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From: miller@rochester.UUCP (Brad Miller)
Newsgroups: net.misc.coke
Subject: classic coke
Message-ID: <10569@rochester.UUCP>
Date: Sun, 14-Jul-85 14:33:02 EDT
Article-I.D.: rocheste.10569
Posted: Sun Jul 14 14:33:02 1985
Date-Received: Wed, 17-Jul-85 08:35:19 EDT
Distribution: net
Organization: U. of Rochester, CS Dept.
Lines: 31

A lot of people seem to think coke had the reintroduction of their old formula
'up their sleeve' all along.

The problem with this statement is that there are substatial costs incurred when
changing the formula of a product, especially when it must contain a new
designation (e.g. 'new'). These costs approach that of introducing a totally new
product. The only advantage to giving it the older name is, of course, name
recognition. However, to suppose that Coke would really risk alienating all of
it's current customers if they really believed that there would be such an
outcry at replacing the coke formula seems foolish. All of the pre-release
market studies I saw indicated that coke felt that current customers would not
reject the new flavor, but they would gain market share among pepsi drinkers.
(Taste test statics ran roughly 35% of coke drinkers preferred the new coke,
while 75% would drink it, 50% of pepsi drinkers preferred the new coke over
pepsi.)

So, one may ask, why did the stock go up on the news Coke would reintoduce
their old flavor? SHELF SPACE!! Colas are sold based on the amount of shelf
space they have at the retailer. By introducing a new product, Coke implicitly
forces the retailer to make a decision on what other products they will have
to reduce shelf space for in order to carry the original coke. Given that the
new coke is performing adequately in most areas (there are some large
exceptions) the dealer is unlikely to decrease shelf space for the old coke, so
shelf space for other products, like the off brands and (they hope) pepsi
products will decrease. Bottom line, more total sales, albeit less for any
one part of their product line. (WSJ had an article about shelf space and
its effect on third brands after the introduction of all the caffine free
products by both Coke and Pepsi).


Brad Miller