In a brilliant psychological move, Woodruff summoned his entire fountain sales force for a special meeting in 1926. He informed them that they were all fired. Coca-Cola didn’t need salesmen, since the drink was now selling itself. However, if they cared to return the next day, he was forming a new department, and they might be interested. When the shaken men came back the following day, they were rehired as “servicemen” who would no longer “sell” Coca-Cola but offer their free advice and repair service. To assure a new outlook and to emphasize change to the dealers, each man’s territory was reassigned.
Woodruff also preached standardization to the bottlers, a more delicate task given their recently bruised feelings. Through Veazey Rainwater, he implemented the bottlers’ Standardization Committee in 1924. At first, this group dealt primarily with appearances rather than product, issuing decrees on appropriate uniforms and truck colors. Initially, they chose a white-and-green striped cotton suit that some Coca-Cola men complained resembled jail outfits. Trucks should be yellow and red with black hoods and fenders. The real issue, of course, was whether Coca-Cola was being bottled at each of the 1,200 plants under hygienic conditions, with uniform carbonation and syrup throw. The bottlers’ contract unfortunately left the matter of quality up to the individual bottler, specifying only that each drink should contain at least an ounce of syrup per eight ounces of carbonated water at more than an atmosphere of pressure.
The contract did not prevent Woodruff from exerting his considerable influence. He was horrified when visiting one bottling plant early in his presidency. Dust caked the machinery, broken bottles were piled in a corner, and spilled syrup attracted flies. The Boss summoned the owner and told him he’d better clean up his operation by the next day, or he would soon find himself in some other line of work. “But Mr. Woodruff,” the bottler protested, “it don’t do no good to clean up. The next day it’ll just look like this again.” There was a moment of tense silence as Woodruff slowly took his cigar out of his mouth, his eyes boring holes into the bottler. “You wipe your ass, don’t you?” Woodruff said. With that, he replaced the cigar and left.
While this piece of Company folklore may be exaggerated, there is no question that Robert Woodruff could and did make the bottlers acutely uncomfortable, notably by manipulating the amount of advertising “cooperation” he extended beyond the minimal amount specified in their gallonage allowance. The bottlers soon got the message: if you played ball with Woodruff, if you were a good boy, you were rewarded with more advertising support, more encouragement, more perks. If you didn’t, you suddenly found yourself with virtually no support, ostracized by many members of the Coca-Cola family.
Woodruff found another solution for failing bottlers during the twenties: he bought them out. By the end of the next decade, The Coca-Cola Company owned twenty-five bottling plants, most in major cities. In the ensuing years, these plants served as training grounds for new employees and future managers. Independent bottlers loved to point out that the Company-owned plants never did particularly well, largely because of management turnover.
THE SEEDS OF FOREIGN CONQUEST
As impressive as all of these changes were, none could compare to Robert Woodruff’s greatest contribution to Coca-Cola’s future. He applied his energy and organizational skills to opening overseas markets. It is a tribute to his independence and foresight that he did so against the express wishes of his board.
The old men on the Coca-Cola board—Ernest Woodruff and his cohorts—had initially regarded an invasion of Europe as one of their principal tasks. The last sentence in the Syndicate’s official press release announcing the 1919 buyout said that the new management would “extend the operations . . . more widely than heretofore, not only in the United States, but in foreign countries.” For years, Sam Dobbs had resisted every effort of eager would-be European entrepreneurs, insisting that the time was not yet ripe for real expansion beyond the United States. Under direction from the new owners, however, Howard Candler finally agreed to a European venture. “Our Sales Department is being deluged with applications to handle Coca-Cola throughout the world,” Candler noted in his 1921 annual report. “We believe the foreign field should be occupied by direct representation, owning plants, manufacturing and bottling our own product.” In 1922, with an expenditure of some $3 million, bottling franchises were started all over Europe, largely funded by Coca-Cola and run by locals.
The new outlets were a disaster. For six months, Coca-Cola “teaser” advertising had stimulated curiosity and anticipation for a grand introduction of the drink. Crowds assembled in cafes, restaurants, and stores to try the new bottled beverage. After they snapped the crowns, their curiosity was soon overcome by nausea. The American drink made them sick. The cafes and bars, covered with caramel-colored vomit, soon emptied.
What had happened? Although the bottlers had religiously followed instructions, putting the proper amount of syrup into each bottle and adding sufficient carbonated water at the correct pressure, no one had bothered to make sure the water was clean and nonalkaline. And no one had told them that the crown corks had to be sterilized. The bacterial Coca-Cola reacted with the germ-infested corks to produce a poisonous brew.* Only one French bottler persisted. Georges Delcroix solved his sanitation problems, then overcame a governmental ban on importation of a “medicine,” but his sales, primarily to American tourists at Harry’s Bar and the Eiffel Tower, remained quite small.
With the European disaster fresh in their minds, the board members responded negatively when young Robert Woodruff told them he intended to see whether only Americans could develop a taste for the soft drink. Thwarted once again by his father, Woodruff took matters into his own hands, sending Colonel Hamilton Horsey to England in the fall of 1924 for a thorough survey. Long-term prospects, Horsey reported, were good. Over ten million people lived within a fifty-mile radius of Trafalgar Square, compared with only seven and a half million within a similar compass of New York City. Transportation and communication facilities were excellent. British advertising was similar in character to that in the United States. Nonetheless, Horsey noted serious obstacles. The drab year-round weather encouraged hot drinks, though mineral waters and ice cream were becoming more popular. The soda fountain was a new phenomenon in England; there were only some thousand in the entire country. The British resented any “show of pomp [or] braggadocio,” Horsey observed; Coca-Cola would have to go slow, avoiding “crashing through” methods.
Horsey’s final recommendation was to commence bottling in the London area, committing $500,000 to a three-year introductory period. He suggested importing syrup from Canada for political and tax purposes, since it was a member of the Commonwealth. In addition, a separate British corporation, entirely under control of The Coca-Cola Company, should be set up. Since a prospective consumer “does not become enthusiastic when he first tastes it,” Horsey predicted that “the work of the English Company, in the beginning, will be similar to the pioneer work . . . done in America forty years ago.”
Woodruff did not actually implement Horsey’s suggestion in England until 1932, probably because he failed to secure sufficient funds from his board. Instead, in 1926 he founded the Foreign Department and sent Horsey back to the Continent to re-kindle the business there on a limited budget. At the same time, he sent other emissaries to Central America and China, and the following year himself embarked on a three-month trip throughout South America.
Woodruff regarded continental Europe as a vital area, placing it directly under Gene Kelly, who ran the Canadian operation. A native Georgian and former White employee, Kelly was the only truck salesman Woodruff handpicked for work at Coca-Cola. Even more than Woodruff, he was a stickler for detail, writing trunk-filling manuals to cover every conceivable aspect of the Coca-Cola business. He had brought the per capita consumption of the soft drink in Montreal near that of New Orleans. If anyone could salvage the European trade, it was Kelly. Woodruff also put Cuba under Canadian supervision, which resulted
in some overbuilt bottling plants on that tropical island—the roofs were designed to hold heavy snow.
By the end of the twenties, Coca-Cola’s missionaries had installed bottlers throughout the world, and Woodruff had secured adequate advertising for the new ventures. Because the soda fountain was a uniquely American institution, sales of foreign fountain Coca-Cola were meager. Rather than ship bulky syrup containers overseas, Woodruff had his chemists develop a special powdered concentrate without sugar, which made it doubly useful for the Company. Foreign bottlers would supply their own sugar so that, if the price went up again, it wouldn’t affect The Coca-Cola Company.
Woodruff did not make the mistake of locking himself into perpetual overseas contracts, leaving him free to change the price of concentrate and to replace weak bottlers. In other ways, however, he used the domestic bottlers as a model, insisting that the Company wouldn’t suffer from the stigma of being an intrusive American product. Instead, the business would use local bottles (all made in the hobbleskirt shape to Coca-Cola specification), caps, machinery, trucks, and personnel. Wherever it went, Coca-Cola would benefit the economy. Everyone would make money. Everyone would be happy.
The systematic creation of a worldwide industry posed unforeseen difficulties, however. Coca-Cola had to rely either on already established local bottlers, who might not push the product properly, or on wealthy entrepreneurs who knew nothing about soft drinks. In the latter case, the Company preferred to deal with prominent locals, but it often wound up using American corporations. In Guatemala and Honduras, for instance, the United Fruit Company, which dominated the local economy, took the franchise. An Illinois flour concern owned the bottling rights for Haiti, Puerto Rico, and the Dominican Republic.
In other countries, government regulations presented major problems. In Amsterdam, health officials forced the Company to label the drink “limonade gazeuse,” despite objections that “lemonade,” the European term for soda pop, implied a cheap, common drink. In Rome, a tax was levied on all advertising signs, and the city had to approve each type of display before it was erected. That was better than Bermuda, where no large outdoor billboards were allowed at all.
In each new country, the Company hired local lawyers to handle the delicate matter of registering the trademark, a process occasionally complicated by someone who had arrived first. The American achievement of Coca-Cola had already resulted in a flurry of imitators. One British firm, Duckworth & Company, concocted an ersatz Coca-Cola syrup that it exported widely to South America and elsewhere. In 1928, The Coca-Cola Company filed its first overseas suit in Britain’s Chancery Division to cut off the Duckworth syrup. As a more direct expedient, Coca-Cola simply bought out some prior registrants, such as Toni-Kola in Holland and Peru. In neighboring Mexico, the trademark situation was a complete disaster, spiced by political unrest and revolving governments. There were already four pirated registrations for the identical “Coca-Cola” name, as well as a host of registered imitators. In 1925, Harrison Jones, accompanied by company chemist W. P. Heath and a lawyer, drove to Mexico to un-tangle the situation. They temporarily failed, though Mexicans would in time drink more Coca-Cola per capita than any other nationality. Cuba, too, hosted innumerable imitators, but the legal system there, swayed by American intervention over the years, proved more malleable.
Different languages and cultures also caused problems. The Company developed one universal ad for distribution showing only the torso of a man in a tuxedo drinking from the trademark glass and featuring the hobbleskirt bottle. “Coca-Cola” was the only word in the ad. But even that wouldn’t have worked in China. The Chinese characters which most closely reproduced the sound of “Coca-Cola” translated roughly to “bite the wax tadpole.” Finally, an alternative that meant “can mouth, can happy,” had to suffice.* In Dutch, the slogan “Refresh Yourself With Coca-Cola” meant “Wash Your Hands With Coca-Cola,” so in Holland another phrase was devised.
In Cuba, an unfortunate wind blew one day as the soft drink manufacturer tested the new art of skywriting. “Tome Coca-Cola” (Drink Coca-Cola) was blurred so that the crowds below received the message, “Teme Coca-Cola” (Fear Coca-Cola). Even the Company’s most earnest efforts to adapt advertising to local culture provoked trouble. An elegant lithograph showing a bullfight was prepared for Cuba, but since the sport was illegal there, it proved unusable.
Even though the overseas business didn’t bring in much immediate revenue, Woodruff knew that it had great public relations value. He sent photographers around the world to take snapshots of Coca-Cola’s new presence, and, apparently with the board’s approval, he published them in a special edition of the Red Barrel at the beginning of 1929. The copy accurately pointed out that
few Americans realize that Coca-Cola is now found within the bull fight arenas of sunny Spain and Mexico, at the Olympic Games Stadium below the Eiffel Tower above “Gay Paree,” on the holy pagoda in distant Burma, and beside the Coliseum of historic Rome. For many years Coca-Cola has been a national institution of the United States with widespread popularity throughout Canada and Cuba. But during the past three years it has been extended beyond national borders and its sales are now international in scope. At present Coca-Cola is sold in seventy-eight countries.
While it was no doubt true that some Coca-Cola fountain syrup and special gold-foiled export bottles were shipped to seventy-eight countries, the drink was actually only bottled in twenty-seven nations—and the volume was pathetic, the drink’s quality often disgraceful. Nonetheless, Woodruff legitimately considered it a remarkable achievement in a short time. A world map appeared at the end of the Red Barrel article, with the countries where Coca-Cola was sold shaded in black. It clearly challenged any self-respecting Coca-Cola man to fill in the empty white spaces.
AN ILL-ADVISED SHORT SALE
By the end of 1927, Robert Woodruff could look back on his first five years at Coca-Cola with satisfaction. Sales had climbed steadily from a little over seventeen million gallons a year in 1923 to nearly twenty-three million in 1927. With the money pouring in, Woodruff had retired all of the preferred stock in 1926, leaving the Company free of debt. There was a contingency reserve of $5 million in addition to a $10 million surplus. From a low of $65 in 1923, Coca-Cola stock had stormed to just under $200 in 1927, when Woodruff had declared a two-for-one stock split.
The Boss knew that the entire stock market was due for a fall, and he was sure that it would take his overvalued Coca-Cola stock with it. This run-up had been too quick, too easy. Of course, he had faith in the ultimate future of the soft drink, but no stock soared up forever. Consequently, in October 1927, Robert Woodruff quietly sold short his 4,600 shares of Coca-Cola stock. In other words, he bet half his personal fortune against his own company, planning to use the proceeds of his gamble to help his former boss and good friend, Walter White, take the troubled White Motor Company private.
As the stock market crash of October 29, 1929, demonstrated, Woodruff was absolutely right about the market in general. But he was wrong about Coca-Cola. After the stock had split in 1927, it was worth $96 a share. The day of the crash, it stood at $137. During the day, it slipped to just above $128 and by the end of the year had recovered to $134, continuing to rise steadily in the following years. By the time he actually covered all his shorts, Woodruff had lost nearly $400,000. In the future, his belief in Coca-Cola would be unshakable, but he had earned that faith the hard way.*
Even though Woodruff failed to raise the cash to take the automotive company private, he and Walter White didn’t give up. They spent a great deal of time together on a thirty-thousand-acre plantation they had bought in southwestern Georgia and christened Ichauway, an Indian word meaning “where deer sleep.”
Then, in late September 1929, White was killed in a car crash, and all plans to take the company private were abandoned. The Boss stepped into the breach, serving simultaneously as the president of White Motor Company and The Coca-Cola Company, an unheard-of feat that ga
rnered much admiration and publicity. For over a year, Woodruff lived on a Pullman car, conducting business for both companies on the train between Atlanta and Cleveland. Few knew that one of his primary motivations was his “serious and critical financial condition,” a phrase culled from a secret memo detailing his disastrous short sale.
Nonetheless, Robert Woodruff and Coca-Cola faced the Great Depression in remarkably good shape. Over the next decade, virtually every company in America would languish as the economy was cut in half. But the Coca-Cola cover girls smiled through it all, for good reason. The only cloud on the horizon was an imitator that had nearly died several times already. The upstart would prove a worthier opponent than anyone at Coca-Cola could have foreseen in 1929.
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* Robert Woodruff probably retained a feeling of defensive inferiority about his brief college stint. He eventually resumed Asa Candler’s tradition of Coke philanthropy toward Emory, the “Coca-Cola School.” Even the college song asserts, “We were raised on Coca-Cola, no wonder we raise hell.”
* When they weren’t feuding, Woodruff and the volatile Cobb remained lifelong friends, which does not speak well for Woodruff’s taste. Ty Cobb sharpened the spikes on his shoes to intimidate other players when he slid into a base. Even his teammates despised him. At Cobb’s death in 1961, his Coca-Cola shares were worth $1.7 million.
† Robert Woodruff was actually never in danger of taking a loss on his stock, having paid almost nothing for it, thanks to his father.
* It is possible that Woodruff was dyslexic, like many other notables such as George Patton, Woodrow Wilson, and Thomas Edison.
* In 1927 the Food, Drug and Insecticide Administration took over the Bureau of Chemistry’s regulatory functions, and three years later it became the Food and Drug Administration (FDA).
For God, Country, and Coca-Cola Page 26
