The Launch of New Coke

Case Studies in Business Marketing

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Case Details:

Case Code : MKTG034
Case Length : 10 Pages
Period : 1985 - 2002
Pub Date : 2003
Teaching Note : Available
Organization : Coke
Industry : Food, beverages and Tobacco
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Dr. John Pemberton, an Atlanta-based pharmacist, developed Coke's original formula in 1886. It was based on a combination of oils, extracts from coca leaves (cola nut) and various other additives including caffeine. These ingredients were refined to create a refreshing carbonated soda.

Pemberton's bookkeeper, Frank Robinson, suggested that the product be named Coca-Cola. He also developed the lettering for the brand name in a distinctive flowing script. On May 8, 1886, Coke was released in the market. It was first sold by Joe Jacobs Drug Store in the U.S. The first advertisement of Coke appeared in 'The Atlanta Journal' dated May 29, 1886.

Pemberton took the help of several investors and spent $76.96 on advertising. Initially, he could sell only 50 gallons of syrup at $1 per gallon. To make the drink popular, it was served free for several days - only after this that the drink gained people's acceptance.

After Pemberton's death in 1888, Asa Candler, his friend and a wholesaler druggist, acquired a stake in the company. Coca-Cola's sales soared even without much advertising and as many as 61,000 servings (8 ounces) were sold in 1889. This made Candler realize that the business was profitable. He decided to wind up his drug business and be associated with Coca-Cola full time.

As the business expanded, Candler also invested a higher sum in advertising the drink. By 1891, Candler bought the company for $2,300. In 1892, he renamed it as Coca-Cola and a year later, Coca-Cola was registered as a trademark. Only Candler and his associate Robinson knew the original formula.

It was then passed on by word of mouth and became the 'most closely guarded secret in the American industry.' Though occasional rumors spread that cocaine was an ingredient of Coke's formula, authorities mentioned that this was not true. By 1895, Coke was made available in all parts of the US, primarily through distributors and fountain owners.

Coke was advertised as a drink, which relieved one of mental and physical exhaustion, and cured headache. Later, Candler and Robinson repositioned Coke as a refreshment drink. In the beginning of the 20th century, manufacturing firms in the US were criticized for promoting adulterated products and resorting to misleading advertisements...

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