23 April 1985: Coca-Cola launches New Coke
On April 23, 1985 Coca-Cola replaced its 99-year-old formula with a sweeter New Coke, after blind taste tests showed people preferred it. Customers did not want a better taste; they wanted their Coke. The backlash was fierce, and on July 11 the original returned as Coca-Cola Classic. Sales of the old formula then rebounded, and some joked the whole fiasco was a marketing stunt.
The lesson: Brand loyalty is an asset that does not show up in taste tests or on the balance sheet.
What it meant for investors
$1,000 in Coca-Cola at the start of 1990 → $15,556 today, vs $19,429 in the S&P 500.
We start the clock at the start of 1990, the first year in our price data after the event. That is 15.6 times the money, but $3,873 less than a plain index fund made over the same years.
What Coca-Cola teaches: A wonderful business bought at an extreme valuation can deliver poor returns for a decade; quality does not protect you from overpaying.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 1990 | $4.50 | $15,556 | $19,429 |
| 1995 | $12.00 | $5,833 | $14,783 |
| 2000 | $29.00 | $2,414 | $4,626 |
green = beat the S&P 500 · red = lost money
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