In 1975, Pepsi directly targeted its long-term competitor, Coca-Cola, with the “Pepsi Challenge”, claiming that in taste tests people preferred Pepsi. After Coca-Cola conducted its own tests rumours spread that Coke did indeed have a taste problem.
In public, Coca-Cola appeared unconcerned. But senior executives knew that they could not afford to ignore Pepsi’s latest marketing offensive, given that Coke’s market share had fallen substantially in the face of competition from Pepsi and from new beverages such as diet drinks, citrus flavours and caffeine-free colas. Indeed, Coca-Cola, realising that tastes were changing and competition was getting tougher, was itself marketing many of these new products. However, Coca-Cola’s taste problem was a serious issue for a core product, and Coke’s shrinking lead in the cola market convinced senior executives of the need to act. In the New York Times, Brian Dyson, head of Coca-Cola USA, commented: There is a danger when a company is doing as well as we are … to think that we can do no wrong. I keep telling the organisation, we can do wrong and we can do wrong big.
During December 1984 the company decided to proceed with a new formula for Coke. The target date for the launch of the new formula, new Coke, was April 1985 and Dyson involved Coca-Cola’s senior marketing and public relations officials, who were given the vital (and secret) task of co-ordinating new Coke’s debut.