For God, Country, and Coca-Cola

by Mark Pendergrast

  Similarly, Company athletic sponsorship spanned the globe. Taking advantage of the Japanese fascination with American football, the Company flew two U.S. college teams to Tokyo for the “Coca-Cola Bowl,” in which Oklahoma State beat Texas Tech 45–42. Since 1982, the Company had sponsored Sawayaka (Refreshing) Baseball Clinics in Japan. When the Brazilian soccer league nearly went bankrupt in 1987, Coke stepped in to sponsor it—but only if every player on every team sported a gigantic bright-red Coca-Cola logo. “The visual effect is stunning,” a Company publication crowed. “Next year, even the game ball will bear the red and white trademark.” Because of Coke’s midfield signs at all World Cup venues, it reached twenty-five billion viewers during the 1990 playoffs. During the Tour de France, all cyclists carried a water bottle with the Company logo as they whizzed past giant Coke cans and sign-boards along the route before crossing a Coca-Cola finish line—quite a change from 1950, when French spectators had violently protested Coke support of a bicycle race. Regardless of the sport—field hockey, basketball, volleyball, gymnastics, sumo wrestling, motorcycle races—Coca-Cola sponsored it in almost every country in the world.

  The Olympics, of course, furnished the world’s most outstanding sports tie-in opportunity. In 1988, the Company paid for the Coca-Cola World Chorus, a hundred-voice choir selected from participating countries. For the opening ceremonies at Calgary and Seoul, the chorus debuted the official song of the event, “Can’t You Feel It?” While the lyrics didn’t mention Coca-Cola, their resemblance to “Can’t Beat the Feeling” conveyed the appropriate message anyway. As a Company publication observed, the Olympics represented “a hot marketing opportunity,” and Coke was determined to leverage Olympic symbols to promote sales—through special promotions, contests, and jackets emblazoned with the Coke trademark and the Olympic rings. At the events, the Coke logo was scrawled gaudily in neon, on murals and banners, on huge inflated cans atop buildings, on umbrellas and blimps, while the Company hosted a popular pin-trading center. Altogether, Coke invested about $80 million on its 1988 Olympic promotions.

  CREATING SOFT DRINK HEAVEN

  By the end of 1988, Coke’s international vision had resulted in new joint ventures in Taiwan, China, Indonesia, Belgium, and Holland, while the triple-A program functioned smoothly. For the first time, the Company’s after-tax net income topped a billion dollars, with 76 percent of that amount deriving from outside the United States—a dramatic increase of 15 percent in just three years. Highlighting the global business, the 1988 annual report featured Keough and Goizueta smiling in front of a vast world map; breaking precedent, the report touted the international performance before mentioning the United States.

  Indeed, the outlook around the world made Coke executives drool. In Norway (annual per capita for Company products: 176), the top three soft drinks were Coca-Cola, Coke light (the international name for Diet Coke), and TaB, with a combined market share of 87 percent. Halfway around the world in China, customers lined up each morning outside the local bottling plant, where supply couldn’t keep up with demand. Though the per capita remained minuscule—only 0.4—a new concentrate plant in Shanghai had just opened and three more bottlers would follow within a year. In the Soviet Union, Coke had barely begun. Under Gorbachev, however, the future of free enterprise appeared favorable, and Coke yearned to overtake Pepsi’s early lead there. So far, the Company had garnered only an abortive U.S. grand jury investigation into charges that it had bribed its way into the USSR. Neither the bribery accusations nor the lack of hard currency disturbed Coca-Cola particularly. Someday, the Soviet market would bear fruit.

  As the chief operating officer of the Company, Don Keough, so charming in public, was proving himself a tough operator who sometimes lost his Coca-Cola patience. Although Keough was immensely likable, immediately establishing contact and rapport—“it is hard not to be knocked over,” wrote a Fortune reporter, “by his cocked smile, his jet-engine voice, and his touchy-feely nature”—that hands-on management style could turn rough if you didn’t produce results. Goizueta found complaints from shell-shocked area managers amusing. “In 1981,” he laughed, “everyone thought I was the bad cop and Don the good cop. Now I’m the nice guy and he’s the SOB.” In planning sessions with Coke men, Keough could be ruthless. When a manager complained of Pepsi’s recent inroads, Keough snapped back, “You’ll never spend cheaper money than stopping them in their tracks.”

  In the long run, Keough and Goizueta viewed the Pacific Rim—with two billion people, roughly 40 percent of the world’s population—as the ultimate promised land for Coke. Keough’s eyes glazed when he talked about Indonesia, a country that, he was quick to point out, sweated squarely on the equator and consisted primarily of Muslims (median age: eighteen) who didn’t touch alcohol. “Now you tell me,” Keough beamed, “where else would heaven be for a soft drink?”

  BRINGING GRITS TO FRANCE

  A better prospect for the early nineties, however, lay in Western Europe, where Coca-Cola already predominated. By the end of 1992, the Company knew, the European Community (EC) planned to remove most of the economic barriers between the nations, effectively unifying a market whose population, one-third larger than the United States, was compressed into a relatively small, accessible area. While other U.S. companies worried about a “Fortress Europe” mentality, Coca-Cola already held the keys to the citadel.

  Nonetheless, Keough and Goizueta were dissatisfied with European per capita, just eighty-one drinks a year. To focus on the area, the Company reorganized its three world divisions in the fall of 1988, carving out a fourth EC Group. The central troublemaker of the sector—geographically as well as culturally—was France, with its miserable per capita of thirty-one, despite Coke’s presence there since 1920. The Company blamed longtime franchisee Pernod Ricard, too busy selling its Orangina to push Coke properly, and, after a protracted legal battle, Coke finally wrenched the concession away from Pernod early in 1989. In Dunkirk, construction was already under way on a gigantic canning plant to serve all of Europe, while Coke’s third-largest concentrate factory opened at Signes. The Winter Olympics would arrive at Albertville in 1992, the same year that Euro Disney was slated to debut just outside Paris, and the Company wanted to prime the French palate. William Hoffman, they decided, was just the man for the job.

  Although Hoffman spoke no French—he had never even visited France, having spent most of the eighties developing vigorous Atlanta supermarket promotions—he confidently spearheaded the French renaissance, initiating a program called Let’s Think Big, exhorting his newly hired merchandisers to build Europe’s largest displays. Hoffman launched his textbook Coca-Cola marketing blitz in Bordeaux, the heart of French wine country, where vending machines and massive soft drink displays were considered gauche. Hoffman and his gang quickly convinced skeptical hypermarket managers that their profits from Coke would spiral if they showcased a solid wall of reduced-price Coke. Beautiful women dressed in red-and-white outfits distributed coupons for free drinks, while Coke men slapped up thirty-five thousand logo stickers, along with 550 illuminated outdoor signs. By the spring of 1989, five hundred vending machines lined Bordeaux sidewalks, where a Company publication proclaimed them “an accepted and welcome part of the landscape.”

  The Company journalist had mistaken immobilized shock for acceptance, however. Hoffman exerted a bizarre fascination for the natives. “He’s so American!” they exclaimed, not knowing whether to be charmed or horrified. Stunned by Coca-Cola’s “Georgia Week,” which included American football, a screening of Gone with the Wind, and imported grits, the local café owners watched helplessly as their young consumers abandoned the overpriced $2.50-per-drink Cokes served at their establishments in favor of the ninety-cent variety now available from the street-side vending machines. As the café operators mobilized for a boycott of Coke products, the Company hastily agreed to remove the offending Bordeaux vending machines. Elsewhere in France, however, the flood of coin-operated dispensers only incr
eased. When a right-wing politician accused Coke of subverting French culture and luring youth away from wine, others responded by raising a glass of the bubbly American vintage, proclaiming it “our anti-fascist drink.”

  The American tactics eventually prevailed, even in France, where volume swelled by 23 percent in 1989.* Meanwhile, in Great Britain, the alliance with Cadbury Schweppes doubled sales in three years, with a huge new bottle/can plant at Wake-field in northern England to supply the increased demand. Throughout Europe, the same dynamic yielded a 10 percent annual volume growth. By the end of 1989, the EC Group contributed 29 percent of the Company’s operating profits.

  LAPPING UP THE SWEAT AND MUCOS

  Unlike the French, the on-the-go Japanese loved vending machines—first introduced by Coke in the early sixties—which now supplied them with ice cream, eggs, beer, whiskey, pornography, toothbrushes, or dating services in addition to beverages, cold or hot—a necessary trait for dispensing Georgia Coffee, Coke’s popular noncarbonated, sweetened coffee drink. Because of ferocious competition in the Japanese beverage market, five thousand different flavors vied at any one time. Of the thousand new drinks annually introduced to consumers, only 10 percent survived. To stay in contention, Coca-Cola offered a bewildering array of carbonated, fruit, and coffee beverages, averaging one new flavor per month. The vending manufacturers adapted by proffering up to thirty different choices. Out of the two million machines in Japan selling soft drinks, over seven hundred thousand dispensed Coca-Cola products.

  As one Coca-Cola manager observed in 1987, “It’s hard to overstate the significance of our business in Japan.” That year, the island reaped more profits than any other country, including the United States. By the end of the decade, however, the crucial Japanese trade flashed warning signals. Coke’s soft drink market share remained high at 84 percent, but per capita stalled and then slipped, as rumors about illness caused by the bubbly beverages rippled through the entire industry. Japanese health drinks with fiber, calcium, vitamins, and other nutrients gained market share, while carbonated sodas suffered.

  Japanese marketers scoured dictionaries for English names, often with disgusting results by American standards. “If you feel your body and skin become dry,” one ad suggested, “try to drink Pokka’s Mucos please.” An isotonic drink similar to Gatorade received the label Pocari Sweat. Coke responded with less nauseating-sounding drinks such as Aquarius (isotonic), FiBi (soluble fiber), and Mone (honey-lemon), but Coca-Cola’s product sales still dwindled. Company marketers were frustrated even more when Regain, a non-carbonated caffeine-and-vitamin tonic billed as a pick-me-up, premiered in Japan. The Regain jingle, issued as a CD, hit the top of the pop charts. “Can you fight twenty-four hours, Japanese businessman?” the lyrics inquired, as lightning bolts sizzled from a dark-suited figure clutching a briefcase.

  Regain effectively utilized an approach familiar to John Pemberton and Asa Candler, while Coke commercials depicted mindless Japanese teenagers imbibing on sunny summer afternoons—conveying the implicit message that Coke was a drink for indolent youth, not necessarily for industrious students or hardworking adults. Typical Japanese employees commuted up to four hours a day, labored long hours, and returned to cramped apartments in a gray city. They were likely to dismiss the commercials as irresponsible propaganda. Furthermore, Coca-Cola’s American image, previously a boon in Japan, had transmuted into a questionable asset. The Japanese no longer looked up to America, with its ailing economy, crime, poverty, and AIDS epidemic. To the Japanese, American workers appeared lazy and self-satisfied, and the “I Feel Coke” commercials only reinforced that view. Despite Coke’s frantic marketing efforts—splashing the logo on an entire train and wheeling a “MOBO-TRON” van complete with sixteen-foot video monitor through Tokyo’s streets—sales remained flat. As a new decade loomed, frustrated researchers commissioned a sociological study to address the Japanese problem, while dispatching veteran ad man John Bergin to assess the situation.*

  BACK TO THE BASICS

  As Toyotas and Hondas cruised U.S. highways and Japanese corporations snapped up American real estate and banks, a backlash mentality escalated. Just days after the stock market crash in 1987, the Sony Corporation had outraged Japan-bashers by purchasing CBS Records, along with its cache of classic American song rights. Now, as 1989 drew to a close, Goizueta revealed that Coke was selling Columbia Pictures to Sony for $3.4 billion, by far the largest Japanese buyout of an American enterprise. Suddenly, Mr. Smith Goes to Washington belonged to the Nipponese. According to one commentator, the Japanese had “bought a piece of America’s soul.”

  Goizueta ignored the uproar following the sale, which netted $1.2 billion for the Company’s 49 percent of the stock. As far as the Coke CEO was concerned, the sale perfectly capped the Hollywood venture, which had been a financial bonanza but a public relations failure. He was still smarting over the David Puttnam affair, in which the outspoken new British head of Columbia, director of Chariots of Fire and The Killing Fields before coming to work for Coke, had alienated the American movie establishment, loudly complaining about star salaries and runaway budgets, without making a single smash movie. Consequently, Goizueta was delighted to unload Columbia for a healthy profit. As an immense money machine, the entertainment sector had boosted the bottom line while the Company put its beverage house in order. Now, Goizueta intended to pump the cash from the sale into the international business. Just as he had sought diversification when he took over the Company, he now refocused on soft drinks. “There’s a perception in this country that you’re better off if you’re in two lousy businesses than if you’re in one good one—that you’re spreading your risk,” he complained. He challenged anyone to “tell me something that gives me the return or the growth potential of soft drinks.”

  Investment guru Warren Buffett agreed with Goizueta. The Sage of Omaha, Buffett, chairman of Berkshire Hathaway Inc., was an old friend and neighbor of Don Keough, who had converted the financier to Cherry Coke back in 1986. Long known as a “white knight” for his long-term equity positions in companies without attempting takeovers, Buffett plunked down a billion dollars for a 6.3 percent stake in The Coca-Cola Company in 1989—an unusual move for the midwestern investor noted for picking undervalued stocks. With its price-to-earnings ratio hovering around thirty, Coke was not cheap, but Buffett shrewdly spotted its limitless potential. Not surprisingly, he joined the board of directors soon afterward.

  MURRAY SCHWARTZ: SICK OF COKE?

  As the corporate Coca-Cola juggernaut plunged ahead, Emmet Bondurant and Bill Schmidt awaited final decisions from Judge Murray Schwartz. After eight years of bitter litigation, the two trials, which took five months to hear, ended in January of 1989, generating thirteen thousand pages of transcripts. As both sides prepared for possible closing arguments, Schwartz developed another undisclosed illness and could not render judgment on the cases. Bondurant and Schmidt couldn’t believe it, since the fifty-eight-year-old Schwartz knew every nuance and angle of the case, for which he had already issued twelve interim opinions. How could he abandon it now?

  No one knew the exact nature of the judge’s illness, though it was perhaps related to a long history of heart trouble. Nonetheless, rumors also circulated that he had suffered a nervous breakdown, and the Coke cases may have been a contributing factor. Schwartz had lived and breathed the bitter battle for nearly a decade, the theory went, and now that the decision loomed, he apparently couldn’t face it.

  The case was reassigned to Judge Joseph J. Farnan Jr., a Reagan appointee who signaled his hostility to both sides at the outset, commenting, “Counsel in this case couldn’t agree on which door to take to the courtroom.” As they prepared their arguments once again, both sides learned that Schwartz had miraculously recovered and climbed back into his judicial seat—but he would not resume the Coke cases. As the retrial commenced, Judge Farnan signaled his complete disdain for the proceedings by openly perusing the L.L. Bean catalog during testimony. Wit
hin a few years, the cases would end in a whimper, with The Coca-Cola Company assessed a dollar in damages to each bottler in the suits. The Schmidts sold their bottling company. Big Coke had prevailed.

  REVISITING THE HILLTOP

  Meanwhile, as the retrial bored Judge Farnan, Coca-Cola decided to reclaim its heritage along with the high ground in cola-ad battles, which had degenerated into a rather confusing star wars. That year, Coke and Diet Coke commercials had showcased twenty-seven different celebrities, along with thirty-one football players, while Pepsi starred Billy Crystal, Robert Palmer, and Magic Johnson, among others. “I think there can be a real sense of confusion ultimately as to who stands for what,” an outside creative director commented. It didn’t help when Don Johnson crossed over from Pepsi to Diet Coke, or Ray Charles, a Georgia musician who had sung powerful Coca-Cola odes in the past and presided at New Coke’s unveiling, extolled Diet Pepsi in “blind” taste tests. By the end of the eighties, advertising was expensive, imitative, and corporate, with the glorious days of innovation apparently receding into the past. Technically, the gorgeously filmed spots excelled, crammed with special effects, dancing, and music, but they were dead inside. The few genuinely moving commercials often harkened back to classic ads of another era.

  In September of 1989, McCann-Erickson temporarily escaped the celebrity onslaught by remaking the 1971 commercial, “I’d Like to Teach the World to Sing.” Scheduled to premier during the Super Bowl in January, this time the peaceful celebrants would share Cokes with their children, who would sing “Can’t Beat the Real Thing” in counterpoint to their parents’ more traditional tune. A detective hunt turned up only twenty-five of the two hundred original cast members, so actors from different countries filled in the balance. It was billed as a twenty-year anniversary, though that was actually two years away.