HOW COKE DECIDED A NEW TASTE WAS IT Losing out to Pepsi in important markets, Coca-Cola launched a $4-million consumer test that produced results it liked.
By - Jaclyn Fierman

(FORTUNE Magazine) – IT'S ONE of the boldest gambles in marketing history, but Coca-Cola Chairman Roberto Goizueta, 53, says he has no qualms about changing the world's favorite soft drink after 99 years: ''I was much more anxious when we launched Diet Coke.'' Behind his confidence is a $4-million research project -- the company's biggest for any new product -- that convinced him that consumers will like Coke's new formulation better than the old one and prefer it to Pepsi. Goizueta says he even got a nod of support from Robert Woodruff, Coca- Cola's change-resistant grand old man and boss for more than a half century, who died at 95, just 47 days before Coke made the big announcement. Goizueta would have had to make a move sooner or later. The Atlanta-based | company (1984 sales: $7.4 billion) still dominates the $23-billion U.S. soft- drink industry, and Diet Coke has become the No. 1 U.S. diet drink. But Coke, its flagship brand, has been slipping behind Pepsi in supermarkets, one of the most important outlets for both companies. Last year Pepsi led there by nearly two percentage points, worth roughly $80 million in revenues. And for years Coke had to endure television commercials in which Pepsi won a taste test hands down. Coke had believed for some time that its original secret formula, concocted by Georgia pharmacist John Pemberton in 1886, was a big part of the problem. The company began trying out new tastes in 1981, the year it started developing its one-calorie Diet Coke, but it didn't settle on the new Coke formula until late last summer. In October, aided by two Atlanta market research firms, MARC and Kenneth Hollander Associates, Coke took the new taste to over 30 cities across the country. Some 40,000 people cast their vote, about eight times the number Coke usually samples to test a new product. With the brands not identified, 55% chose the new Coke over the old; 52% chose it over Pepsi. The new Coke has four more calories than the old, but two fewer than Pepsi. It is slightly sweeter and is designed to be less filling. At first the company considered simply changing the formula without telling anyone, but it scotched that idea. ''We got the best results when we hit people over the head with the fact that Coke had a new taste,'' says Roy Stout, Coke's senior vice president of market research. When the drink was marked Coke but not identified as new, Coke and Pepsi tied. When participants learned they were drinking a new Coke, they chose it over Pepsi by about eight percentage points.

Testing the reformulation of 7X, the code name for Coke's secret ingredients, ''involved more security than a military operation,'' says market researcher Kenneth Hollander. Coke didn't begin identifying the brands to its test groups until March, and then it pretended that Pepsi was trying out a new product too. Coke produced bogus Pepsi cans marked ''new taste.'' Pepsi reacted swiftly. Within a week it had a new ad on television showing a forlorn Coke fan about to down her first Pepsi. ''Will somebody out there tell me why Coke did it?'' she asks plaintively. ''First they said they were the real thing; then they said they were it.'' Pepsi hopes there are plenty of people out there -- namely the 45% who prefer the old Coke -- who are asking the same question.