EVs Might Be New Coke on Wheels

Coca-Cola’s introduction of New Coke in 1985 has been called one of the greatest marketing fiascos of American business. In a blundering attempt to reverse its steady market share decline, Coca-Cola management decided to sack the 99-year-old iconic Coke formula and replace it with New Coke.

However, things did not go as planned. Many Coke drinkers were furious with management’s unilateral actions to limit what they could buy. Electric cars and soft drinks are worlds apart, but there are key issues in the New Coke story that are relevant to how the roll-out of electric vehicles might resonate with U.S. car owners in the coming years.

The Right Thing to Do

In 1985, Coca-Cola was losing market share to various sweet-tasting competitors, especially Pepsi. Based on the findings of a 200,000-person taste test (later found to be not as clear-cut as initially thought), management decided to ditch the iconic Coke formula and replace it with a sweeter bubbly blend they called New Coke. It seemed the right thing to do.

Pushback

Coca-Cola management was unprepared for the outrage of consumers who could not purchase the original Coke they “loved.” Unprecedented consumer pushback forced the quick return of original Coca-Cola to store shelves as Classic Coke, alongside New Coke and Diet Coke.

Three Market Issues

New Coke’s fiasco underscored three market issues. First, consumers are not a homogeneous group. Second, consumers do not like being forced to purchase a product. Third, products are complex and differently perceived and used by various groups of consumers.

Consumers Are Not a Homogeneous Group

From its research (later found to be flawed), CocaCola management believed that most consumers preferred a sweeter soft drink to original Coke. However, a sizable share of the taste group did not agree.

In retrospect, it seems obvious that most consumers should not determine what a manufacturer makes available to all consumers, but this was not clear to CocaCola management at the time.

Consumers Do Not Like to Be Forced

In a competitive economy, product market share is won by offering consumers what they want or will enjoy.

Product diversity is a natural result of consumers not being a homogeneous group in their preferences or needs. Consumers, especially in the U.S., prefer a choice of products so they can purchase what best suits them.

Product Complexity

Products often mean different things to different people and satisfy their diverse interests, needs and desires. This intensifies consumer ire when a product is taken from them, as in the case of original-formula Coke.

One Coke executive said in response to the New Coke fiasco, “We did not know the product we were selling. Coca-Cola is not just a soft drink, it is a part of peoples’ lives.”

New Coke and Cars

Soft drinks and cars are worlds apart, however some key market issues from the New Coke drama could be in play given the unprecedented and top-down decision to convert the country’s vehicle fleet from fossil-burning to electric-powered cars and light trucks.

New Coke’s Three Lessons

First, vehicle owners are not a homogeneous group in why they purchase and how they use cars. This is especially true of new-vehicle buyers compared to preowned vehicle buyers, who own most of the vehicles on U.S. roads.

Second, given the unprecedented impact of vehicles on the lives and livelihoods of Americans, a lack of choice between fossil-fueled and electric vehicles could have unprecedented consumer ramifications.

Vehicle buyers (both new and pre-owned) are much more likely to be upset by a lack of choice of how vehicles are powered than Coke drinkers were about flavor in 1985.

Third, vehicles are much more complex products than soft drinks in terms of why they are purchased and how they are used.

The limited number of electric vehicles on the road has kept them primarily in the hands of a relatively small population of enthusiasts, who most likely have significantly different reasons for the vehicle purchase and use than most of the more than 230 million consumers who own and operate cars and light trucks across the country.

Additional Challenges

In addition to the three market issues presented here, electric vehicles face other challenges in the U.S., such as the need for a charging infrastructure coupled with the electrical capacity and delivery system to support it, more extensive EV driving range, and more affordable EV models, to name a few.

However, the greatest challenge for EVs in the U.S., if they are to be dependably produced (primarily in the U.S.) in the massive numbers necessary to have a tangible impact on vehicles in operation, is the complexity and offshore dependence (and possible fragility) of the supply chains on which their two central systems (batteries and electric motors) rely.

Dramatic changes in U.S. relations with a key country or two (which could happen abruptly) would have draconian consequences for EV production in the U.S. for many years – more about this in future issues of the Lang iReport.

Six Major Takeaways

• In 1985, the Coca-Cola company created one of the greatest fiascos in the history of American business when it made a top-down decision to ditch the original Coke formula, which had flourished for 99 years, for a sweeter-tasting New Coke.

• The unprecedented pushback from consumers, who could not purchase the iconic Coke they “loved,” forced management to quickly return the original Coke formula to store shelves as Classic Coke, alongside New Coke and Diet Coke.

• The New Coke fiasco underscored three market issues: consumers are not a homogeneous group, consumers do not like being forced to purchase products and products are complex and differently perceived and used by various groups of consumers.

• There is a world of differences between soft drinks and cars. Still some critical issues in the New Coke drama could be in play in the unprecedented and topdown decision to convert the country’s vehicle fleet to electric-powered

• The limited number of EVs on the road has kept them primarily in the hands of a relatively small population of enthusiasts, who most likely have significantly different reasons for purchasing and using vehicles than most of the over 230 million Americans who own and operate the nation’s VIO.

• In addition to the market issues from the New Coke drama, the most significant challenge for producing enough EVs (primarily in the U.S.) to substantially impact the country’s VIO and aftermarket are the complexity and off-shore dependence (and possible fragility) of the supply chains on which EVs’ two central systems (batteries and electric motors) rely. Dramatic changes in U.S. relations with a country or two could decimate EV production in the U.S. for many years.