As much as we'd like to believe that The Coca-Cola Company is infallible, it proved in 1985 that it isn't.
It's inconceivable to us mere mortals that a company of the size and scope of Coca-Cola could make a mistake on the scale of New Coke the one it made in 1985. Although company officials have been honest (albeit a bit redfaced) about the blunder all along, the legend has arisen that New Coke was nothing more that a throwaway product created as part of a greater plan. People refused to believe any decision that colossally disastrous (and ultimately that colossally fortuitous) could have been the mere result of a very human miscalculation.
And yet it was. It was also a very logical — indeed, reasonable — mistake to make.
The early 1980s found Coke teetering on the edge of losing the cola war to Pepsi. The previous fifteen years saw Coca-Cola's market share remain flat while Pepsi's continued to climb. Pepsi was winning in the supermarkets (where shoppers had free rein to choose either beverage), and it was only Coke's greater availability in restricted markets (such as soda vending machines and fast food outlets) that was keeping its numbers ahead of Pepsi's. (Coke's market share had been shrinking for decades, from 60% just after World War II to under 24% in 1983.)
Coke's market share problems were exacerbated by the relative success of other types of sodas, including some manfactured by Coca-Cola and Pepsi themselves. The more consumers drinking diet, citrus, or caffeine-free beverages, the fewer sugar cola drinkers there were to sell to. The pie was getting smaller. This market segmentation should have been affecting Coke and Pepsi equally, yet only Coke had to fight to hang onto its share. Despite the competition, Pepsi was gaining new customers. No doubt about it, people liked the taste of what the boys in blue were selling.
Adding to Coca-Cola's segmentation problems was the runaway success of their own child, Diet Coke. Rather than replacing the sugars in the Coca-Cola formula with artificial sweeteners and then attempting to bring the taste of the new beverage back to more closely resemble the original, the company formulated Diet Coke the other way around. An entirely new flavor was created — one that was smoother and had less bite to it but was still a cola. People loved it.
Introduced in 1982, Diet Coke shot up the charts to become the uncontested #4 soft drink in America (with only Coke, Pepsi, and 7-Up ahead of it) by the end of 1983, and by 1984 it was comfortably nestled in the #3 spot. It was also helping to speed the ascendency of Pepsi over Coca-Cola, because the more Diet Coke drinkers there were, the smaller the pool of available sugar cola drinkers