The Coke Machine - Michael Blanding [29]
As hope of the 1970s settled into economic malaise, however, Coke showed how easy it was to appeal to the other side of the political spectrum. A new series of ads featured lighthouses, redwoods, and corn silos, set to a song called “Look Up, America!”—a nod to the new “moral majority” backing conservative president Ronald Reagan. Through it all, sales of soft drinks continued to soar, from 242 cans per person in 1970 to 363 cans per person in 1980. As Pepsi’s new CEO Roger Enrico once said, “At Pepsi, we like the Cola Wars. . . . The more fun we provide, the more people buy our products—all our products.” It was Pepsi, however, that changed the rules of engagement, leading to the Coca-Cola Company’s biggest blunder, and the Coca-Cola brand’s greatest triumph.
What’s amazing , in retrospect, about the Pepsi Challenge isn’t that Pepsi had the audacity to compete with Coke on the basis of taste. It’s that it hadn’t done so before. Here, the two soda giants had been fighting it out for decades on which soda refreshed or relaxed you better, on which one made you feel younger or more nostalgic—as if to distract consumers from the simple idea that they could just drink the one they thought tasted better.
It took a state of near desperation to try it. Coke had trounced Pepsi on market share for years in Texas before a new regional manager decided on a fresh approach. He found it in television commercials inviting shoppers to try two sodas head-to-head, filming their surprised expressions when it turned out they liked Pepsi better. The campaign doubled market share in just a few months, and Pepsi eventually rolled it out nationally, reaching 90 percent of the market by 1983.
The campaign rocked Coke to the core, leading to its own tests revealing that Pepsi did actually outperform Coke on taste by a small margin. Nonetheless, both companies fired off competing ads, each claiming they actually tasted better, at the same time slashing prices and offering discounts at supermarkets to win back customers. After a year or two, however, they realized the scorched-earth tactics only hurt both of them.
“The Pepsi Challenge, if managed differently, might have resulted in a real Cola War, one that was price-based,” says historian Richard Tedlow. “This, however, is precisely the kind of competition both companies want to avoid.” Pepsi’s incoming president, Roger Enrico, called off the campaign almost as soon as it began, and both companies soon returned to more traditional forms of advertising—with Coca-Cola releasing the new slogan, “Coke Is It!” which, like “Things Go Better,” was ambiguous enough to open itself to any interpretation.
Inside Coke, however, executives continued to fret. Every year, Pepsi chipped away at the company’s market share a little bit more. From a high of 60 percent after World War II, Coke’s share had fallen to just 22 percent by 1984—compared with Pepsi’s 18. What was worse, when Coke applied a pseudo-scientific measure called the Advertising Pressure Index (API), it found “advertising alone couldn’t account for Pepsi’s aggressive advance, or Coke’s devastating decline”—as if the thought that a company could grow or falter due to something other than its advertising image had never occurred to them. That realization set them up for a drastic mistake under the leadership of Coke’s new president, a Cuban chemist named Roberto Goizueta.
A member of Cuba’s financial elite who fled the island before Castro’s takeover in 1960, Goizueta got