The Surest Disaster Ever Made
RISK MANAGEMENT AND NEW COKE
“I don’t think I’d be more upset if you were to burn the flag in our front yard.” On July 11, 1985, just 79 days after the unveiling of New Coke, Coca-Cola held another press conference to announce the return of the original formula. New Coke was reviled when it was released and is still considered one of the biggest marketing disasters of all time. But the funny thing is people actually liked the taste of New Coke better than the original recipe. Coca-Cola executives didn’t make the change on a whim. They’d run over 190,000 blind taste tests on consumers in U.S. and Canada and the data showed people liked New Coke better. Unfortunately, they failed to ask how customers would feel if New Coke replaced the original. Coca-Cola is one of the most recognizable brands in the world. The formula has been tweaked over the years, but Coca-Cola built a brand on being an American classic. While New Coke might have been a good business move when competing with Pepsi, it essentially sacrificed what made people choose Coca-Cola in the first place. Ditching the old recipe in exchange for something new was seen as a total betrayal to their customers, and Coca- Cola paid dearly for the mistake.
In risk management, customer perspective of your company and your brand is important. Making decisions without assessing the risk to your brand can have disastrous consequences — just ask Coca-Cola.
On April 23, 1985, Coca-Cola Company chairman and CEO Roberto Goizueta announced at a press conference that the century-old company was introducing a brand-new formula, a sweeter soda christened New Coke. In an even more shocking move, Coca-Cola would be discontinuing its original formula in favor of New Coke. This dramatic change was the result of Coca-Cola’s rival, Pepsi-Cola, increasing in popularity year by year. What Goizueta claimed was “the surest move ever made” quickly became a total disaster. Loyal Coca-Cola drinkers protested loudly. By June, the company was dealing with 8,000 angry phone calls a day. One disgruntled soda drinker wrote to the company to declare,
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