In 1990, after its shares gained 20 percent (while the S&P 500 declined 7 percent), Coke stock split two-for-one, then jumped an astonishing 73 percent in 1991, allowing another stock split early in 1992. For the banner year of 1991, Roberto Goizueta was awarded over $86 million in compensation, much of it quietly buried in a proxy statement in the form of a one-time bonus of one million shares of Coke stock. With excessive salaries of American CEOs under attack during the recession, Goizueta’s reward made front-page national headlines, but admirers retorted that he had earned it—if the stock had not gone up, he wouldn’t get so much money.
As the recession deepened, however, Coke shares languished for the next two years, even though the soft drink company’s steady global growth continued. True, it slowed to a total case volume rise of only 3 percent in 1992, but in 1993 it climbed 5 percent. The thin-skinned Goizueta grew increasingly irritated, eager to convince skeptics that Coca-Cola’s fundamentals were sound and that the stock should resume its extraordinary growth.
TROUBLE ON THE HOME FRONT
Although Coke’s worldwide momentum appeared unstoppable, the flagship U.S. market was flashing warning lights—one of the primary reasons for Wall Street’s nervousness. Seeking to capitalize on Coke Classic’s historic image, in 1990 the Company opened a glitzy $15 million museum in downtown Atlanta, followed by a store to sell products emblazoned with the Coke logo on New York’s Fifth Avenue. A gigantic new Spectacular in Times Square, lit just before midnight on New Year’s Eve, December 31, 1991, featured a forty-two-foot Coke bottle that, aided by sixty miles of fiber-optic tubing, a mile of neon, and thirteen thousand incandescent light bulbs, uncapped itself, offered a straw to a huge invisible mouth—perhaps God’s?—and emptied itself in each cycle.
Despite such hoopla over the core brand, however, in 1991 and 1992 the Company’s domestic case volume sales grew barely 2 percent. Refusing to admit defeat, Goizueta repositioned the moribund New Coke—its unfortunate nickname aging quickly—as Coke II. Atlanta consumers suggested tongue-in-cheek slogans such as: “Coke II: The Embarrassment Continues.” The renamed drink again failed to garner significant sales. A Coke “MagiCan” promotion garnered piles of negative publicity when, instead of cash popping out of “prize” cans, a foul-smelling and tasting liquid—sealed into the bottom to add weight—leaked out and hit some consumer tongues. The $100,000 promotion was scrapped.
On top of such temporary glitches, beverage analysts feared that the market for old-fashioned colas may have reached saturation point. After more than a century of deluging North America with Coke and Pepsi ads, could the marketers hope to squeeze out any more substantial gains? The diet segment, which had grown at 20 percent annual rates during the 1980s, had now slowed to 3 percent yearly growth as consumers switched from obsession with weight to health. Upstart “New Age” drinks such as Snapple and Clearly Canadian were stealing market share. Some experts felt that a decade of Coke/Pepsi domestic price wars may have eroded brand loyalty, turning the drinks from image-rich elixirs into mere commodities bought on sale. Goizueta sniffed at such suggestions, pointing out that Mello Yello—Coke’s minor-league response to Pepsi’s popular Mountain Dew—sold more than Snapple.
Meanwhile, private-label colas, spurred by aggressive Dave Nichol, the CEO of Canada’s Cott, were making inroads into brand-name sales. Cott’s high-quality private-label beverage sold as President’s Choice Cola in Canada and as Sam’s American Choice in U.S. Walmarts. In Great Britain, Cott supplied supermarket giant Sainsbury’s cola, as well as entrepreneur Richard Branson’s upstart Virgin Cola. “Coke and Pepsi are passé,” Nichol boasted. “Cott,” Goizueta snarled in response. “We sell more Coke in Nigeria than they sell worldwide.” In blind taste tests, Consumer Reports noted in an August 1991 cover story, private colas were indistinguishable from Coke or Pepsi. In a funny commercial, RC Cola depicted Coke and Pepsi men baiting fishhooks with their respective soda cans, then pulling humans from the ocean, a can bulging their cheeks. “For years you’ve been fed the same old line—that there are only two great-tasting colas to choose from,” intoned the narrator. “Hey, you don’t have to swallow that.”
COKE CALLING HOLLYWOOD
But the real problem, as Roberto Goizueta saw it, was his main brand’s lackluster advertising. The Interpublic Group, which included McCann-Erickson, Lintas, and others, had produced all Coke product ads for decades. Since the 1985 New Coke debacle, however, the ads had lost fizz and focus. In the fall of 1990, Goizueta complained that “Can’t Beat the Real Thing” wasn’t working. A Coke marketing executive noted that Pepsi’s spots were “hipper” than Coke’s. “Then go to a hipper source,” Goizueta snapped.
Soon afterwards, Ike Herbert, Coke’s veteran head of marketing, called Peter Sealey, who had fallen in love with Hollywood and the relaxed California lifestyle when he oversaw Columbia Pictures. Sealey had left Coke in 1989, staying in California when the Company sold Columbia to Sony. “I had a beautiful place on the ocean, a hot tub, Chardonnay. I was blissing out,” Sealey recalled later. “I totally believed I would never return to Coke.” But now Coke wanted him back, along with his Hollywood connections. Sealey agreed, though he had to move back to Atlanta and shave his beard because of Goizueta’s Castro phobia.
Sealey took over as Coke’s first director of global marketing just as Coke stumbled again. During the Superbowl in January 1991, Coke pulled its planned advertising to run a serious rolling text, explaining that frivolous ads were inappropriate because the Gulf War had just begun. Football fans were simply annoyed. One critic called the Coke ads “cheap, phony, patronizing and holier-than-thou.” Meanwhile, Diet Pepsi introduced Ray Charles singing, “You’ve got the right one, baby, uh-huh,” surrounded by a chorus of slinky young black women. The Pepsi spots were enormously popular—a particularly bitter blow, since Georgia-born Ray Charles had once sung for Coke. People in offices and schools across the country began to say “uh-huh”—except in the corporate halls of Coca-Cola, where the expression was forbidden.
Pepsi gleefully mocked Coca-Cola’s stodgy image. In one ad, after taking a sip of Coke, rap singer M. C. Hammer burst into a smarmy rendition of “Feelings.” In another spot, when Pepsi accidentally arrived at a nursing home, the elderly imbibers boogied about and said “Awesome,” while frat house boys who received Coke played a sedate game of bingo.
In this tense atmosphere, something had to give. Don Keough, who would retire in two years, didn’t want his departing legacy to be a lame campaign. In the summer of 1991, he flew to Manhattan to plead with McCann-Erickson executives to come up with something spectacular. “If you don’t pull this off, folks, you are staring at a loss of the business,” he told them. In the meantime, Sealey was talking to super-agent Mike Ovitz, the founder of Creative Artists Agency (CAA), who was eager to do a deal with Coke. In the fall of 1991, Ovitz flew to Atlanta to make his pitch to Goizueta. “Here we’ve got the greatest star in the world, Coca-Cola,” Ovitz told the CEO. “It’s instantly recognizable, the most bankable star in the world.” Ovitz proposed that CAA use Hollywood actors, directors, and writers to create innovative Coke commercials.
The Coke executives weren’t yet willing to go quite that far. Instead, they wanted CAA to work with McCann to create a sure-fire new theme for Coca-Cola. The news of the Coke/CAA partnership terrified the ad industry late in 1991, though no one knew exactly what CAA would do for Coke. Ovitz babbled about bringing “macro-vision” to the task, while Peter Sealey said that CAA’s job was “to be in tune with culture. They know what is going to pop a year from now.”
With the CAA threat looming, the soft drink ad blitz continued. In a frantic effort to counter the Diet Pepsi “Uh-huh” campaign, Interpublic’s Lintas agency went one step further in the celebrity ad wars by exhuming Humphrey Bogart, James Cagney, and Louis Armstrong to appear in Diet Coke commercials. Not only were the dead stars colorized, but they interacted with live actors, while Elton John sang a twist on the long-standing
“Just for the Taste of It” theme. Ad critic Bob Garfield was not impressed. “Coca-Cola is obsessed with Pepsi-Cola’s youthful image in the U.S., and has been trying desperately, pathetically to approximate it,” he wrote. “It speaks to Coca-Cola’s notion of the pop-culture vanguard that its lead presenter, in order to seem contemporary, must be surrounded by dead people.”
When the Super Bowl rolled around in January 1992, Coke shocked the ad world by opting out of the $1.7 million-per-minute commercials. Instead, Peter Sealey orchestrated “Helios,” the first truly global ad for Coca-Cola, in which McCann-Erickson demonstrated its worldwide capacity. Airing on the same day as the Super Bowl, happy Coke drinkers greeted viewers in twelve languages. The ad, which ran at 6 a.m. Eastern Standard Time on CNN, appeared simultaneously in some 130 countries to kick off the Company’s 1992 Olympic coverage.
Meanwhile, Pepsi’s much-hyped Super Bowl ads were an inexplicable departure from the venerable “Choice of a New Generation” theme, switching to a blander “Gotta Have It” slogan that was intended to appeal to all generations. Instead, as the ever-acerbic Bob Garfield noted, “out of nowhere, Pepsi has decided to be like Coke: to embrace everybody, to be all colas to all people.” He objected to the new slogan’s “licentious overtones,” concluding that “it’s the wrong message, to the wrong audience, at the wrong time.”
With the traditional feel-good global campaign under way, it appeared that McCann may have found its footing again, at least internationally. But behind the scenes, the infighting continued. From the beginning, the enforced relationship between McCann and CAA was plagued by “suspicion, jealousy, resentment, and one-upsmanship,” as Goizueta biographer David Greising observed. McCann had recently recruited Gordon Bowen from Ogilvy & Mather to save the domestic Coke account. But when Bowen suggested “A Spark of Life” as the new theme, Shelly Hochron of CAA blasted him. “That is the worst advertising idea I’ve ever heard of,” she said, and Peter Sealey agreed with her.
Things only got worse for Bowen at a crucial July 1992 presentation in Atlanta. The CAA storyboards weren’t particularly impressive, featuring a dog digging up a Coke bottle. Bowen stuck to his “Spark of Life.” But veteran McCann ad man John Bergin, an old friend of Keough’s, stole the show with a presentation that took Bowen completely by surprise. They were all missing the essence, the majesty of Coca-Cola, Bergin said. “Let the brand be itself.” In his talk, he built up to the lyrics of a song he had written: “Always there, Always new, Always real, Always you—Always Coca-Cola.” In secret, Bergin had even created a “steal-a-matic,” working over an old McDonald’s commercial showing a Taiwanese little league team visiting the United States, which he now showed. Bergin staged a coup. Sealey ordered both CAA and McCann to create their own ads, using the “Always” theme.
On October 15, 1992, both teams came to Atlanta for the final shoot-out. This time, Roberto Goizueta would join Don Keough to view sample ads. It was clear from the outset that CAA would win. Sealey had flown to California in order to escort the CAA team back to Atlanta. Ovitz tantalized Goizueta by promising that famous directors like Francis Ford Coppola and Rob Reiner would create Coke spots. Then they rolled the sample CAA spots. As Bergin watched, he was dismayed by their uneven quality and scattershot approach. There was the dog digging up the Coke bottle. In another one, space men identified an alien by asking him trivia questions about Coke. The only appealing ad, Bergin thought, was one in which computer-animated polar bears admired the northern lights and drank Coke.
Bergin was even more dismayed by the reaction of the Coca-Cola executives. Already programmed to like the CAA efforts, they roared with laughter, nudged one another appreciatively, and acted “absolutely giddy,” as another McCann man recalled later. Keough bounced happily to the lilting “Always Coca-Cola” tagline sung at the end of each spot. Bergin scribbled a note and passed it to a colleague: “We are dead.” CAA had co-opted Bergin’s two-word theme, but there was nothing left of his lyrics or core Coke concepts. When the new Coke ads debuted in February 1993, McCann made only two, while CAA produced twenty-four in what Sealey dubbed a “new paradigm” approach to advertising.
The ads signaled the end of the traditional “one sight, one sound, one sell” approach. Instead, each of the disparate spots was supposed to represent a “rifle-shot” directed at one particular market segment. To some critics, they simply appeared uncoordinated. At least, however, they represented new energy and change. Though he called the two dozen commercials “flawed,” critic Bob Garfield was basically impressed, calling them “the best Coca-Cola advertising campaign in at least a decade.” He loved the polar bears watching the aurora borealis, calling the spots “sweet, unexpected, visually arresting and very nearly majestic.” The other efforts were all over the place, but they were at least united by the brilliant new “Always Coca-Cola” theme, along with the red Coca-Cola disk, resurrected from the 1950s.
Most members of the traditional advertising community were underwhelmed by the CAA efforts. “Coke is willing to try anything in its effort to stumble across what made it great,” sniffed one ad man. The much-vaunted commercials made by famous movie directors weren’t particularly impressive. Indeed, Francis Ford Coppola’s was scrapped. “Directing commercials is a whole different world than directing movies,” one veteran ad man noted. “You have to think a lot faster on your feet and improvise a lot more.” Another advertising executive called the CAA efforts “a creative gang bang with no strategic centrality and not enough gate-keeping to keep the good stuff away from the bad stuff.”
Peter Sealey didn’t care what the critics said. He was ebullient, pointing out that the twenty-four CAA ads cost less than the seven elaborate commercials McCann made the year before. At the press launch for the commercials, he watched the audience stir and murmur, not sure what to think until the polar bear ad came on. “From then on,” he recalled, “it was a love fest. This was an audience on a ride.” It appeared that Sealey’s California psychobabble would work in Atlanta. “God, you’re ringing all the emotional bells there,” he burbled about a new ad. “You’re talking social facilitation, self-actualization.” Years later, he observed, “I have never been more happy in my life than I was in early 1993.” Just as he seemed to be on top of the Coca-Cola world, however, Sealey was about to be dethroned.
THE RETURN OF THE AYA-COLA
Although he didn’t know it, Sealey’s fate was sealed the day Don Keough retired in April 1993. Keough, whom one long-time admirer described as “the heart and soul and probably most of the vascular system of Coca-Cola,” would be sorely missed. A master communicator and motivator, Keough could fire up the bottlers, wax poetic about his favorite soft drink, or turn tough task-master when needed. Instead of replacing him, CEO Roberto Goizueta allowed people to speculate whether Doug Ivester or John Hunter would eventually succeed him. Ivester, who had shone in his brief stint in Europe, came back to head the North American Coca-Cola business in July 1990, while gruff Australian John Hunter was made head of international operations.
Most insiders bet on the aggressive Ivester, who, at forty-four, was ten years younger than Hunter. In addition, Goizueta clearly favored him, regarding him as a kind of junior version of himself. Both men were detail oriented, demanding of themselves and others, and came from the technical rather than marketing side of the business. In order to complete his grooming for the top Coke position, for more than a year Ivester met on Saturday mornings with Sergio Zyman—the enfant terrible widely perceived as the “fall guy” for New Coke—for lessons in marketing theory. During these sessions, Zyman took the opportunity to criticize Sealey’s advertising and marketing programs. Impressed with his tutor’s acumen, Ivester briefly tried to get Zyman and Bowen to come up with alternative advertising to CAA.
Now that Ivester was the de facto number two man in the Company, he convinced Goizueta that Sealey was too slow and cautious. Worse, Sealey had failed to rejuvenate Diet Coke advertising or sales. Abandoning the
back-from-the-dead colorized-celebrity approach and the ten-year-old “Just for the Taste of It,” in January 1993 he had approved a new slogan, “Taste It All,” with frenetic lifestyle spots featuring active consumers of all ages. The ads misfired, in part because the product wasn’t emphasized enough. “I saw Diet Coke on the screen for maybe one second,” a bottler groused. At the end of May, Coke cut Diet Coke’s ad budget to the bone, then announced in mid-July that the campaign would be modified or scrapped.
A week later, Ivester marched into Sealey’s office at 3 p.m. and told him, “This just isn’t working out.” Afterward, Coke’s personnel director told a stunned Sealey, “You’re going to be radioactive now. You’d better leave quickly.” Sealey cleaned out his desk. In public, however, Ivester praised Sealey for “taking our advertising to a new level of excellence.” The next business day, Sergio Zyman arrived to take his place. Perhaps with some relief, Sealey moved back to California.
The resurrection of Sergio Zyman caused a shudder to run through Coca-Cola and Madison Avenue offices. Known as the “Aya-Cola,” the mercurial, arrogant Zyman had antagonized many with whom he had worked back in the 1980s. “Why him?” one secretary asked, bursting into tears. “They used to say they needed one office for Zyman and one for his ego,” a long-time Coke watcher said. “I have no desire to work for or with Sergio Zyman ever again,” a former Coke brand manager stated bluntly. “Sergio was very much a ‘for me’ or ‘against me’ sort of leader. There was no middle ground. He was not subject to logic or numbers or reason.” Goizueta defended his new marketing guru, explaining that time had mellowed him. He apparently hadn’t changed all that much, however, since Ivester and Goizueta later passed out T-shirts proclaiming “GUTS—Get Used To Sergio.”
For God, Country, and Coca-Cola Page 62
