In 1952, Eisenhower was elected in a landslide, and Robert Woodruff had placed an intimate friend in the White House. As a benign, ironic gesture, Woodruff now prefaced letters to the president with “Dear Boss,” but there was never much question about who was really the dominant character. During the fifties, Eisenhower hunted with Woodruff several times at Ichauway, as well as joining him for lunch or golf elsewhere. In 1959, Woodruff scolded Eisenhower for a photo in which the president sipped from a Coke bottle through a straw—a sissy way to imbibe. Ike responded that “when I tip up a bottle of Coca-Cola for a good drink it lasts only seconds—with a straw, a lot of talk and more walking, I was able to contact more photographers and newspaper correspondents.”
FIGHTING FOR THE NICKEL COKE
Despite Woodruff’s immense influence and a Coca-Cola investor in the White House, the fifties brought a maze of woes for the soft drink company and its bottlers, starting with postwar inflation. The United States had spent its way out of the Depression during World War II, and many economists expected a postwar recession once the war ended. They were wrong. Instead, Americans released their pent-up savings in an orgy of spending. Besides, the war never really ended, since the Korean conflict soon flared. Even when that war was over, the arms race with the Soviet Union resulted in an ever-increasing defense budget. In 1945, America began a steady inflationary spiral that would cut the value of the dollar in half by 1970.
At first, increased costs worked in favor of the Coca-Cola bottler, since they played with a bigger profit margin than their Pepsi and Royal Crown counterparts, who were trying to eke out a living while selling their twelve-ounce drinks for a nickel. Within two years of the war’s end, Walter Mack had to modify his popular jingle to “twice as much for a penny more,” since Pepsi bottlers could no longer afford to sell their drink for a nickel. Some bottlers raised the price to six cents, seven cents, or a dime, while others reduced the bottle size to ten or eight ounces. Chaos reigned. A new slogan promising “more bounce to the ounce” didn’t help. Pepsi’s profits plunged from over $6 million in 1946 to just over $2 million in 1949. During the same period, its stock dived from $40 to $8 a share.
Meanwhile, Robert Woodruff was determined to hold the traditional five-cent price, even when exorbitant sugar costs triggered the 1921 Consent Decree’s automatic jump in syrup cost to the parent and actual bottlers. The five-cent Coke had become, as Woodruff’s crony Ralph Hayes put it, “a national expectation and an American institution,” and neither he nor the Boss sanctioned deviation from the sacred price. Hayes noted that, with the proper “evangelical zeal,” any potential backsliders might be held in check.
Company men could easily toe the line, since it was the bottler who actually felt the low retail price’s squeeze. In 1950, Coca-Cola accounted for half of all U.S. soft drink sales, and those associated with the drink were accustomed to the good life. “Coke bottlers,” commented a financial journalist, “have had two Cadillacs in their own and their children’s garages for so long that they think their rights are being trifled with when the profits don’t just roll in.” By 1950, inflationary pressures had intensified, and many Coca-Cola bottlers nudged their wholesale prices above the traditional eighty cents per carton. In turn, most retailers in the area then bumped prices above a nickel for a bottle.
While the situation was merely uncomfortable for Coke bottlers, it was killing the opposition. The soft drink trade journals clamored for Coca-Cola to let go of the nickel price, hailing every defection with loud hurrahs. An executive for Bireley’s Bottling Company plaintively begged Coca-Cola for “some relief’ for “those who would like to stay in business.” The situation grew so desperate that some competing brands actually lobbied in favor of state soft drink taxes, which would force even Coke bottlers to abandon the nickel.
Dr Pepper tried a different tactic, suing Coca-Cola in 1951 for $750,000 damages for “restraint of trade,” accusing the soft drink giant of monopolizing the market. The rival drink company claimed that Coke threatened to cut off supply to retailers who sold for over a nickel. At the same time, a Senate committee investigating the “Crisis in the Soft Drink Bottling Industry” accused Coca-Cola of the same ploy, asserting that Company officials should “release their stranglehold on the industry and let bottlers set their own price on a competitive basis.” The media and general public rallied to the nickel drink’s support, however. “It is true that the price of nearly everything has gone up,” wrote an editor for the Pittsburgh Post-Gazette, “but should this company be penalized if its bottlers can still undersell their competitors?” Coca-Cola deserved “a medal instead of a lawsuit,” he concluded.
The abandonment of the nickel price was inevitable, however, as the Chicago sales representative recognized when he beseeched the Company not to add a huge neon “5¢” to the local Spectacular. As costs of labor, transportation, energy, bottles, and ingredients rose steadily throughout the fifties, even the die-hard bottlers were forced to disregard the Boss. By the beginning of 1951, the Company ceased mentioning the five-cent price in national ads, and by mid-decade, the nickel drink was all but dead.*
As Woodruff attempted to hold the line on price, Coke stock fell for the first time in years, and a few disgruntled bottlers felt that the Boss had lost his leadership ability. Veazey Rainwater Jr. planned a daring insurrection in April of 1951. Renting a huge hall in Florida, he invited major bottlers and other stockholders to a banquet to plot strategy. His father, getting wind of Junior’s efforts, sent telegrams urgently advising bottlers not to go. The next day, only one curious stockholder appeared, and Veazey Jr.’s abortive coup attempt flopped.
PARABLE OF THE NEW SHOES
The price debacle was the first in a string of unwanted changes forced on Woodruff. The Coca-Cola magnate had led the Company with uncanny brilliance through the Roaring Twenties, the depths of the Depression, and a tumultuous world war by adhering to several simple iron-clad principles. Coca-Cola was the greatest soft drink in the world. No human market should remain untapped. The 6.5-ounce hobbleskirt bottle for five cents offered the drink in the perfect container at the optimal price. With quality control, efficient distribution, and massive advertising, everyone associated with the drink would make more and more money. There was no need to market any other drink. There was no need to diversify into other businesses.
Although he guarded against it, Woodruff was a victim of his own success. “Flattery is like chewing tobacco,” Woodruff liked to say. “It tastes sweet, is very satisfying, and does no harm unless you swallow it.” Inevitably, however, the Boss was surrounded by toadies who, as Ralph Hayes put it, chanted “an everlasting litany” of “yessir, yessir, thatsrightsir, yousaiditsir.” Lawyer Hughes Spalding, for instance, told Woodruff that “more depends on you than any other man in the Southeast.” Woodruff naturally assumed that he was infallible. In addition, the sentimental Coca-Cola man hated change. He saved knickknacks to such an extent that his office resembled a rummage sale. Once Woodruff found the right way to do something, he stuck to it unless absolutely compelled to do otherwise. Joe Jones illustrated the point with the story of Woodruff’s hand-tooled British shoes. The Boss complained that a new pair didn’t fit as well as the old ones, which he had worn for twenty-five years. “Well, Mr. Woodruff,” Jones said, “you wear these new ones for twenty-five years and then we’ll return them if you don’t like them.”
While Woodruff may have been forced to admit defeat over the drink’s price, that seemed a small matter compared with the beloved little bottle that fit the hand so neatly. In 1948, Cecil Barbee, the oldest of the California bottling brothers, shocked his fellow Coca-Cola men at a convention by directly defying Woodruff. “Men,” he said, holding up a brown parcel, “I have here the answer to all our troubles.” As he spoke, he removed layer after layer of paper, finally holding up a specially made carton of twelve-ounce hobbleskirt bottles. It took more than a renegade bottler to change Woodruff’s mind, though. In the end, that job
fell to a traitorous Coca-Cola executive named Alfred N. Steele.
PALLY STEELE’S CIRCUS
Steele, a D’Arcy advertising man, joined The Coca-Cola Company in 1945 at the age of forty-three as vice president in charge of bottler sales. A large man with tortoise-shell glasses and wavy iron-gray hair—a younger, less profane version of Harrison Jones—Steele brimmed with energy and big ideas. “Call me Al,” he bountifully ordered subordinates, whom he routinely accosted with “Hey, Handsome,” or “Let’s try this out, Pally,” accompanied by a robust slap on the back. Consequently, he himself soon earned the nickname of Pally Steele.
The new Coca-Cola salesman had once run a circus, where his favorite act had not been the trapeze artists or lion tamers but the sideshow barkers. Like them, he could “talk the horns off a brass bull,” as Delony Sledge, Coke’s advertising director, put it. He could also outspend anyone else at the Company. In 1948, Steele went all out to create the most elaborate pep skit ever seen at a bottlers’ convention. Unfortunately, the sound system failed, and the drama flopped as actors flailed and jumped about without being heard, while bottlers tittered nervously.
Steele’s personality irritated Woodruff, but the Boss could have tolerated the flamboyant salesman’s excesses if they had yielded results. Unfortunately, this disastrous convention was soon followed by an unforgivable incident at the Atlanta Biltmore. Steele, unhappily married for the second time, brought a call girl with him to Atlanta and had her publicly paged as Mrs. Steele. Word of this behavior reached the Boss. Typically Southern, the Coca-Cola moral code forgave adultery but punished anyone stupid enough to get caught, and Steele soon found himself in a new office, Woodruff’s version of Siberia—no mail, no phone calls, no meetings, no responsibilities. The Boss disliked firing his people, but he didn’t mind humiliating and boring them into quitting. For a man like Steele, who could never sit still behind a desk anyway, such treatment was torture. In 1949, he joined Pepsi as a vice president under Walter Mack. Along with him, he took a group of daring Coke men who believed Steele when he told them that at Pepsi they wouldn’t be stifled by tradition—and it didn’t hurt that he doubled their Coca-Cola salary.
But Walter Mack wasn’t ready to relinquish power to Steele, and he had his own traditions—promoting square dances, sky-writing, and art exhibits while his demoralized bottlers were bailing out in droves. Steele informed the Pepsi board that he would quit unless he was given complete control of the company. Consequently, at a dramatic March 1, 1950, board meeting Mack was booted upstairs as board chairman, and Al Steele became president of the Pepsi-Cola Company. Mack quit a few months later.
Pepsi, Steele recognized, was plagued by its past image as a lot of drink for little money—oversweet bellywash for kids and poor people. In the South, racist whites considered it a “nigger drink,” and even in the rest of the country people preferred to pour Pepsi into glasses and serve it as Coke. Steele recognized the need, as he put it, to get Pepsi out of the kitchen and into the living room. To revitalize the drink’s advertising, he lured his old friend John Toigo away from D’Arcy and installed him at Pepsi’s agency, the Biow Company. At the same time, Steele’s chemists reformulated the drink, lowering the sugar content to approach Coca-Cola’s tartness.
In the calorie-conscious fifties, Toigo touted Pepsi as “the Light Refreshment” which would “refresh without filling.” Svelte socialites drank from the bottle, redesigned with elegant swirls. On television, the new American craze, classy Faye Emerson hosted a fifteen-minute Pepsi show, leaning in her low-cut dress over iced bottles. When Al Steele saw that the studio was using a plain container, he rushed to Tiffany’s, bought an ornate silver champagne cooler, and placed it in the shot. “Pepsi-Cola’s up to date / With modern folks who watch their weight,” perky Polly Bergen sang in TV spots.
At the same time, Steele penetrated the vending market, which Mack had abandoned to Coke because the twelve-ounce bottle wouldn’t fit the standard machine. It was clearly impossible to hold the line on a five-cent drink in the big container anyway, so he created an eight-ounce bottle (still offering more for the money than the tiny Coke) that fit vending machines. He then arranged low-interest loans for the machines with payment to begin six months after purchase. That way, poorer bottlers could buy the $1,000 units on credit and pay for them out of profits. He also spearheaded paper cup vendors, correctly surmising that Coke bottlers, trapped by their own history and contract, wouldn’t compete, since the bottlers had no access to fountain syrup.
The flamboyant Steele knew that none of his innovations would matter unless he could instill new confidence and pride in his bottlers. Undeterred by his disastrous experience at the 1948 Coke convention, he threw huge bashes for Pepsi franchisees, urging them to plow money back into their businesses and local advertising. “You can conserve yourself into bankruptcy,” he told them, “or you can spend your way into prosperity.” Steele demonstrated his belief in this maxim by plunking down a cool $6 million for 1952 advertising. He assigned his right-hand man, Herb Barnet, to copy Coca-Cola tactics—insisting on quality control, standardized blue uniforms, shelves of procedural manuals, and military organization. Steele built a coterie of managers in his own image. “The whole trick in hiring executives,” he told a subordinate, “is to find a good man and turn him into a prick. A good man will be able to stand the course, but if the guy was a prick to begin with, he’ll crumble along the way.”
Steele’s charismatic exhortations also inspired his syrup salesmen. “I don’t care if the consumer wants carbonated sweat in a goatskin pouch,” he told them. “If so, this side of the room go looking for goats and this side start running fiercely in place.” Pepsi men targeted twenty-five metropolitan areas for particularly heavy sales efforts. Spending $13 million, Steele bought out key Pepsi bottlers who were failing to push the product and installed his own men. Unlike Coca-Cola, which had sold most of its ailing Company-owned plants after World War II, Pepsi’s directly managed plants turned a profit quickly. Steele even dared to invade the fortress of Coca-Cola’s virtual monopoly on the fountain trade. For $30,000, he placed Pepsi in six hundred Fox Theater outlets on the West Coast. Finally, leaving the domestic business in Barnet’s hands, Steele commenced globe-hopping to jump-start the Pepsi trade overseas.
The radical Pepsi overhaul proved incredibly effective. As Coke’s Delony Sledge put it, Pepsi’s sales jumped “like a scalded cat.” In less than five years, Coke’s worldwide lead dwindled from five-to-one to three-to-one, with Pepsi’s share of the domestic cola market rising from 21 percent to 35 percent. Even in Atlanta, the mecca of Coca-Cola, Pepsi’s sales increased 30 percent a year. Al Steele, back in his competitor’s hometown to open a new Pepsi bottling plant, had the gall to inform Atlanta journalists that Coca-Cola was not Pepsi’s biggest competitor—tea and coffee were. Rubbing salt in the wound, he added, “It’s a tribute to The Coca-Cola Company that a number of its former employees are on the management team that is helping Pepsi-Cola move up.”
COCA-COLA ENTERS THE TELEVISION AGE
While Pepsi roared to life under the direction of Al Steele, a Coca-Cola shareholder wrote that the Company “slumbers peacefully, self-satisfied with all of its past progress.” Coke’s public relations consultant compared Coke to a frumpish housewife, “modest, sedate, pretty for a long time,” while Pepsi was the Marilyn Monroe of the business. “Lots of people think she’s too common. But they look—and a lot who won’t even admit it want to feel.” Momentarily rising above his “stooge” role, Hughes Spalding was also alarmed, writing to Woodruff that his executive board was aging. “Pardon me for saying so,” he wrote, “but I just have a hunch that when a fellow has his prostate removed he has lost his ambition, certainly in some respects.” Coca-Cola was, in some ways, growing old and fat, just as Woodruff had feared. Bottling plants were celebrating their fiftieth anniversaries; many of the third-generation bottlers took profits for granted. They lacked the fire in the belly that characterized t
heir hungry Pepsi counterparts, and they hated change as much as Woodruff.
During the early fifties, The Coca-Cola Company could hardly be accused of standing still, however. Aware that television was revolutionizing home entertainment even more than radio had in the thirties, Coca-Cola sponsored a 1950 Thanksgiving special in which the Company’s radio stars, Edgar Bergen and his dummy, Charlie McCarthy, debuted on TV. The dummy amused audiences by complaining about the wooden nickels he received as pay, demanding real money so he could buy Coca-Cola. A month later, Bergen also starred in a Christmas Day special, One Hour in Wonderland, which marked the first association of Coke with Walt Disney’s animated characters. Later in the decade, Coca-Cola sponsored The Mickey Mouse Club.
The advent of television steadily changed America’s leisure habits, along with other trends of the 1950s. Soda fountains at the local drugstore went into a long, slow decline, as people clustered around the TV set instead of gathering in public places. The take-home market, where Pepsi was scoring its greatest gains, now accounted for two-thirds of all soft drink sales. To worsen matters, the corner grocery stores where Coca-Cola was so well entrenched folded as chain supermarkets sprouted in the young suburbs.
For God, Country, and Coca-Cola Page 39
