The Coke Wars: When The Pepsi Challenge Nearly Killed Coca-Cola

Coke and Pepsi have been forced to change their colouring agents, but definitely won't be changing the taste. Last time they did that in 1985, the shit really hit the fan...
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The announcement that Coca-Cola and Pepsi are both changing the way their drinks’ colouring agents are produced, so as to avoid having a cancer warning slapped across their packaging, has led to Coke in particular very strongly stressing that (a) there is no danger to the consumer and (b) just as importantly, this is not a recipe change and will not in any way change the taste of the drink.

Because if there’s one thing, other than the possibility of your favourite fizzy drink killing you, which is likely to see sales figures fall off the edge of a cliff, then it’s a change in taste and Coke would know all about that.

Back in the early Eighties they were rapidly losing market share to their sweeter-tasting rival, Pepsi. Results of the famous Pepsi Taste Challenge seemed to demonstrate that people wanted a sweeter-tasting drink and no matter how many advertising dollars Coke threw at the problem they couldn’t stop the gap between them and Pepsi shrinking.

The company had been considering a recipe change on-and-off for about 20 years so while they were formulating Diet Coke (launched in 1982) they began taste testing several recipes for regular Coke. One stood out and the company put it in a Coke can and spent $4m on market research comparing the old and new formulas.

In nearly 200,000 blind taste tests, 62% of testers said they preferred the new, sweeter taste

In nearly 200,000 blind taste tests, 62% of testers said they preferred the new, sweeter taste. However, significantly, while one market research firm suggested the new taste would be a hit, research from another suggested that consumers would view any change negatively as it would be messing with ‘Americana’. Undeterred Coke’s executives unanimously agreed, over Christmas 1984, to change the recipe of their flagship product for the first time in its 99-year history and make it sweeter.

So, uber-secret Project Kansas was put into action and Coke employed McCann-Erickson Worldwide to market the launch implementing huge security measures to stop news of the change leaking. McCann executives working on the project had to sign a legal document forbidding them from talking about the change to anyone, including other employees and even their spouses and they were moved to a secret office guarded by security personnel. Only people with passes were allowed in while no paperwork was allowed out. Cans of the new Coke were only carried in secure briefcases.

The vast majority of Coke employees and bottlers were also kept in the dark until the day before the new Coke was launched. When Sergio Zyman, Coke’s senior Vice President of Marketing, announced the recipe and taste change to a bottlers meeting in Atlanta on April 22, 1985 he got a foretaste of what was to come. According to Tim Shortt, a creative director with McCann who was present, the 5,000 bottlers despairingly shook their heads almost in unison.

Pepsi responded gleefully and gloatingly. Despite the stringent security measures, they had got wind of the formula change and took out full-page newspaper ads on the day of Coke’s Press conference declaring that the Coke Wars were over. “After 87 years of going eyeball to eyeball the other guy blinked” they claimed and not without some justification, after all Coke was changing to taste more like Pepsi. The company’s boss then gave his entire work force the following Friday off.

Coke’s launch took place in front of 700 journalists at New York’s Lincoln Centre with live feeds to media in Atlanta, Houston and Los Angeles (hell, if it had happened today, The Guardian would have live blogged it).

“The best has been made even better,” declared Coca-Cola CEO Roberto Goizueta after a brief video montage linking Coke with imagery of typical Americana from the Grand Canyon to JFK. The Press, however, were less than convinced and Goizueta was bombarded with negative questions. “Are you 100% certain this won’t bomb?” was the opener and things went downhill from there. Goizueta even struggled to describe the new taste before he was finally asked whether the recipe of Diet Coke would also change “assuming this is a success”.

“No,” Goizueta replied. “And I didn’t assume that this is a success. It is a success.”  He turned on his heels and the Press conference was over.

A campaign group called Old Cola Drinkers of America gained huge coverage by pouring new Coke down the drains

Then the new formula hit the shelves and the shit really hit the fan. Coke launched a massive publicity campaign.  There were TV adverts with Bill Cosby, millions of free samples, parades and fireworks and workers renovating the Statue of Liberty were the first in New York to receive cans. Yet despite all this the public rejected the new taste on a massive scale.

The Press ran endless taste tests of their own with almost unanimously negative results. A campaign group called Old Cola Drinkers of America gained huge coverage by pouring new Coke down the drains and launching a class action law suit trying to get the old recipe reinstated. Coke ads were booed when they were played on the big screen at the Houston Astrodome and the company received nearly 40,000 letters of complaint.

By early May Coke’s consumer hotline was receiving 1,000 angry calls a day. By early June the number had hit 8,000. With Coke’s sales figures collapsing, the company admitted defeat and held another Press conference on July 11th – 79 days after the infamous launch.

“The passion for original Coca-Cola – and that is the word for it, passion – was something that caught us by surprise…” said Coke president Don Keough. “It is a wonderful American mystery, a lovely American enigma, and you cannot measure it any more than you can measure love, pride, or patriotism.”

The original recipe was back. The calls kept pouring in but now they were calls of gratitude and Coke sales rocketed.  It was a marketing man’s dream, which led some to speculate that was the aim all along although Keough was quick to dismiss the suggestion simply saying “we’re not that smart”.

The old Coke was reintroduced as “Coke Classic” and co-existed with its younger sibling “New Coke” for several years before, due to confusion and limited shelf space, the latter was by-and-large removed and the word “Classic” went the same way in 2009 having gradually shrunk on packaging in the preceding years. Strangely, New Coke was very popular in Chicago where sales flourished and it was sold until 2002 and if you’re desperate to get your hands on a bottle, it’s still available in Yap and American Samoa.

So infamous is New Coke, Time magazine ranks it as number 23 on its list of The 50 Worst Inventions Ever while Advertising Age claimed the launch to be the industry’s sixth biggest moment.  But how could Coke have got things so spectacularly wrong?

An oft-repeated, although possibly apocryphal, story might go someway to explaining. It tells how a Coke delivery driver in Marietta, Georgia was attacked by a woman with an umbrella while stacking cans of the new Coke. “You bastard,” she screamed at him, “you ruined it – it tastes like shit!” When a Pepsi driver, who was also present, burst out laughing the angry woman turned her anger on him yelling: “You stay out of it! This is family business. Yours is worse than shit!”

The message is clear: taste is important but not as important as the product’s identity, to which consumers had familial attachment. Malcolm Gladwell discusses this in his book Blink, where he argues Coke simply used the wrong type of tests.

Sip tests, where testers drink only small quantities of a product, often produce diametrically different results to home-use tests. While many people will prefer a sweeter drink when just having a small amount they will find such drinks too sweet when drunk in any quantity. The tests also fail to take into account something called “sensation transference” which is when testers attribute their emotional attachment to a product to the taste of the product.

Pepsi’s increasing market share was not so much about the product’s taste as it was to do with how the firm had, since the Sixties, consciously marketed the drink as a youth product as well as how they played on the potentially misleading nature of the Pepsi Taste Challenge (a sip test).

Coke, mainly because they feared their plans would leak out, never asked testers if they wanted the taste of the drink to change. In essence they asked the wrong question and so they got the wrong answer and failed to grasp the fact that it wasn’t just about the taste but also image, history and culture. Coke is as American as you can get and, as we all know, you don’t mess with America.

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