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It was a decade ago that Coca-Cola Co. met the cola war's equivalent of the Alamo: the introduction of new Coke. But the joke is no longer on Coca-Cola and rivals aren't laughing.

"They have a lot going for them right now," said Barry A. Ziegler, an analyst with A.G. Edwards & Sons, St. Louis. "The company has outperformed the market by a great deal."

Coca-Cola is having the last laugh, and celebrated the 10th anniversary of new Coke at its Atlanta headquarters last week. Beverage analysts say new Coke was the best mistake the company could have possibly made.

What landed the ill-fated product's project manager, Sergio Zyman, in the executive doghouse in 1985 is what has made him a marketing genius today, overseeing more than 30 agency accounts as chief marketing officer.

Since 1985, Coca-Cola's global gallonage has increased 7% per year. Total unit volume market share in the soft drink category went from 38% to 42%-each share point equaling $500 million in retail sales, according to Beverage Digest. Coca-Cola is a player to be reckoned with in nearly every segment of the soft drink industry.

Coke Classic was the leading brand in 1994 with a 20.4% unit volume market share. Pepsi, finished second with 17.8%. New Coke, now known as Coke II, snagged 0.1%.

What by most counts was a colossal blunder was responsible for turning the company into a marketing wonder, according to Tom Pirko, president of Bevmark, a beverage consultancy in New York. With new Coke, Coca-Cola stumbled onto two of the biggest trends changing the face of the cola category.

The new Coke fiasco taught the company there was tremendous demand for a different flavor among sodas, a demand that would ultimately lead to the New Age beverage craze.

"Coke didn't know it at the time but they plugged right into that message," Mr. Pirko said.

Teas and juices have stolen the thunder from regular soft drinks. Regular and diet cola unit volume share of the category sank from 63.6% in 1984 to 58.3% in '94.

With that in mind, Zyman & Co. learned the hard way about product differentiation without tainting the Coke icon. Instead of putting a bevy of new beverages under the same label, Coca-Cola diversified, giving distinct brand names to its new market entries like Fruitopia, which Time named one of last year's 10 best products.

Branching out also meant Coca-Cola would have to back away from its megabrand advertising strategy. Coca-Cola's accounts used to be consolidated within a few monolithic agencies like McCann-Erickson Worldwide and Leo Burnett USA. Those days are over: Mr. Zyman balkanized Madison Avenue's hegemony on Coca-Cola's accounts, assigning them to more offbeat agencies like Wieden & Kennedy, Portland, Ore., which rose to fame on the wings of the Nike name in the late 80's. The agency currently handles OK soda.

Industry observers note that Coca-Cola and Pepsi-Cola Co. have clearly reversed roles as the more innovative advertiser.

"Pepsi preaches innovation, but they do the same things again and again," Mr. Pirko said. "People are losing a secure hold on what Pepsi means to them."

Coca-Cola has been prolific in product development lately. It recently ventured into the root beer market with the acquisition of Barq's last month. A flotilla of new flavors has been launched for the Fruitopia and Nestea brands. And the Coca-Cola Foods division is also introducing Orchard's Best, a line of non-citrus juices, to select markets. Coke Classic and Sprite will reappear on shelves in vintage contour bottles and package graphic changes were made to the Minute Maid, Hi-C and Powerade brands.

Too much too soon? Not at all, said Mr. Meyers. "They are looking for the next sensation right now. There's going to be retrenchment."

Mr. Zyman continually keeps creative juices flowing, if not flooding, into the Atlanta office from shops big and small around the globe. It currently has 21 agencies from just a handful in the 1980s.

Beverly Hills, Calif.-based Creative Artists Agency, handlers of the flagship Coke Classic brand, will launch six new executions of the "Always Coca-Cola" campaign today. Gone are the polar bears; the current icons are the sun; Thomas Edison; and a Snippet, a much-loved children's toy.

More changes are on the way. While agency executives have said Chiat/Day, New York, has resigned Fruitopia and Cherry Coke, a Coca-Cola spokesman said the company has no knowledge of any change in their relationship. But, executives close to Coca-Cola say the brands are moving and there are expected to be more.

The company already has moved the Diet Sprite account to Fallon McElligott Berlin and said it had assigned a summer promotion for Caffeine Free Diet Coke to Hill, Holiday, Connors, Cosmopulos, Boston.

But while a Coca-Cola spokesman confirmed to the press an Ad Age report of the Hill Holliday assignment, insiders now say that Mr. Zyman was unaware of the assignment and put it on hold.

Sprite, which grew 12% in worldwide unit case volume last year, will continue to be handled by Lowe & Partners/SMS, New York, while Caffeine Free Diet Coke continues at Publicis, Paris.

Next year could be even better for Coca-Cola. The company has sponsorship rights to the Summer Olympics next summer in Atlanta where it is also planning a theme park near the Games site.



Headquarters: Atlanta

U.S. sales: $16.1 billion in net operating revenue in 1994

Leadership: Roberto C. Goizueta, chairman-CEO; M. Douglas Ivester, president-chief operating officer; Sergio S. Zyman, senior VP-chief marketing officer

U.S. ad spending: $1.3 billion

Agencies: McCann-Erickson Worldwide, New York (media buying); Creative Artists Agency, Beverly Hills, Calif. (lead creative for Coca-Cola/Coca-Cola Classic); Lowe & Partners/SMS, New York (Diet Coke and Sprite); Publicis Conseil, Paris (Caffeine-free Diet Coke/Caffeine-free Coca-Cola Light); and many others.

Recent successes: Acquisition of Barq's will make Coke a major player in the root beer market; snagged sponsorship rights to the 1996 Olympics; doubled unit volume market share of Powerade sports drink in 1994.

Challenges: Investing in new products without forgetting the flagship brand; increasing company value by continuing to buy back stock shares; expanding overseas without squeezing margins.

Source: Advertising Age and company reports

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