Bluefield Daily Telegraph, Bluefield, WV

Slate

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
Slate
  • baby-generic.jpg For millennials, out-of-wedlock childbirth is the norm

    This month brings us yet another reminder that, for young Americans, having children outside of marriage is very much "the new normal," as The New York Times once put it.

    June 24, 2014 1 Photo

  • May 2014 was the hottest may in recorded history

    According to new data released this week, May 2014 is officially the warmest May in recorded history.
    Both NASA and the Japan Meteorological Agency have tentatively ranked May at the top of historical measurements, though NASA's numbers are preliminary because crucial information is still missing from China.

    June 20, 2014

  • GM recalls soar past 20 million. Why don't consumers care?

    In case you thought there couldn't possibly be another General Motors recall so soon, you're just not thinking big enough. This week, GM said it was recalling 3.36 million more cars. The cause: an ignition switch defect that could result in keys carrying extra weight (read: a keychain) to slip out of position and shut the vehicle off abruptly during "some jarring event."

    June 18, 2014

  • No one is against devoted dads

    Father's Day is Sunday, which means that it's time for pundits and politicians to scold the American public - with special ire reserved for black members of the American public - for our supposed indifference to the wonder and awe of fatherhood.

    June 12, 2014

  • 74129880-graduates.jpg The fate of the overeducated and underemployed

    According to the Federal Reserve Bank of New York, about 44 percent of young bachelor's degree holders lucky enough to be working are employed in positions that technically don't require their degree. While that number isn't far off from the historical norm — 22-year-olds have always needed a little time to find their professional footing — the fraction stuck scraping bottom in truly low-paying jobs has grown quite a bit since the recession.

    June 4, 2014 1 Photo

  • Skype's real-time language translator

    This week at Re/Code's Code Conference, Microsoft announced a real-time, multilingual translation beta called Skype Translate. The service can mediate between two video chatterers who speak different languages by providing text and audio translation after each person finishes speaking. Currently the service works for English and German, but Microsoft says it will support other languages soon. The beta will be released later this year.

    May 29, 2014

  • New Orleans does away with traditional public schools

    The second-graders paraded to the Dumpster in the rear parking lot, where they chucked boxes of old work sheets, notebooks and other detritus into the trash, emptying their school for good.

    May 29, 2014

  • Amazon sells steroids and stimulants banned in sports

    I have by no means executed a comprehensive search of wares sold by Amazon directly or through its third-party sellers, but I found other prescription drugs for sale without a prescription, including the antibiotic norfloxacin and the muscle relaxant methocarbamol. Both compounds, like clindamycin, warrant careful oversight to avoid complications or endangering public health, such as by breeding antibiotic resistance.

    May 29, 2014

  • 2010-Winter-Olympic-Games-001.jpg Nobody wants to host the Winter Olympics

    If we end up watching slopestyle from the Central Asia steppes in 2022, it will likely be because it's becoming clear that nobody in Europe wants to host these Olympics anymore. Publics may finally be getting wise to the fact that the long-term economic benefits of hosting mega-events like the Olympics or the World Cup are usually negligible at best.

    May 27, 2014 1 Photo

  • Woman sues a New York Hospital for forcing a C-section. Can doctors do that?

    Though Dray's doctor claims he did not force her to have a C-section, her hospital record included a note signed by the hospital's director of maternal and fetal medicine that said, "I have decided to override her refusal to have a C-section."

    May 21, 2014