I believe Max translated to the bottlers that I was sincere in my consolidation efforts. In the summer of 1987, Atlanta gave me approval to present the plan to the bottlers. In our initial meetings we had greater acceptance than we anticipated but it was far from universal. We felt that we had about 40 percent of the bottlers on board, another 30 percent whom we could convince, and another 30 percent who strongly opposed the plan and would never agree. Despite our optimism, the plan immediately sparked an uproar. Regardless of the obvious business logic, and the fact that it would be very lucrative for the bottlers, emotion surged.
For many of the bottlers, higher profits did not trump the loss of control over their own companies, Heinz recalled in an interview for this book. And some of the bottlers were already so wealthy, a little more money was not that tempting, particularly if it meant losing the prestige of owning a Coca-Cola bottling franchise.
“We would tell the bottler, ‘Today you make five million dollars a year in profit. You could easily make seven million dollars,’” Heinz recalled. “The bottler would say, ‘I don’t know what I should do with the five million dollars. My family is rich. Everything is great. What will I do with the additional two million dollars?’”
Bottlers began calling Atlanta to complain, which we had expected and felt we could manage. We were wrong. Heinz and I were at a meeting in Munich when Halle called. “Stop,” he told me. “You’re not to go any further. You are to abandon the plan.”
Heinz and I met that evening in the hotel, believing our careers were over, that we had been totally undermined by headquarters, and that we needed to resign. We both agreed to do so the next morning. Yet after sleeping on it, we decided not to. Although we had indeed been undermined, we were not going to give up so easily. We would now find another way to accomplish our goal.
Soon after, we began negotiations with the bottlers and developed a plan to lower costs while whittling the number of bottlers down to 30—not one, as originally planned. We created a central sales office, which was both more efficient and more convenient for the larger customers, who would no longer have to order from several different bottlers. And we closed some production facilities and gave the bottlers a piece of the canning business in exchange for lowering some of their product discounts. It was a compromise and like all compromises, it was a bit messy. Although the overall strategy was seen as a success in Atlanta—I had managed to consolidate Austria and Switzerland down to single bottlers—in Germany it got us only halfway to where we needed to be. Halfway wasn’t enough, though we were able to put growth back into the business and achieve a material increase in profitability. Later, as CEO and Chairman, I finished the job that needed to be done. Today, Germany operates under a single bottler.
In another accomplishment which I viewed as significant, Heinz and I also introduced a new returnable 1.5 liter plastic bottle, which is still used in many countries. “We invented the bottle even though we did not have approval from Atlanta to do so,” recalled Heinz, who succeeded me as German division manager. “We saved money in other parts of our business and paid for the development of the bottle, which was a lightweight plastic. In marketing, we touted it as the ‘unbreakable bottle.’”
The bottle was extremely successful and decades ahead of its time environmentally. Retailers embraced the bottles because they contained 50 percent more content than the old one liter glass bottles. Germans were accustomed to returning bottles for deposits. They returned all empty bottles—soft drinks, mineral water, and beer—so it was already part of the culture. The new plastic bottles were washed, sanitized, and reused twenty times, greatly reducing the amount of plastic used.
Despite these achievements, there were times when I worried that my career at Coca-Cola was over.
At a gathering of supermarket executives in Nice, France, Don Keough, the company president, and Ralph Cooper, one of my peers in Europe, were there for two days. I suddenly realized that Ralph had been invited by Don to a dinner, and I was ignored. I thought Don was snubbing me because of the bottler restructuring and mentioned it to his executive assistant, John White, who managed to get me into one final lunch. Still, I believed I was getting the cold shoulder from North Avenue.
At the airport in Nice, I ran into Michael J. O’Connor, a giant in the supermarket industry and close friend of Keough, who had founded the Retail Research Council in the U.S. I became good friends with Michael while serving on the Research Council in Europe and he was someone I trusted and confided in.
“I just got stiffed by Don,” I told Michael. “I think it’s over.”
At this point in my career, other companies were approaching me to discuss job offers and some of the positions were quite attractive, such as president of the Guinness beer empire, based in London. I told Michael I might start looking around.
Michael assured me that I had it all wrong and that my career was on track. “You are part of the future of this company,” he said. “Stay around.”
He was right and there is a business lesson there: Hypersensitivity can be hazardous to your career. As you advance up the ladder in a corporation, it is possible to see phantoms everywhere that in your perception are out to destroy your career; almost always it’s your imagination trying to get the better of you.
While I perceived Don Keough as snubbing me, it was, in fact, a simple oversight. A year later, he asked me to lead a task force evaluating Coke’s operation in Brazil, then managed by Jorge Giganti. North Avenue complained that Giganti was not communicating well with headquarters, that he had a crazy idea about sponsoring the bankrupt Brazilian soccer league. Behind it all, however, was the basic fact that growth was stagnant. After arriving in Rio, I asked Jorge for his side of the story. “It’s fine,” he said, later adding, “I only phone Atlanta once a month.”
Within the first hour, I had discovered the core of the problem: lack of communication. We spent the week there and validated that the soccer sponsorship was actually a good idea. For only $1 million, all the soccer teams in Brazil would be wearing the Coca-Cola logo. This was Brazil and this was soccer. We would have been crazy to have turned down that sponsorship. A lack of trust and a lack of communication between Giganti and headquarters had placed a cloud over the deal. I disagreed with only one of Giganti’s decisions, which was to allow the Coke bottlers to also sell beer. A visit to one bottling plant convinced me of this. The beer trucks outside the plant were shiny and new while the Coca-Cola trucks were a disgrace, the paint faded and chipped. Giganti and more important, some of the bottlers, had fallen in love with a new skirt—beer—and were ignoring the more profitable mainstay, Coca-Cola.
I returned to Atlanta and presented my findings to the company senior management team led by Keough and Claus Halle. “I actually think this is very simple,” I told the group. “You’re half the problem and Jorge is half the problem. You’re talking past each other. At the end of the day, it’s as simple as that.” I then, point by point, went through the other outstanding issues, largely agreeing with the Brazilian strategies.
I told them further that Jorge had agreed to begin calling Atlanta once a week and to be absolutely transparent about what he was doing. “I think it’s going to work,” I added. It did. Communication and trust often drive decision-making as much as logic.
For the first year in Germany, my family and I were miserable, but that would change totally as we learned to appreciate the warmth of the people. There is nothing superfluous in German friendship. German friends are real friends. We ended up making some really great friends and keep in touch with them even to this day. In Germany, there is a tradition that when you become close, a family will literally “propose,” asking you to become “du” friends. Du is the German word for “you” reserved for family and close friends as opposed to the more formal “sie.” When you are asked to become a “du” friend, both couples link arms and drink a toast of German Sekt (champagne). It’s quite a big deal. We made three “du” friends in Germany while
we were there, all outside the Coca-Cola community.
On one occasion, we went with one of our du friends to a particularly memorable dinner at the Bavarian castle of the Count of Thurn und Taxis, who was a member of a royal family that had made a fortune developing the German postal service.
The count needed a successor and was married to a young woman named Gloria von Thurn und Taxis, who was totally outrageous and featured in every German magazine. At the time she was in her late twenties and her hair was dyed pink. The count was forty years her senior.
It was a very formal dinner with ornate candelabras on the table and footmen wearing their royal livery. After dinner, we retired to the basement and the castle bowling alley which was old, wooden, and warped. On the wall were the names of the bowlers who had scored strikes, dating back to the 1800s, with royal names in gold, commoners in black. The count was sitting in a corner, rather inebriated, with spiffy young men fawning over him. His young wife, a singer in a pop band, decided to give a live performance with a song to her husband that was basically a sexual taunt. The cellar was filled with serious business executives along with young and trendy German society on the dance floor. We managed to slide out early at 3:30 A.M. with a glimpse of a side of German life that fascinated us but to which we did not belong.
We loved the order and discipline of Germany, although we hated the fact that shops closed at noon on Saturdays. For example, there was a pond near our house and we’d go there regularly to buy fresh trout, though never on Sundays when almost everything was closed. Our house in France was a twelve-hour drive away so we were able to spend more time there as well as in many wonderful European cities. Pamela wanted a Mercedes 280 SLC and we bought one, even though some people told us a certain “lady of the evening” drove the same model. However, we decided that since it was the car Pamela wanted she should have it. And I could use the extra tax-free income!
We spent some weekends along the Rhine River with its absolute picture-book scenery, once staying in a twelfth-century renovated castle with an owner who also looked like he had come out of the twelfth century. There was another memorable weekend on Sylt, the fashionable North Sea island that almost anyone who is anyone has visited. The people are easy to identify and remember; as you wander the beaches, you can’t help but notice a complete absence of any swimwear, although there were some people who were fully clothed, including ourselves. Pamela noted, correctly, that most of the people who had their clothes off were a little too old to be interesting. I remember standing, suitably clad, in a line to get ice cream between two rather naked, very brown, slightly protruding ladies. Two elderly couples, both stark naked, approached each other on the beach. Apparently friends, they kissed each other on the cheek and greeted one another in the third person while their extremities flapped with their movements. Despite baring all, they were not yet “du” friends.
We were even able to make a day trip behind the Berlin Wall on a cold winter day in 1987. Pamela, Cara, and I joined a German colleague at Coke, Georg Fleischer, and his wife and daughter. Georg, who escaped from East Germany after World War II by jumping over a barbwire fence, was in charge of the communist countries in Eastern Europe as well as Turkey, a very small division that dealt primarily in countertrade since communist currency was not convertible on the world market. Under this arrangement, Coca-Cola would trade for a product made by the communist country and would then sell that product in the West, creating a credit which allowed the import of the concentrate to produce our brands. It was a very difficult and awkward process since there were so few Eastern bloc products that could be sold easily in the West. (One notable exception was the Russian vodka, Stolichnaya, landed exclusively, and unfortunately, by Pepsi.)
We hired drivers to take us across the border in separate cars, Georg and his family taking one checkpoint since they were German citizens. My family and I went through the infamous Checkpoint Charlie, a chilling experience with an extensive, tense search that lasted nearly forty-five minutes. All your money had to be converted into East German marks, and if the money was unspent you were not allowed to bring it out of East Germany on your return to the West.
Georg took us on a tour of the neighborhood where he lived as a child. There were still bombed-out areas, more than forty years after the war. Georg had two sisters still living in East Berlin who were married to senior officials in the communist party.
“Theoretically, we could walk around the corner here and see your sister and brother-in-law,” I said to Georg. “What would you do if that happened?”
“We would walk past each other,” he replied. “It’s not in my interest or Coca-Cola’s interest to have any interaction with them whatsoever. And it’s certainly not in their interest.” It was the most chilling feeling, the very idea of walking past one’s own sister. After the Wall fell, I asked Georg if he had linked up with his family. “Yes,” he said. “But I do not see them anymore and we have nothing in common. We are different people.”
We toured East Berlin, eating lunch at a leading hotel that was nevertheless very low-quality and sparse. We wanted to spend our East German marks before we returned but there was very little to buy. We finally found some rubbishy souvenirs to purchase. And then it hit me: There was no economy in East Germany. There was no advertising. It was gray and dark with no ambience. How was that sustainable? We went back through the border and I felt a tremendous relief at getting out. You really did feel oppressed behind the Berlin Wall.
At age nine, Cara suddenly decided that she wanted to be an English girl in an English boarding school, and enrolled in Moira House School in Eastbourne. We missed her dreadfully and visited on weekends, but in early 1989 it was time to move to yet another continent, and this time Cara traded her British accent for a Southern drawl.
While I had viewed my efforts in Germany as a partial failure since we had never totally consolidated the bottlers, Atlanta apparently felt otherwise. In the fall of 1988, just three months after I had helped resolve the friction between headquarters and Brazil, I was offered a position in Atlanta as a group president for all of Eastern and Northern Europe, the Soviet Union, Africa, and the Middle East, seventy-nine countries in all.
We were sorry to leave Germany. It had grown on us during our time there. Yet for the first time since South Africa we would have a permanent home. Pamela and I had always liked Atlanta when we’d visited and rated it as one of America’s nicest cities, with its wonderful warm climate most of the year, abundance of trees and lakes, and Southern hospitality.
Right before leaving Germany, Georg, who would now report to me, took me on a tour of Turkey, one of the countries in my new territory, to see where real opportunities lay and to meet someone he had a high regard for. The man was a young, up-and-coming region manager named Muhtar Kent. I had no way of knowing it at the time, but Muhtar would soon become one of my most valuable lieutenants.
The world was about to change very quickly.
Five
THE WALL FALLS
Shortly after moving to Atlanta, I found myself on a company plane to Saudi Arabia, summoned to a meeting with Prince Faisal.
Saudi Arabia ejected Coca-Cola in 1968 during the Arab League boycott of companies doing business with Israel. Although the boycott was slowly fading and Coca-Cola was sponsoring the World Youth Soccer Tournament in Saudi Arabia in February 1989, a legal dispute blocked us from building a bottling plant there. We even had to obtain an import license to ship product in for the tournament.
The Kaki family, which owned the Saudi bottling franchise before the boycott, claimed it still had the rights, which Coca-Cola disputed. The legal case was complicated by the fact that in Coke’s absence, Kaki produced its own brand called Kaki Cola, and Coca-Cola, had unfortunately, supplied a cola concentrate, although not the original formula, for the drink.
With the boycott ending, Coca-Cola awarded the bottling franchise to the very reputable and wealthy Olayan family but the legal suit with the Kaki famil
y was progressing very slowly. Geoff Unsworth, who was in charge of Coke’s Middle Eastern operations at the time, did not endear himself to me when he repeated former White House Press Secretary Marlin Fitzwater’s quote, “When you’re dealing with the Middle East, two thousand years is the normal wait for something to happen.” Sorry, but that was a bit too long of a wait for me.
We met Prince Faisal in his office, a huge opulent room. His desk was on a raised platform so we were literally looking up at him. He proceeded to deliver a lecture: It was fine for Coca-Cola to come in for the soccer tournament (which Prince Faisal was personally directing) though we would never be allowed to permanently reenter Saudi unless we partnered with the prince’s preferred partners, not the Olayans. The prince wanted the business and was absolutely hostile, at times dropping veiled threats into our conversation.
We reported back to the Olayans and were assured by the company patriarch, Suliman Olayan, that we should not be concerned. “He’s been given the World Youth Tournament to run because he’s not really one of the influential princes,” Suliman said. “This, too, will pass.”
The prince contacted us once again a few months later but we were unable to schedule a meeting and never heard from him again. Suliman was right, it went away. Meanwhile, the Kaki suit made its way torturously through the Saudi courts, and at one point we had to appear before the Saudi Minister of Justice. For two hours we sat with a senior member of the Olayan family while the minister heard all the other cases. Some of them were rather tragic. There was an eighteen-year-old girl married to a really wizened old man, a forced marriage. She claimed that he had beaten her, yet the minister brusquely sent her home with no relief. It was like a medieval court.
Inside Coca-Cola Page 10
