The Land :: www.TheLandOnline.com

Nuts & Bolts

August 9, 2013

How Coke won the cola wars

The inspired Pepsi Challenge marketing campaign of the 1980s was my childhood introduction to one of the fundamentals of scientific inquiry: the double-blind experiment. In a world beset with soft drink advertising, how could you really know which soda you liked best? Clearly what made sense was to put prejudice and branding aside, don a blindfold, and focus on pure flavor.

It was one of the greatest marketing coups of all time. In the late 1970s and early 1980s, Pepsi steadily gained on Coke in terms of market share. Characters in the ads always picked Pepsi, of course, but so did most people who tried it in real life - the sweeter taste was more appealing. By 1983, Pepsi was outselling Coke in supermarkets, leaving Coke dependent on its larger infrastructure of soda machines and fast food tie-ins to preserve its lead. That was a success in its own right. But even better, Pepsi forced Coke into an infamous business blunder. Faced with eroding market share, Coke began a series of its own internal taste tests aimed at developing a superior product. Thus was born the dread New Coke, a sweeter cola reformulated to best both Pepsi and the classic formulation of Coke in blind taste tests.

The backlash was fast and furious, with over 400,000 letters of complaint pouring in to the company. Despite declining market share, Coke was still by far the market leader over Pepsi - and the company's millions of loyal customers weren't looking for a new flavor. Pepsi recorded the fastest year-on-year sales growth in the company's history during New Coke's first month, while a consortium of Coca-Cola bottlers decided to sue the company for changing the product.

But then Coca-Cola's senior leadership did something tough: They admitted that they were wrong. And they executed a strategic pivot that's kept them on top of the rivalry ever since. They reintroduced the original formula under the name "Coca-Cola Classic" and sold it in parallel with New Coke for a while. Over time, the "new" Coke was phased out, and Coca-Cola Classic became just, well, Coke once again - a product so culturally iconic that across a significant swath of the United States it serves as a generic term for what decent people call "soda" and Midwesterners call "pop."

For the past 25 years, Coke advertising has focused on the brand first and foremost. The soda is a shared experience that's supposed to remind you of friendship, family, adorable bears and other fuzzy associations. And it's worked great. According to industry statistics compiled by Beverage Digest, Coke owns 17 percent of the American market for carbonated soft drinks. The next most popular choice is Diet Coke with 9.4 percent. Pepsi languishes in third place at 8.9 percent. Though it's the flagship brand of a diverse beverage and snack company with over $65 billion in revenue, Pepsi is a definite loser in the popularity sweepstakes.

Pepsi is a quintessential example of a "challenger brand" that's seeking an edge against a dominant, iconic firm. Marketing has often emphasized the idea of Pepsi as newer or more youthful - "the choice of a new generation" - as a way of turning its second-place status into an advantage. But Pepsi works as such a great example of a challenge because despite decades of efforts, none of its different slogans or logos or celebrity endorsements has ever put it in first place.

It's a frustrating place for the company to be, because the Pepsi Challenge wasn't just an ad gimmick. It really is true that blind taste tests suggest that people like it better than Coke. Yet people keep buying more Coke. One theory of this "Pepsi Paradox," described by Lone Frank in Scientific American, is that we should take the Pepsi Challenge at face value. Coke's victory is a triumph of branding over flavor, and a clear sign that consumer companies should invest lots of money in advertising. Researchers intrigued by the paradox have suggested that Coke's ads actually rewire the human brain.

When Read Montague of Baylor College Medicine performed a version of the Pepsi Challenge with subjects hooked up to an fMRI machine, he found something interesting. In blind taste tests, most people preferred Pepsi, and Pepsi was associated with a higher level of activity in an area of the brain known as the ventral putamen, which helps us evaluate different flavors. By contrast, in a nonblind test, Coke was more popular and was also associated with increased activity in the medial prefrontal cortex. Montague's interpretation: This prefrontal activity represented the higher-thinking functions of the brain associating the soda with ad campaigns and, in effect, overriding the taste buds.

But perhaps this is wrong. Felix Salmon notes that in blind taste tests of wine, people almost invariably prefer sweeter varieties. This hardly means sweeter wines are always better - and Pepsi is sweeter than Coke. On this view it's actually Pepsi that scored the marketing triumph, by convincing people that a blind taste test represents the true mark of soda flavor. Likewise, the idea that Coke triumphs because of ads rather than flavor has trouble explaining the failure of New Coke. New Coke had the same ads behind it as old Coke, but was specifically engineered to beat Pepsi in taste tests.

But taste tests consist of relatively modest sips, and Americans don't drink tiny sips of soda. We drink whole cans of soda. We drink 20-ounce bottles. We drink Big Gulps at 7-Eleven. We drink sodas so large that Michael Bloomberg wants to make them illegal. Serious soda drinkers consume multiple servings per day, every day of the week. And while we want something sweet, we don't necessarily want that kind of long-term relationship with something too sweet.

That's why New Coke could succeed in a lab but fail in the marketplace. The Pepsi Challenge is a great marketing gimmick but not a viable path to displacing the leading brand. Some rivalries come down to the fundamentals. Coke just has a flavor that most people like better, and decades of brand-on-brand combat can't change that.   

1
Text Only
Nuts & Bolts
  • Expo takes precautions to prevent spread of virus
    An outbreak of a potentially deadly equine virus will mean some empty stalls at the upcoming Minnesota Horse Expo.

    April 14, 2014

  • CNHI papers honored for spot news, enterprise journalism

    Newspapers in Norman, Okla., Anderson, Ind., and Andover, Mass., are among those honored in the Best of CNHI 2013.

    April 3, 2014 1 Story

  • touch.jpg Divorce is on the rise, and it's the baby boomers' fault

    A new paper from demographers at the University of Minnesota found that the age-standardized divorce rate has actually risen by an astonishing 40 percent since 1980.

    April 3, 2014 1 Photo

  • Newborn.JPG Census: U.S. has fewest births since 1998

    The U.S. recorded the most deaths in its history and the fewest births since 1998, resulting in the lowest population gain from natural causes in 35 years, an analysis of 2013 Census Bureau estimates released Thursday shows.

    April 3, 2014 1 Photo

  • dog-sunglasses.jpg Do animals have a sense of humor?

    Right now, in a high-security research lab at Northwestern University's Falk Center for Molecular Therapeutics, scientists are tickling rats. Their goal? To develop a pharmaceutical-grade happiness pill. But their efforts might also produce some of the best evidence yet that humor isn't something experienced exclusively by human beings.

    April 3, 2014 1 Photo

  • VIDEO: X-Ray released of tree trimmer with chainsaw embedded in neck

    Not only did the tree trimmer who got a chainsaw caught in his neck survive, he climbed down the tree by himself after the accident.

     

     

    April 3, 2014

  • Screen shot 2014-02-20 at 4.23.54 PM.png Get ready for spring with these 3 apps for gardening

    Even if it's still cold out, it's almost time to start planning a spring garden. Whether you have a full backyard garden you eat from all summer or just a few tomatoes and herbs on the porch, these apps will have you make the most of your garden

    February 28, 2014 1 Photo

  • Data breach hits Target's profits, but that's only the tip of the iceberg

    In its first financial release since the December breach that enabled the theft of millions of customers' payment data, Target said profits fell 46 percent and that the breach had already cost the retailer $17 million. The final tally will be bigger, the company said, but it's unclear by how much.

    February 28, 2014

  • Dwindling Midwest high school grads spur college hunt

    A waning number of high school graduates from the Midwest is sparking a college hunt for freshman applicants, with the decline being felt as far away as Harvard and Emory universities.

    February 28, 2014

  • Six reasons childhood obesity has fallen so much

    A major new paper appearing in Wednesday's edition of the Journal of the American Medical Association finds that childhood obesity - age 2 to 5 - has fallen from 13.9 percent in 2003-04 to 8.4 percent in 2011-12.

    February 28, 2014

Featured Ads
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
The Land's Twitter Feed