 00:06:00.860 --> 00:06:02.839 It felt like your parents' drink. It felt like 00:06:02.839 --> 00:06:07.620 Eisenhower era America in a neon 80s world. Yeah. 00:06:07.680 --> 00:06:10.660 So you have a declining market share, a competitor 00:06:10.660 --> 00:06:13.459 that's cooler than you, and a customer base that's 00:06:13.459 --> 00:06:15.899 aging out. Okay. So into this burning building 00:06:15.899 --> 00:06:19.839 walks Roberto Goizueta. The new CEO. Right. I 00:06:19.839 --> 00:06:22.139 was reading his bio, and he's such a fascinating 00:06:22.139 --> 00:06:24.459 figure in this story because he doesn't fit the 00:06:24.459 --> 00:06:27.800 mold of the good old boy Atlanta executive. Not 00:06:27.800 --> 00:06:31.300 at all. Roberto Goizueta became CEO in 1980. 00:06:31.720 --> 00:06:35.300 He was a Cuban exile who had fled Castro's regime. 00:06:35.839 --> 00:06:39.040 And he was not a sentimental man. No. He was 00:06:39.040 --> 00:06:41.959 a chemist by training, not a marketer. He came 00:06:41.959 --> 00:06:44.439 from a technical background where results matter 00:06:44.439 --> 00:06:46.720 more than tradition. He looked at a formula. 00:06:47.160 --> 00:06:50.379 as a chemical compound, not a holy relic. He 00:06:50.379 --> 00:06:53.019 had that famous line to his staff, right? About 00:06:53.019 --> 00:06:56.279 sacred cows? Yes. That's the key to his entire 00:06:56.279 --> 00:06:59.120 mindset. He gathered his top executives and told 00:06:59.120 --> 00:07:01.100 them there would be no sacred cows. Meaning? 00:07:01.459 --> 00:07:03.660 Nothing was off the table. If it wasn't making 00:07:03.660 --> 00:07:05.500 money or if it could be improved, he was willing 00:07:05.500 --> 00:07:07.759 to change it. He basically said, we are not a 00:07:07.759 --> 00:07:10.360 museum, we are a business. And you have to understand 00:07:10.360 --> 00:07:12.920 his history, too. He'd run the Coca -Cola subsidiary 00:07:12.920 --> 00:07:15.160 in the Bahamas before this. Right. What happened 00:07:15.160 --> 00:07:16.699 in the Bahamas? That seems like a pretty good 00:07:16.699 --> 00:07:20.500 gig if you can get it. It was a good gig, but 00:07:20.500 --> 00:07:23.540 he used it as a laboratory. He improved sales 00:07:23.540 --> 00:07:26.639 there significantly by tweaking the flavor of 00:07:26.639 --> 00:07:29.459 the drink to match local tastes. Really? He changed 00:07:29.459 --> 00:07:32.040 the formula there? He did. He added a little 00:07:32.040 --> 00:07:34.120 more sugar. Change the carbonation levels. Yeah. 00:07:34.199 --> 00:07:36.839 He had seen firsthand that if you adjust the 00:07:36.839 --> 00:07:38.939 formula to match what the people currently want, 00:07:39.139 --> 00:07:42.319 you can boost profits. So he didn't have this 00:07:42.319 --> 00:07:45.220 reverence for the secret formula that the public 00:07:45.220 --> 00:07:48.420 assumed the CEO of Coca -Cola would have? None. 00:07:48.579 --> 00:07:51.519 He saw it as a variable, not a constant. That 00:07:51.519 --> 00:07:53.779 makes so much sense. So he's looking at the data, 00:07:53.879 --> 00:07:56.459 seeing the global decline and thinking, I fixed 00:07:56.459 --> 00:07:58.759 this before by changing the recipe. Why not do 00:07:58.759 --> 00:08:00.879 it again on a global scale? He was willing to 00:08:00.879 --> 00:08:03.040 break the glass. He was willing to blow up the 00:08:03.040 --> 00:08:05.839 building if it meant saving the company. He believed 00:08:05.839 --> 00:08:08.439 that the product itself, the liquid in the bottle, 00:08:08.540 --> 00:08:11.279 was the problem. Not the marketing, not the brand 00:08:11.279 --> 00:08:13.480 image, the actual taste. The taste. He thought 00:08:13.480 --> 00:08:16.579 people prefer the taste of Pepsi. Therefore, 00:08:16.779 --> 00:08:18.959 we must make our product taste more like Pepsi. 00:08:19.100 --> 00:08:21.519 It's a very logical chemist's brain deduction. 00:08:21.860 --> 00:08:24.189 So this kicks off the secret mission. Project 00:08:24.189 --> 00:08:26.750 Kansas. I love the code names from the 80s. Project 00:08:26.750 --> 00:08:29.930 Kansas. It was named after a famous photo of 00:08:29.930 --> 00:08:32.549 a journalist, William Allen White, drinking a 00:08:32.549 --> 00:08:34.610 Coke. A little piece of trivia for you. I like 00:08:34.610 --> 00:08:37.230 that. This was a top secret initiative led by 00:08:37.230 --> 00:08:41.649 marketing VP Sergio Zayman and Brian Dyson. Their 00:08:41.649 --> 00:08:45.539 mandate was simple, but terrifying. Yeah. Create 00:08:45.539 --> 00:08:47.759 a flavor that beats Pepsi. And this is the part 00:08:47.759 --> 00:08:50.000 that I think gets lost in the Coke was stupid 00:08:50.000 --> 00:08:52.679 narrative. They didn't just guess, right? Oh, 00:08:52.720 --> 00:08:54.779 God, no. They didn't just mix a bucket of syrup 00:08:54.779 --> 00:08:57.039 in a back room and say, yeah, that's good. They 00:08:57.039 --> 00:08:59.480 tested the living daylights out of this. Oh, 00:08:59.519 --> 00:09:01.639 they tested it more than almost any product in 00:09:01.639 --> 00:09:04.039 history up to that point. This is where the tragedy 00:09:04.039 --> 00:09:06.860 of the data comes in. OK. They ran blind taste 00:09:06.860 --> 00:09:10.769 tests. With nearly 200 ,000 consumers. 200 ,000. 00:09:10.889 --> 00:09:13.370 200 ,000. Just think about the logistics of that 00:09:13.370 --> 00:09:17.250 in 1984. No internet, no digital surveys. This 00:09:17.250 --> 00:09:19.750 is clipboard and paperwork in malls across America. 00:09:20.029 --> 00:09:22.090 That is a sample size that would make a medical 00:09:22.090 --> 00:09:24.450 researcher jealous. You usually launch a drug 00:09:24.450 --> 00:09:27.669 with way less data than that. Exactly. And the 00:09:27.669 --> 00:09:31.210 results were overwhelmingly positive. The new 00:09:31.210 --> 00:09:34.990 formula, which was sweeter and smoother. It had 00:09:34.990 --> 00:09:38.409 less of that bite or burn that the original Coke 00:09:38.409 --> 00:09:40.710 had. It was designed to be more like Pepsi. It 00:09:40.710 --> 00:09:42.669 was. And it beat everything. It beat the original 00:09:42.669 --> 00:09:45.669 Coke by a solid margin. It beat Pepsi. Even in 00:09:45.669 --> 00:09:47.730 the South. Because I know we're going to talk 00:09:47.730 --> 00:09:49.629 about the backlash, but surely the South held 00:09:49.629 --> 00:09:51.889 the line during the testing. That's the thing. 00:09:51.970 --> 00:09:54.470 They didn't. That's what was so convincing to 00:09:54.470 --> 00:09:57.110 the executives. Even in the Southeast, even in 00:09:57.110 --> 00:09:59.809 Atlanta, Coke's hometown, people preferred the 00:09:59.809 --> 00:10:04.219 new flavor in blind tests. The data said. Unequivocally, 00:10:04.219 --> 00:10:07.220 this tastes better. So if I'm Goizueta and I'm 00:10:07.220 --> 00:10:09.940 looking at this spreadsheet with 200 ,000 data 00:10:09.940 --> 00:10:11.659 points. You feeling pretty good? I'm thinking, 00:10:11.799 --> 00:10:14.620 checkmate. We found a product that beats our 00:10:14.620 --> 00:10:17.159 competitor and our own old product. It seems 00:10:17.159 --> 00:10:19.240 like a no -brainer. It does. It looks like the 00:10:19.240 --> 00:10:22.139 perfect business decision. But, and there is 00:10:22.139 --> 00:10:24.179 always a but in these stories. There always is. 00:10:24.360 --> 00:10:26.860 There were warning signs in the qualitative data 00:10:26.860 --> 00:10:29.090 that they chose to ignore. What do you mean by 00:10:29.090 --> 00:10:32.009 qualitative? I mean the feelings, the emotions. 00:10:32.389 --> 00:10:34.690 They were so focused on the quantitative, the 00:10:34.690 --> 00:10:37.789 numbers, the percentages, that they missed the 00:10:37.789 --> 00:10:41.110 emotional cues. What specifically did they miss? 00:10:41.129 --> 00:10:43.690 Because I saw a mention of focus groups going 00:10:43.690 --> 00:10:46.009 wrong. Well, most of the tests were blind, right? 00:10:46.129 --> 00:10:49.009 Here is cup A, here is cup B. Which do you like? 00:10:49.190 --> 00:10:51.490 Simple. But they also did focus groups where 00:10:51.490 --> 00:10:54.070 they would reveal to the testers what they were 00:10:54.070 --> 00:10:56.070 drinking. They'd say, okay, this new one you 00:10:56.070 --> 00:10:58.269 like, that's going to be the new Coca -Cola, 00:10:58.409 --> 00:11:01.330 and we are taking the old one away. That's a 00:11:01.330 --> 00:11:03.210 bold move to tell them you're taking the old 00:11:03.210 --> 00:11:05.590 one away. Usually companies just add to the line. 00:11:05.750 --> 00:11:08.350 Right. And for most people, surprisingly, the 00:11:08.350 --> 00:11:10.870 preference actually went up. It did. Yeah. They 00:11:10.870 --> 00:11:13.570 liked the idea of a new and improved Coke. They 00:11:13.570 --> 00:11:15.429 bought into the marketing hype before it even 00:11:15.429 --> 00:11:19.059 launched. But there was this small group. About 00:11:19.059 --> 00:11:21.759 10 to 12 percent of the participants. The angry 00:11:21.759 --> 00:11:24.379 minority. The angry minority. Yeah. These people 00:11:24.379 --> 00:11:27.240 didn't just dislike the idea. They felt alienated. 00:11:27.279 --> 00:11:29.720 They were furious. What were they saying? Things 00:11:29.720 --> 00:11:31.799 like, I might stop drinking Coke altogether. 00:11:32.220 --> 00:11:34.940 They talked about it like a betrayal. But looking 00:11:34.940 --> 00:11:37.860 at it from a boardroom perspective, 10 percent 00:11:37.860 --> 00:11:41.159 isn't a majority. Right. In a democracy, if you 00:11:41.159 --> 00:11:43.580 win 90 percent of the vote, that's a landslide. 00:11:43.620 --> 00:11:46.159 You pop the champagne. That is exactly how the 00:11:46.159 --> 00:11:48.320 executives saw it. They looked at the raw numbers. 00:11:48.360 --> 00:11:50.700 They thought, OK, we lose 10 % of the diehards, 00:11:50.740 --> 00:11:53.899 but we gain the Pepsi generation. Net positive. 00:11:54.220 --> 00:11:56.320 But they missed something. They missed the social 00:11:56.320 --> 00:11:59.799 dynamic. In these focus groups, the angry 10 00:11:59.799 --> 00:12:03.559 % were so vocal, so passionate, that they started 00:12:03.559 --> 00:12:06.220 to sway the other people in the room. It's the 00:12:06.220 --> 00:12:08.659 loudest voice in the room syndrome. It is. They 00:12:08.659 --> 00:12:11.480 exerted this peer pressure effect. The negativity 00:12:11.480 --> 00:12:14.159 was contagious. A person who five minutes ago 00:12:14.159 --> 00:12:16.940 said, yeah, this new stuff is pretty good. We'd 00:12:16.940 --> 00:12:19.139 hear the angry guy ranting about tradition and 00:12:19.139 --> 00:12:21.120 the good old days. And suddenly they'd change 00:12:21.120 --> 00:12:23.259 their mind. Suddenly they'd say, you know what? 00:12:24.000 --> 00:12:26.139 He's right. This is terrible. Why are you doing 00:12:26.139 --> 00:12:28.539 this? That's fascinating. So the spreadsheet 00:12:28.539 --> 00:12:32.019 says 90 % approval, but the room vibe says riot. 00:12:32.279 --> 00:12:34.580 Exactly. And the executives weren't in the room. 00:12:34.620 --> 00:12:36.179 They were just looking at the report summaries. 00:12:36.620 --> 00:12:39.419 Correct. And the company actively downplayed 00:12:39.419 --> 00:12:41.919 that psychological reaction. They focused on 00:12:41.919 --> 00:12:43.840 the sip tests, the raw preference. They thought 00:12:43.840 --> 00:12:46.820 once people get used to it, the anger will fade. 00:12:47.200 --> 00:12:49.820 It's just the shock of the new. I have to ask 00:12:49.820 --> 00:12:52.440 the obvious question here, though. Did they ever 00:12:52.440 --> 00:12:56.120 consider just selling both? They did. Like keep 00:12:56.120 --> 00:12:59.379 old Coke and launch new Coke as Coke Supreme 00:12:59.379 --> 00:13:02.299 or something? Why did it have to be a Highlander 00:13:02.299 --> 00:13:05.230 situation where there can be only one? It's a 00:13:05.230 --> 00:13:07.809 great question, and they did consider it. It 00:13:07.809 --> 00:13:10.210 wasn't completely off the radar, but management 00:13:10.210 --> 00:13:12.909 rejected it for a few very specific tactical 00:13:12.909 --> 00:13:15.929 reasons. Okay, like what? First, their bottlers 00:13:15.929 --> 00:13:18.470 were already furious with them. Why are the bottlers 00:13:18.470 --> 00:13:21.129 mad? Complexity. Coke had just launched Diet 00:13:21.129 --> 00:13:24.730 Coke in 1982, which was a huge hit, but a logistical 00:13:24.730 --> 00:13:27.850 nightmare. A new product, new cans, new everything. 00:13:28.230 --> 00:13:29.830 And they were launching Cherry Coke around the 00:13:29.830 --> 00:13:32.570 same time in 1985. The bottlers, the guys who 00:13:32.570 --> 00:13:34.230 own the trucks and the factories, were screaming, 00:13:34.330 --> 00:13:35.789 we don't have enough shelf space. We don't have 00:13:35.789 --> 00:13:38.169 enough trucks. They didn't want another SKU to 00:13:38.169 --> 00:13:40.409 manage. Right. The bottlers are the ones who 00:13:40.409 --> 00:13:43.149 actually have to put the liquid in the jars and 00:13:43.149 --> 00:13:45.529 drive the trucks to the Piggly Wiggly. They are 00:13:45.529 --> 00:13:47.440 the boots on the ground. Right. And there was 00:13:47.440 --> 00:13:50.120 a lot of legal tension, too. Bottlers were suing 00:13:50.120 --> 00:13:52.980 Coca -Cola over syrup pricing contracts. It was 00:13:52.980 --> 00:13:55.639 a messy time. So adding another product would 00:13:55.639 --> 00:13:58.259 have just made things worse. Much worse. Plus, 00:13:58.340 --> 00:14:02.039 the marketing team feared cannibalization. Cannibalization. 00:14:02.120 --> 00:14:04.559 It's when your new product eats the sales of 00:14:04.559 --> 00:14:06.679 your old product. They worry that if you have 00:14:06.679 --> 00:14:09.519 two Cokes, you split your own market share, you 00:14:09.519 --> 00:14:12.000 dilute the brand, and suddenly... Pepsi looks 00:14:12.000 --> 00:14:14.299 even bigger by comparison because your sales 00:14:14.299 --> 00:14:16.299 are split between two buckets. So Goizueta makes 00:14:16.299 --> 00:14:19.220 the call. He pushes all the chips to the center 00:14:19.220 --> 00:14:21.899 of the table. He makes the decree. New Coke or 00:14:21.899 --> 00:14:25.299 no Coke. It had to be a total replacement. He 00:14:25.299 --> 00:14:27.379 wanted to show confidence. He insisted on the 00:14:27.379 --> 00:14:30.539 new label. He genuinely believed this was the 00:14:30.539 --> 00:14:32.779 future and that keeping the old stuff was just 00:14:32.779 --> 00:14:36.360 clinging to a dying past. So April 23, 1985. 00:14:36.919 --> 00:14:40.179 The big day. Lincoln Center. The invites go out. 00:14:40.440 --> 00:14:43.340 It was a spectacle. But Pepsi, you have to hand 00:14:43.340 --> 00:14:45.500 it to Pepsi. They played this beautifully. How 00:14:45.500 --> 00:14:48.519 so? They knew it was coming. Oh, they knew. The 00:14:48.519 --> 00:14:51.379 beverage industry is leaky. They had spies or 00:14:51.379 --> 00:14:53.980 just good industry intel from suppliers. They 00:14:53.980 --> 00:14:56.860 knew Coke was changing the formula, so they poisoned 00:14:56.860 --> 00:14:59.820 the well. That sounds ominous. How do you poison 00:14:59.820 --> 00:15:02.000 the well for a soda launch? They started shaping 00:15:02.000 --> 00:15:05.340 the narrative before Coke even said a word. They 00:15:05.340 --> 00:15:07.929 declared victory. Before the launch. The day 00:15:07.929 --> 00:15:10.409 of the launch. Before the press conference. They 00:15:10.409 --> 00:15:12.509 gave their employees the day off. They ran full 00:15:12.509 --> 00:15:15.450 -page ads saying Pepsi won the Cola Wars. They 00:15:15.450 --> 00:15:18.909 framed Coke's change not as an improvement, but 00:15:18.909 --> 00:15:21.610 as a desperate admission of defeat. That is 4 00:15:21.610 --> 00:15:24.289 -D chess right there. So by the time Goizueta 00:15:24.289 --> 00:15:26.710 walks on stage, the reporters are already primed 00:15:26.710 --> 00:15:28.990 to be cynical. Exactly. And they fed reporters 00:15:28.990 --> 00:15:31.659 questions to ask. So when Goizueta stands up 00:15:31.659 --> 00:15:33.600 there trying to describe the flavor as bolder, 00:15:33.600 --> 00:15:36.399 rounder, more harmonious. More harmonious. That 00:15:36.399 --> 00:15:38.019 sounds like he's describing a symphony and not 00:15:38.019 --> 00:15:42.220 a soda. Laughs. He was trying to elevate it. 00:15:42.259 --> 00:15:44.539 He was a sophisticated man. But the reporters 00:15:44.539 --> 00:15:47.179 were skeptical. They asked point blank. Is this 00:15:47.179 --> 00:15:49.360 an admission that the old Coke was bad? And what 00:15:49.360 --> 00:15:52.519 did he say? Goizueta got defensive. He refused 00:15:52.519 --> 00:15:55.279 to say the word taste test. He refused to admit 00:15:55.279 --> 00:15:58.059 that Pepsi forced their hand. So he didn't give 00:15:58.059 --> 00:16:00.519 a straight answer. No. He said the secret formula 00:16:00.519 --> 00:16:03.220 wasn't sacrosanct. He pointed out that they had 00:16:03.220 --> 00:16:06.139 changed the formula back in 1935 to make it kosher. 00:16:06.379 --> 00:16:08.519 I didn't know that. They changed it for religious 00:16:08.519 --> 00:16:11.899 reasons. Yes. They made tweaks for kosher certification 00:16:11.899 --> 00:16:15.320 removing tallow and glycerin derived from beef 00:16:15.320 --> 00:16:18.240 and later for halal and vegetarian compliance. 00:16:18.279 --> 00:16:20.620 So his argument was, we've done this before. 00:16:20.860 --> 00:16:23.580 His argument was, we tweak things all the time. 00:16:23.580 --> 00:16:26.289 This is just another tweak. But he refused to 00:16:26.289 --> 00:16:28.610 admit that consumer preference drove the decision. 00:16:28.769 --> 00:16:31.669 He famously called it one of the easiest decisions 00:16:31.669 --> 00:16:34.809 we've ever made. Oof. That is a quote that aged 00:16:34.809 --> 00:16:37.129 like milk. One of the easiest decisions. And 00:16:37.129 --> 00:16:40.210 here's the supreme irony of the launch. For years, 00:16:40.490 --> 00:16:42.710 Coke had been using Bill Cosby as their spokesman. 00:16:42.730 --> 00:16:45.370 Right. And Cosby's whole pitch, his entire shtick 00:16:45.370 --> 00:16:47.870 in the commercials, was that Coke was less sweet 00:16:47.870 --> 00:16:50.860 than Pepsi. He used to say it wasn't cloying. 00:16:50.860 --> 00:16:52.879 He called it the real thing because it had that 00:16:52.879 --> 00:16:54.960 bite. So now they're launching a sweeter drink. 00:16:55.120 --> 00:16:58.279 Now, suddenly, Coke is launching a drink that 00:16:58.279 --> 00:17:00.679 is specifically sweeter to compete with Pepsi. 00:17:00.860 --> 00:17:03.139 They completely undermined their own marketing 00:17:03.139 --> 00:17:05.819 history. They basically said, hey, remember how 00:17:05.819 --> 00:17:08.279 we told you for 10 years that sweet is bad? Just 00:17:08.279 --> 00:17:11.599 kidding. Sweet is good now. They did. But, and 00:17:11.599 --> 00:17:13.359 here's where it gets really interesting and where 00:17:13.359 --> 00:17:17.119 the data gets confusing again. Despite the awkward 00:17:17.119 --> 00:17:19.859 press conference, The launch was initially a 00:17:19.859 --> 00:17:22.859 success. Really? Because the legend says it was 00:17:22.859 --> 00:17:25.319 a disaster from day one? Yeah. I picture people 00:17:25.319 --> 00:17:27.960 throwing cans at the screen immediately. No, 00:17:28.019 --> 00:17:29.920 that's the myth that has built up over time. 00:17:30.160 --> 00:17:32.500 In the first few days, the Coca -Cola stock price 00:17:32.500 --> 00:17:34.779 actually went up. Wall Street liked it. Wall 00:17:34.779 --> 00:17:37.799 Street liked the move. Market research showed... 00:17:37.950 --> 00:17:40.609 80 % of the public knew about the change within 00:17:40.609 --> 00:17:43.150 48 hours, which is insane market penetration 00:17:43.150 --> 00:17:45.809 for pre -Internet days. That's huge. And sales 00:17:45.809 --> 00:17:48.309 in cities like New York, Miami, and Detroit went 00:17:48.309 --> 00:17:50.650 up by 8%. So people were buying it. They were 00:17:50.650 --> 00:17:52.990 curious. They were buying it. They were drinking 00:17:52.990 --> 00:17:56.670 it. 75 % of respondents in early surveys said 00:17:56.670 --> 00:17:59.450 they'd buy it again. They were giving it away 00:17:59.450 --> 00:18:01.390 at the Statue of Liberty renovation celebration. 00:18:01.410 --> 00:18:03.990 It was at McDonald's. If you looked at the spreadsheets 00:18:03.990 --> 00:18:07.839 in May, 1985, a month after launch. It looked 00:18:07.839 --> 00:18:10.180 like the gamble worked. So where did the rebellion 00:18:10.180 --> 00:18:12.819 start? Because we know it ends with burning effigies 00:18:12.819 --> 00:18:14.940 in the streets. At some point, the mood shifted. 00:18:15.160 --> 00:18:17.220 They started where Coke began, the American South. 00:18:17.380 --> 00:18:20.000 Of course. Talk to me about the Southern reaction. 00:18:20.140 --> 00:18:21.819 Why was it so different there? I mean, soda is 00:18:21.819 --> 00:18:24.660 soda, right? Not in the South. You have to understand 00:18:24.660 --> 00:18:27.059 that in the South, Coca -Cola isn't just a carbonated 00:18:27.059 --> 00:18:29.690 beverage. What is it? It's Coca -Cola. It's a 00:18:29.690 --> 00:18:31.670 food group. It's part of the cultural fabric. 00:18:31.750 --> 00:18:34.490 It was invented in Atlanta. It's a point of regional 00:18:34.490 --> 00:18:37.549 pride. For many Southerners, seeing a New York 00:18:37.549 --> 00:18:40.769 -based competitor like Pepsi force Coke to change, 00:18:41.069 --> 00:18:43.690 it was viewed through a very specific historical 00:18:43.690 --> 00:18:46.529 prism. Are you going to say the Civil War? I 00:18:46.529 --> 00:18:49.529 am absolutely saying the Civil War. I know it 00:18:49.529 --> 00:18:51.930 sounds hyperbolic to us now, but some people 00:18:51.930 --> 00:18:54.930 genuinely viewed it as a cultural surrender to 00:18:54.930 --> 00:18:57.609 the Yankees. Wow. Pepsi is based in Purchase, 00:18:57.609 --> 00:19:01.240 New York. Coke is Atlanta. To change the formula 00:19:01.240 --> 00:19:03.440 to taste like Pepsi felt like a betrayal of Southern 00:19:03.440 --> 00:19:06.160 heritage. It felt like Atlanta was surrendering 00:19:06.160 --> 00:19:09.420 to New York values. That is heavy for a drink 00:19:09.420 --> 00:19:12.200 that costs 50 cents. But identity is powerful 00:19:12.200 --> 00:19:14.579 stuff. It is the most powerful stuff. And once 00:19:14.579 --> 00:19:16.279 the South started screaming, the rest of the 00:19:16.279 --> 00:19:18.460 country started listening. And the anecdotes 00:19:18.460 --> 00:19:21.559 of rage are just. They are colorful. Okay, give 00:19:21.559 --> 00:19:24.299 me one. Goizueta received a letter addressed 00:19:24.299 --> 00:19:27.359 to... Chief Dodo, the Coca -Cola company. Chief 00:19:27.359 --> 00:19:30.339 Dodo. Simple, effective, insulting. I like it. 00:19:30.640 --> 00:19:33.200 Another customer wrote in asking for Goizueta's 00:19:33.200 --> 00:19:35.640 autograph. Because they were a fan. Maybe they 00:19:35.640 --> 00:19:37.859 liked the new taste. No. They explained that 00:19:37.859 --> 00:19:40.019 the signature of one of the dumbest executives 00:19:40.019 --> 00:19:42.240 in American business history would be valuable 00:19:42.240 --> 00:19:44.880 to collectors someday. That is cold. That is 00:19:44.880 --> 00:19:48.240 deeply premeditated insult. I respect that. The 00:19:48.240 --> 00:19:52.599 company Hotline 1800, Get Coke, went into meltdown. 00:19:53.000 --> 00:19:55.619 Before the change, they got maybe 400 calls a 00:19:55.619 --> 00:19:57.740 day. Just normal customer service stuff. Right. 00:19:58.380 --> 00:20:01.240 Where can I buy this? Yeah. Or my can was dented. 00:20:01.960 --> 00:20:04.559 Suddenly, they were getting 1 ,500 calls a day. 00:20:04.700 --> 00:20:06.940 And these weren't just complaints. What were 00:20:06.940 --> 00:20:10.259 they? They hired a psychiatrist. to listen in 00:20:10.259 --> 00:20:12.299 on the hotline calls to analyze the consumer 00:20:12.299 --> 00:20:15.539 sentiment. Seriously? Yes. And the psychiatrists 00:20:15.539 --> 00:20:17.400 reported that people sounded like they were discussing 00:20:17.400 --> 00:20:19.940 the death of a family member. They were grieving. 00:20:20.200 --> 00:20:22.619 They felt a genuine sense of loss. They weren't 00:20:22.619 --> 00:20:25.279 angry about a flavor. They were sad that a piece 00:20:25.279 --> 00:20:27.559 of their childhood was gone. It goes back to 00:20:27.559 --> 00:20:30.480 that emotional attachment the data missed. You 00:20:30.480 --> 00:20:33.380 can't quantify childhood memory in a blind taste 00:20:33.380 --> 00:20:35.740 test. You can't. And it wasn't just average citizens. 00:20:36.339 --> 00:20:39.559 Fidel Castro, the Cuban leader, Goizueta's nemesis, 00:20:39.559 --> 00:20:42.099 essentially came out and bashed New Coke. He 00:20:42.099 --> 00:20:44.960 called it a sign of American capitalist decadence. 00:20:45.000 --> 00:20:46.799 That's amazing. He said the Americans had lost 00:20:46.799 --> 00:20:48.619 their way so badly they couldn't even keep their 00:20:48.619 --> 00:20:50.779 sodas straight. Wait, Goizueta's father was a 00:20:50.779 --> 00:20:52.579 Cuban exile, right? He must have hated that. 00:20:52.819 --> 00:20:55.579 Yes. And Goizueta later said that was the only 00:20:55.579 --> 00:20:58.220 time his father ever agreed with Fidel Castro. 00:20:58.929 --> 00:21:01.630 What? They both hated New Coke. You know you've 00:21:01.630 --> 00:21:03.910 messed up when you're uniting the Goizueta family 00:21:03.910 --> 00:21:06.410 and Fidel Castro on a policy issue. It was the 00:21:06.410 --> 00:21:08.769 great unifier. And then you have Gay Mullins. 00:21:09.549 --> 00:21:11.849 Cannot tell this story without Gay Mullins. The 00:21:11.849 --> 00:21:14.390 Seattle retiree, I was reading about him. He 00:21:14.390 --> 00:21:16.509 seems like a character written for a movie. He 00:21:16.509 --> 00:21:19.150 really does. He was a retiree looking to start 00:21:19.150 --> 00:21:22.650 a PR firm. And he saw this as his moment. He 00:21:22.650 --> 00:21:25.779 founded the... Old cola drinkers of America. 00:21:26.019 --> 00:21:28.680 And he sued them. He launched a class action 00:21:28.680 --> 00:21:31.619 lawsuit to force the company to bring back the 00:21:31.619 --> 00:21:34.880 old formula. He was on TV dumping new coke into 00:21:34.880 --> 00:21:37.400 the sewers of Seattle. He became the face of 00:21:37.400 --> 00:21:39.480 the resistance. But there's a funny footnote 00:21:39.480 --> 00:21:41.400 about him in the research, right? A little bit 00:21:41.400 --> 00:21:44.339 of irony. A huge irony alert. Mullins participated 00:21:44.339 --> 00:21:47.339 in a blind taste test later on, challenged by 00:21:47.339 --> 00:21:50.720 a TV station. And he failed. He failed. He either 00:21:50.720 --> 00:21:53.220 couldn't tell the difference, or in some takes, 00:21:53.630 --> 00:21:56.630 He actually preferred New Coke. Blast. No way. 00:21:56.789 --> 00:21:58.970 So the leader of the revolution didn't even know 00:21:58.970 --> 00:22:00.690 what he was fighting for. He was fighting for 00:22:00.690 --> 00:22:03.769 the idea of old Coke. Ah. He wasn't fighting 00:22:03.769 --> 00:22:06.309 for the liquid. That is the crucial distinction 00:22:06.309 --> 00:22:09.390 that goes way to mist. The liquid didn't matter. 00:22:09.450 --> 00:22:13.250 The idea mattered. So consumer rage is exploding. 00:22:13.349 --> 00:22:17.329 The media is piling on. But Coke is a big ship 00:22:17.329 --> 00:22:19.829 to turn around. What finally made them pivot? 00:22:19.990 --> 00:22:23.329 Was it the letters? Was it Gay Mullins? It wasn't 00:22:23.329 --> 00:22:25.650 just the consumers. I think the real pivot point 00:22:25.650 --> 00:22:27.869 was the bottlers. The bottlers again. We mentioned 00:22:27.869 --> 00:22:29.970 them earlier. These are the local business people 00:22:29.970 --> 00:22:32.109 who live in these communities. They were getting 00:22:32.109 --> 00:22:34.910 hammered. They were being socially ostracized. 00:22:35.150 --> 00:22:38.269 Like at the country club or at church. Everywhere. 00:22:38.789 --> 00:22:41.730 Friends, family. Bottlers reported that people 00:22:41.730 --> 00:22:44.089 were angry at them personally. At the bottlers. 00:22:44.190 --> 00:22:46.250 Yes. There's a story about a bottler in Georgia 00:22:46.250 --> 00:22:48.490 who said a woman came up to him at a church picnic 00:22:48.490 --> 00:22:51.190 and accused him of ruining her bridge club. She 00:22:51.190 --> 00:22:53.710 wouldn't speak to him. You do not mess with the 00:22:53.710 --> 00:22:57.009 bridge club. That is a sacred institation. Laughs. 00:22:57.230 --> 00:23:00.150 It sounds funny, but it was affecting their livelihood. 00:23:00.390 --> 00:23:02.269 Drivers were getting yelled at while delivering 00:23:02.269 --> 00:23:04.250 to supermarkets. So they were getting it from 00:23:04.250 --> 00:23:07.569 all sides. On June 23rd, there was a meeting 00:23:07.569 --> 00:23:10.029 where bottlers confronted the executives in Atlanta. 00:23:10.430 --> 00:23:13.109 They basically said, you are killing us out here. 00:23:13.190 --> 00:23:15.289 You need to fix this. And then there's the story 00:23:15.289 --> 00:23:17.710 about Donald Keough, the president of Coke. This 00:23:17.710 --> 00:23:20.009 feels like the cinematic turning point. This 00:23:20.009 --> 00:23:24.839 is the aha moment. kiaf is in monaco of all places 00:23:24.839 --> 00:23:28.420 visiting a small restaurant monaco fancy right 00:23:28.420 --> 00:23:30.720 and the owner comes up to him beaming with pride 00:23:30.720 --> 00:23:34.059 and serves of a chilled 6 .5 ounce glass bottle 00:23:34.059 --> 00:23:36.960 of coca -cola and the owner says i serve the 00:23:36.960 --> 00:23:40.680 real thing a real coke and kiaf realizes he realizes 00:23:40.680 --> 00:23:43.259 the brand is bigger than the company he realizes 00:23:43.259 --> 00:23:45.440 they aren't selling a flavor they are selling 00:23:45.440 --> 00:23:48.230 a memory They're selling consistency. And if 00:23:48.230 --> 00:23:49.950 they don't fix this, they are going to lose that 00:23:49.950 --> 00:23:52.410 magic forever. The owner in Monaco didn't care 00:23:52.410 --> 00:23:54.990 about market share or sweetness. He cared about 00:23:54.990 --> 00:23:57.890 the real thing. So the timeline here is shockingly 00:23:57.890 --> 00:24:01.569 short. Launch in April. By July, they are reversing 00:24:01.569 --> 00:24:06.210 course. 79 days. That is all it lasted. Less 00:24:06.210 --> 00:24:10.190 than three months. Wow. On July 11th, 1985, they 00:24:10.190 --> 00:24:12.309 hold another press conference. And this was big 00:24:12.309 --> 00:24:15.029 news. This wasn't just a business page footnote. 00:24:15.190 --> 00:24:18.690 Huge. Peter Jennings interrupted General Hospital 00:24:18.690 --> 00:24:22.089 on ABC with a special bulletin. You know it's 00:24:22.089 --> 00:24:23.970 a crisis when you interrupt the soaps in the 00:24:23.970 --> 00:24:27.369 80s. That is peak viewing time. A national emergency. 00:24:28.559 --> 00:24:30.660 Senator David Pryor went to the floor of the 00:24:30.660 --> 00:24:33.000 U .S. Senate and called it a meaningful moment 00:24:33.000 --> 00:24:35.740 in U .S. history. For a soda coming back, that 00:24:35.740 --> 00:24:39.200 is wild. For a soda. The hotline received 31 00:24:39.200 --> 00:24:42.440 ,600 calls in two days after the announcement. 00:24:42.619 --> 00:24:45.819 31 ,000. But this time, they weren't angry. They 00:24:45.819 --> 00:24:47.960 were joyful. Executives said it was like they 00:24:47.960 --> 00:24:50.420 had cured cancer. People were weeping with relief. 00:24:50.720 --> 00:24:52.980 So they bring back the original formula, but 00:24:52.980 --> 00:24:54.599 they don't call it Coca -Cola anymore, right? 00:24:55.130 --> 00:24:57.049 This is the branding pivot. They bring it back 00:24:57.049 --> 00:25:00.009 as Coca -Cola Classic. And they keep New Coke 00:25:00.009 --> 00:25:02.430 on the shelves, just labeled as Coke. Later, 00:25:02.430 --> 00:25:05.329 it will be renamed Coke, too. And there is that 00:25:05.329 --> 00:25:07.369 famous quote from Keehoff when people started 00:25:07.369 --> 00:25:10.730 asking if this was all a giant conspiracy. Because 00:25:10.730 --> 00:25:12.970 naturally, people thought, did they do this on 00:25:12.970 --> 00:25:15.150 purpose? Of course. It's the first place your 00:25:15.150 --> 00:25:17.650 mind goes. And Keehoff gave the perfect answer. 00:25:18.490 --> 00:25:21.359 We're not that dumb. And we're not that smart. 00:25:21.539 --> 00:25:23.799 Which is probably the most honest corporate statement 00:25:23.799 --> 00:25:26.079 ever made. It really is. It sums up the whole 00:25:26.079 --> 00:25:29.759 debacle perfectly. It was a blunder, not a scheme. 00:25:30.079 --> 00:25:32.220 So I want to go back to the why for a second. 00:25:32.680 --> 00:25:35.400 We talked about the focus groups, but there is 00:25:35.400 --> 00:25:38.119 some deeper psychology here. I was reading Malcolm 00:25:38.119 --> 00:25:40.619 Gladwell's book Blink as part of the prep for 00:25:40.619 --> 00:25:42.880 this, and he devotes a whole chapter to this. 00:25:43.059 --> 00:25:46.220 Yes. Gladwell argues that the central flaw wasn't 00:25:46.220 --> 00:25:49.059 the data itself, but the methodology of the taste 00:25:49.059 --> 00:25:51.420 test. The sip test. I found this fascinating 00:25:51.420 --> 00:25:54.099 because it relates to biology. Exactly. Explain 00:25:54.099 --> 00:25:56.339 what happens in a sip test. So when you take 00:25:56.339 --> 00:25:58.980 a sip of something, just a tiny bit in a Dixie 00:25:58.980 --> 00:26:01.480 cup, your brain naturally prefers the sweeter 00:26:01.480 --> 00:26:04.240 option. It's a biological reaction to a sugar 00:26:04.240 --> 00:26:06.599 rush. It triggers the reward center immediately. 00:26:07.299 --> 00:26:10.319 Pepsi is sweeter. New Coke was formulated to 00:26:10.319 --> 00:26:13.640 be sweeter. So in a sip test, they win. Right. 00:26:13.720 --> 00:26:16.680 But, and this is the key, we don't drink soda 00:26:16.680 --> 00:26:20.599 by the sip. We drink a whole can or a whole bottle. 00:26:20.759 --> 00:26:23.039 And that's called a home use test. And the biology 00:26:23.039 --> 00:26:25.680 changes. When you drink a whole can of something 00:26:25.680 --> 00:26:28.220 that sweet, it can become cloying. It becomes 00:26:28.220 --> 00:26:30.700 too much. The sip test is a sprint. Drinking 00:26:30.700 --> 00:26:34.000 a Coke is a marathon. Coke was designed for the 00:26:34.000 --> 00:26:36.980 marathon. It has more acid, more bite, less sugar 00:26:36.980 --> 00:26:39.700 impact. But they tested it for a sprint. Yes. 00:26:39.920 --> 00:26:42.440 They optimized the product for the wrong environment. 00:26:42.720 --> 00:26:45.299 They optimized it for the test, not for the living 00:26:45.299 --> 00:26:47.099 room. That makes so much sense. And then there's 00:26:47.099 --> 00:26:49.400 a packaging. You sent me that note about sensation 00:26:49.400 --> 00:26:52.119 transference. Yes. This is a concept by Louis 00:26:52.119 --> 00:26:55.559 Cheskin, a famous marketing psychologist. He 00:26:55.559 --> 00:26:57.960 argued that people don't separate the product 00:26:57.960 --> 00:26:59.819 from the packaging in their minds. They merge 00:26:59.819 --> 00:27:02.619 them. Exactly. They transfer their feelings about 00:27:02.619 --> 00:27:05.680 the box or the can onto the taste itself. Can 00:27:05.680 --> 00:27:07.380 you give an example of how that works? Sure. 00:27:07.680 --> 00:27:10.480 Jeskin did research on 7 -Up in the 40s. They 00:27:10.480 --> 00:27:13.539 found that if they put the exact same 7 -Up liquid 00:27:13.539 --> 00:27:16.500 in a bottle with a slightly more yellow label, 00:27:17.230 --> 00:27:20.630 People swore it tasted more lemony. No way. If 00:27:20.630 --> 00:27:23.109 the label was green, they tasted more lime. The 00:27:23.109 --> 00:27:24.950 brain is so easily tricked, we taste with our 00:27:24.950 --> 00:27:27.589 eyes. We do. So apply that to Coke. The consumers 00:27:27.589 --> 00:27:30.569 believed the product was the red can, the Spencerian 00:27:30.569 --> 00:27:33.630 script logo, the history, the shape of the bottle. 00:27:33.730 --> 00:27:35.670 There's a whole package of sensations. Right. 00:27:35.710 --> 00:27:37.670 When you change the definition of the product, 00:27:37.730 --> 00:27:39.609 when you said, this isn't that thing you love 00:27:39.609 --> 00:27:42.619 anymore, it's something new. You broke the sensation 00:27:42.619 --> 00:27:45.440 transference. You severed the leaf. So it actually 00:27:45.440 --> 00:27:47.119 tasted worse to them because the psychological 00:27:47.119 --> 00:27:49.980 seasoning was gone. Wow. There was also a theory 00:27:49.980 --> 00:27:52.559 I read about called the just noticeable difference. 00:27:52.980 --> 00:27:55.079 It suggests they could have just changed the 00:27:55.079 --> 00:27:58.099 flavor slowly, right? Like boiling a frog. The 00:27:58.099 --> 00:28:01.539 flavor balance hypothesis. Yes. Later studies 00:28:01.539 --> 00:28:03.640 showed that if Coke had just gradually tweaked 00:28:03.640 --> 00:28:06.339 the formula over five years, added a little more 00:28:06.339 --> 00:28:09.579 sugar in 1980, changed the acid balance in 1982, 00:28:09.799 --> 00:28:11.299 no one would have noticed. And they would have 00:28:11.299 --> 00:28:13.119 gotten to the same place. They could have arrived 00:28:13.119 --> 00:28:15.799 at the new Coke flavor without the new Coke launch. 00:28:16.099 --> 00:28:18.160 But they didn't want to do that. No. Goizueta 00:28:18.160 --> 00:28:20.339 wanted a big splash. He wanted the headlines. 00:28:20.599 --> 00:28:24.200 He wanted the new label to attract the youth. 00:28:24.559 --> 00:28:26.980 That was hubris. He wanted the credit for the 00:28:26.980 --> 00:28:28.880 change, and that's what killed it. Now, we have 00:28:28.880 --> 00:28:31.519 to talk conspiracy theories. We do. Because even 00:28:31.519 --> 00:28:34.900 today, if you mention New Coke at a party, someone, 00:28:35.200 --> 00:28:37.059 usually the uncle who thinks he knows everything, 00:28:37.299 --> 00:28:39.819 will say, oh, they did it on purpose to switch 00:28:39.819 --> 00:28:42.400 to corn syrup? The high fructose corn syrup theory. 00:28:42.740 --> 00:28:45.599 It is the most persistent myth in business history. 00:28:45.900 --> 00:28:48.500 So break it down. What's the theory? The theory 00:28:48.500 --> 00:28:51.740 is that sugar was expensive, corn syrup was cheap. 00:28:52.039 --> 00:28:54.480 So they used New Coke as a distraction to switch 00:28:54.480 --> 00:28:57.240 the original formula from cane sugar to corn 00:28:57.240 --> 00:29:00.039 syrup while no one was looking. Is there any 00:29:00.039 --> 00:29:03.220 truth to it? Because logically, it sounds plausible. 00:29:03.500 --> 00:29:05.960 It sounds plausible, but the timeline just, it 00:29:05.960 --> 00:29:07.960 destroys it. The switch had already happened. 00:29:08.019 --> 00:29:11.559 Before New Coke. Way before. Coke started allowing 00:29:11.559 --> 00:29:15.359 bottlers to use corn syrup in 1980, five years 00:29:15.359 --> 00:29:19.289 before New Coke. By 1985, Almost all bottlers 00:29:19.289 --> 00:29:22.890 in the U .S. were already using 100 % HFCS in 00:29:22.890 --> 00:29:25.289 the old Coke. So when people were hoarding old 00:29:25.289 --> 00:29:28.730 Coke in 1985, filling their basements with cases 00:29:28.730 --> 00:29:31.799 of... The good stuff. They were already hoarding 00:29:31.799 --> 00:29:34.279 corn syrup Coke. For the most part, yes. Unless 00:29:34.279 --> 00:29:36.519 they were importing it from Mexico, they were 00:29:36.519 --> 00:29:38.559 fighting for a formula that had already changed 00:29:38.559 --> 00:29:40.400 regarding the sweetener. They were fighting for 00:29:40.400 --> 00:29:43.099 the brand, not the sugar. Exactly. What about 00:29:43.099 --> 00:29:45.480 the classic spike theory that they broke it on 00:29:45.480 --> 00:29:47.759 purpose just so they could bring back the original 00:29:47.759 --> 00:29:50.039 and get a sales bump? Like a new and improved 00:29:50.039 --> 00:29:52.500 strategy, but in reverse. People love to believe 00:29:52.500 --> 00:29:55.160 corporations are playing 4D chess, plotting these 00:29:55.160 --> 00:29:57.619 master strokes. That's more fun that way. It 00:29:57.619 --> 00:29:59.480 is. But look at the chaos we just described. 00:30:00.059 --> 00:30:02.619 Bottlers were revolting. Stock prices eventually 00:30:02.619 --> 00:30:06.039 wobbled. The executives were being publicly humiliated. 00:30:06.279 --> 00:30:09.740 Kiev's quote stands. We're not that smart. No 00:30:09.740 --> 00:30:11.920 company risks their entire existence on a bank 00:30:11.920 --> 00:30:13.880 shot strategy like that. It's too dangerous. 00:30:14.119 --> 00:30:16.200 So it was an accidental victory, not a planned 00:30:16.200 --> 00:30:19.759 one. Exactly. Roger Enrico, the CEO of Pepsi, 00:30:19.920 --> 00:30:23.519 called it the Edsel of the 80s. He said if they 00:30:23.519 --> 00:30:25.880 had fired people over it. It would have destroyed 00:30:25.880 --> 00:30:28.099 the culture of risk -taking at Coke. But they 00:30:28.099 --> 00:30:30.539 didn't fire anyone, did they? No one. Here's 00:30:30.539 --> 00:30:33.559 the amazing part. They didn't fire anyone. Goizueta 00:30:33.559 --> 00:30:36.720 kept his job. Zyman kept his job. And in the 00:30:36.720 --> 00:30:39.180 end, it worked out for them. In a weird way, 00:30:39.279 --> 00:30:43.079 yes. Sales of Coca -Cola classics skyrocketed. 00:30:43.119 --> 00:30:46.640 By the end of 1985, Coke was blowing Pepsi out 00:30:46.640 --> 00:30:49.140 of the water. It re -established Coke as the 00:30:49.140 --> 00:30:51.319 dominant cola. It reminded people why they loved 00:30:51.319 --> 00:30:54.069 it. As Sergio Zayman later said, New Coke was 00:30:54.069 --> 00:30:56.390 a success because it revitalized the brand and 00:30:56.390 --> 00:30:59.009 reattached the public to Coke. Talk about spinning 00:30:59.009 --> 00:31:01.450 a failure. That is world -class spin. It is a 00:31:01.450 --> 00:31:03.410 good spin, but he's not wrong. Before New Coke, 00:31:03.509 --> 00:31:05.609 Coke was just a soda. After New Coke, it was 00:31:05.609 --> 00:31:07.230 an American treasure that you had to fight to 00:31:07.230 --> 00:31:09.650 protect. Before we wrap up, we have to mention 00:31:09.650 --> 00:31:12.210 the pop culture legacy. Yes. Because New Coke 00:31:12.210 --> 00:31:14.710 didn't just disappear. It had a weird afterlife. 00:31:15.210 --> 00:31:17.309 Tax headroom. The computer -generated guy. I 00:31:17.309 --> 00:31:19.529 barely remember him, but he's so 80s. Played 00:31:19.529 --> 00:31:21.289 by Matt Frewer in prosthetics, actually, not 00:31:21.289 --> 00:31:23.950 computer -generated. Oh, really? Wow. Yeah. And 00:31:23.950 --> 00:31:26.769 Coke used him to market Coke, too, or the New 00:31:26.769 --> 00:31:30.250 Coke, to the youth market. The slogan was Catch 00:31:30.250 --> 00:31:33.089 the Wave. And surprisingly, that campaign was 00:31:33.089 --> 00:31:37.029 huge. See? Catch the Wave. Even I know that tagline. 00:31:37.529 --> 00:31:40.869 It had 76 % awareness among teenagers. It was 00:31:40.869 --> 00:31:43.210 actually a very successful ad campaign for a 00:31:43.210 --> 00:31:46.230 very unsuccessful product. It kept New Coke on 00:31:46.230 --> 00:31:49.410 life support for years. And then weirdly, Stranger 00:31:49.410 --> 00:31:52.589 Things brought it back recently. In 2019, season 00:31:52.589 --> 00:31:55.289 three was set in the summer of 1985. So naturally, 00:31:55.529 --> 00:31:58.130 the kids are arguing about New Coke. Right. Lucas 00:31:58.130 --> 00:32:00.430 loves it. Mike hates it. It was a perfect period 00:32:00.430 --> 00:32:02.799 detail. And Coke actually partnered with Netflix 00:32:02.799 --> 00:32:05.079 and did a limited production run of the new Coke 00:32:05.079 --> 00:32:07.720 formula. Did people like it this time or did 00:32:07.720 --> 00:32:09.480 they hate it again? That is the funniest part. 00:32:10.019 --> 00:32:12.220 Reviews were surprisingly friendly. Our palates 00:32:12.220 --> 00:32:14.559 have changed. How so? We're used to sweeter drinks 00:32:14.559 --> 00:32:16.420 now because of the explosion of energy drinks 00:32:16.420 --> 00:32:19.119 and frappuccinos. One reporter said, tastes like 00:32:19.119 --> 00:32:21.579 what's normal now. So Guzueta wasn't wrong. He 00:32:21.579 --> 00:32:25.519 was just 34 years too early. He was a visionary, 00:32:25.720 --> 00:32:29.539 just. A visionary with bad timing and terrible 00:32:29.539 --> 00:32:32.059 execution. So let's unpack the final takeaway 00:32:32.059 --> 00:32:34.259 here. We had this massive company, perfect data, 00:32:34.359 --> 00:32:37.779 unlimited money, and a disaster. Well, New Coke 00:32:37.779 --> 00:32:40.380 failed as a product. As a liquid in a can. Right. 00:32:40.539 --> 00:32:44.779 But it succeeded as a marketing event. It inadvertently 00:32:44.779 --> 00:32:47.500 proved that a brand is not a set of physical 00:32:47.500 --> 00:32:50.559 attributes. A brand is a relationship. It's an 00:32:50.559 --> 00:32:52.700 emotion. You can't put nostalgia on a spreadsheet. 00:32:52.940 --> 00:32:55.079 No, you can't. And that brings me to the big 00:32:55.079 --> 00:32:57.059 question I think listeners should show on. Okay. 00:32:57.440 --> 00:32:59.539 We live in a world today that is obsessed with 00:32:59.539 --> 00:33:03.559 data. Big data. AI algorithms. A .B. testing 00:33:03.559 --> 00:33:05.519 everything to death. Absolutely. Everything is 00:33:05.519 --> 00:33:08.079 optimized. Koch had the perfect data. The blind 00:33:08.079 --> 00:33:09.980 taste test didn't lie. People like the taste 00:33:09.980 --> 00:33:13.059 better. But the data missed the context. It missed 00:33:13.059 --> 00:33:16.240 the humanity. So my question is, what other perfect 00:33:16.240 --> 00:33:19.019 data are companies following today that is completely 00:33:19.019 --> 00:33:21.880 missing the human element? What are we optimizing 00:33:21.880 --> 00:33:24.980 for? Efficiency, sweetness, clicks that is actually 00:33:24.980 --> 00:33:26.900 stripping away the soul of the things we love. 00:33:27.099 --> 00:33:29.700 That is a terrifying thought. Are we optimizing 00:33:29.700 --> 00:33:32.839 the flavor but losing the feeling? Exactly. Sometimes 00:33:32.839 --> 00:33:35.779 the worst product is the one people actually 00:33:35.779 --> 00:33:38.279 want. Because of what it represents. Well, on 00:33:38.279 --> 00:33:39.940 that note, I think I'm going to go grab a Coke. 00:33:40.420 --> 00:33:43.039 A classic one. Make it a glass bottle. It tastes 00:33:43.039 --> 00:33:46.180 better. Always. Thanks for diving in with us. 00:33:46.319 --> 00:33:48.259 A pleasure. And thank you for listening. See 00:33:48.259 --> 00:33:48.740 you in the next one.