For God, Country, and Coca-Cola

by Mark Pendergrast

  COKE GOES NEW AGE

  Zyman’s immediate mission was to create hip products to compete with New Age challengers like Snapple and Clearly Canadian and to meet the private-label cola challenge. Until then, Coke had mounted feeble efforts to reposition Fresca and to introduce Nordic Mist, a Clearly Canadian rip-off, but neither had been given much marketing muscle. In January 1993, Roberto Goizueta called his two top lieutenants, Doug Ivester and John Hunter, into his office to announce a new initiative. Coke wouldn’t just sit back and let these products nibble away at market share. Instead, he planned to introduce a flurry of new products, developed and launched in a hurry. The Company already did it in Japan, where new products were continually surfacing, selling, and disappearing. Why not in the United States? “I want it all,” Goizueta said. “I don’t want them [competitive New Age drinks] to have even these niche products.” Nor did it matter, the CEO said, whether they all survived. He envisioned “new products going in, making money, and then you take them out.”

  It was easy to see why Goizueta was alarmed. In 1984, colas had accounted for nearly 64 percent of the U.S. non-alcoholic beverage market. By 1993, colas slipped below 59 percent, while alternative drinks had grabbed 10 percent of the market. Even before Sealey’s ouster, Goizueta hired Sergio Zyman to spearhead the swift creation of Tab Clear, Coke’s answer to Crystal Pepsi, a colorless cola intended to appeal to the New Age crowd.* While Zyman created the ad campaign in England, Sealey had remained unconcerned. “I thought it was a stupid product,” he recalled later. “I wanted no responsibility for it.” The introductory commercial, cast as a faux news program using a real CNN anchor, brought a flood of complaints from viewers who felt it was deceptive. Neither Tab Clear nor Crystal Pepsi dented the market, and they were withdrawn a year later.

  Goizueta and Ivester didn’t care. They wanted brash new products, they wanted them quickly, and they agreed on the man who could deliver them—Sergio Zyman. When he took over as global marketing director in July 1993, Zyman arrived like a whirlwind. Goizueta also gave Zyman a bigger ad budget to boost Coca-Cola Classic, Diet Coke, and its other brands. He was determined to squash the upstart private-label colas in the wake of April 2, 1993, the day Philip Morris had slashed its cigarette prices to halt inroads from generic cigarettes. That day, which came to be known as “Marlboro Friday,” supposedly signaled the death knell of brand-name dominance, according to many doomsayers. Goizueta protested angrily when Coke stock took a hit, complaining of “irrational market behavior” and claiming, “We are getting a bum rap.”

  Goizueta was even more incensed in January 1994, when Barron’s quoted mutual fund guru John Neff’s negative comments on Coke. Neff advised shorting the Company’s stock. He called it “the Philip Morris of this year” and observed that Coke managers “tout their stock almost outrageously.” Goizueta was incredibly frustrated. Despite a healthy 5 percent worldwide case volume growth in 1993, Coke stock had advanced only $4.50 per share in the last two years, not even breaking $45 as 1994 arrived. Goizueta gave orders on all fronts to move aggressively to increase market share in every conceivable way.

  Zyman immediately initiated work on two new drinks, to be called Fruitopia and OK Soda, and stepped up promotions for the newly introduced PowerAde, Coke’s counter to Gatorade, the dominant isotonic beverage. In March 1994, Zyman launched non-carbonated Fruitopia in eight fruit flavors with New Age names—Citrus Consciousness, Grape Beyond, Cranberry Lemonade Vision, Lemonade Love & Hope, Pink Lemonade Euphoria, Raspberry Psychic Lemonade, Strawberry Passion Awareness, and—perhaps labeling the reaction of many consumers who thought the names were overly cute—Total Fruit Integration. The bottles were covered with psychedelic, funky icons depicting body, mind, and planet, and offered aphorisms suitable for Fruitopian Life, such as “If you can’t judge a fruit by the color of its skin, how can you judge a person that way?” Coca-Cola announced that Fruitopia would go national immediately, supported by a $30 million marketing budget, with plans to go international soon afterwards. Zyman boasted that it was “the first truly global launching of an alternative product.”

  The quick launch of Fruitopia, without local test marketing, startled beverage veterans, but Zyman claimed that he had invented Presearch, “the study of assumptions and hypotheses developed from current worldwide market information.” He was only following the dictates and desires of the marketplace. Consumers, he said, were the real directors of marketing. And what did they order? “We found that consumers want the yin of the new mixed with the yang of the traditional,” Zyman explained. Some commentators were not impressed with the Fruitopia strategy, which one called “mind-bogglingly cheesy,” asking, “What’s the next Fruitopia flavor going to be, Coke? Putrid Peach Paranoia?” There was a chance, he granted, that the Company would succeed. “They’ve got the ad bucks, the distribution, and probably the same view of ‘consumer democracy’ as that held by many a prominent politician—that is that the American public is capable of buying anything if you ram it down their throats hard enough.”

  Though Zyman asserted that Fruitopia would compete with “all alternative beverages,” it was clearly positioned to counter Snapple. Even its wide-mouth embossed glass bottles imitated Snapple. Aside from its ultrahip retro-sixties image, however, the Fruitopia line seemed an odd choice. Snapple’s biggest sellers were teas, and Fruitopia didn’t offer any tea products. Those were left to a new partnership Coke had formed with Nestle, established in Tampa, Florida. In addition Fruitopia’s shelf-stable flavors had to be “hot-filled,” which meant expensive bottler line alterations. “Bottlers hate this stuff,” observed one industry analyst. Zyman merely shrugged. “We will be launching more and more new brands,” he said. “We’re going to hit home runs, then we’re also going to have to hit some profitable singles and even endure some sacrifice bunts.”

  The month after Fruitopia’s debut, Coke introduced another new product. While “Coca-Cola” was the second best-known word on earth, “OK” was the first, so Zyman wanted to co-opt it, too. A typically edgy Zyman enterprise, OK Soda was a brash effort, utterly uncharacteristic of anything The Coca-Cola Company had ever done. Intended to appeal to the cynical, disenfranchised twelve-to-twenty-five-year-old MTV crowd, OK Soda’s can was the antithesis of Coca-Cola’s bright, upbeat image. Instead, the cans featured the black, grey, and white, bleak postmodern face of a young man who looked utterly blank, with a square saying “OK” slapped part-way over his forehead. The can had no discernible front or back. The flavor, mildly carbonated, was similar to the old “suicide” drink, a mixture of every flavor available at the soda fountain, with a touch of spicy orange. Zyman predicted that OK Soda would be one of his home runs, eventually snaring $1 billion dollars of the market and grabbing 4 percent of the entire U.S. soft drink share.

  That seemed an odd prediction for a drink whose bland motto was “Things are going to be OK.” The drink was deliberately positioned to be blasé. It wasn’t exciting, delicious, or sexy. It was just OK. Nonetheless, beverage analyst Tom Pirko thought it might succeed by appealing directly to seen-it-all teenagers. National Public Radio host Noah Adams was skeptical. “Wouldn’t you, if you were 19 years old, . . . feel a bit manipulated that they were coming after you so blatantly?” No. The only problem, Pirko observed, might be that “they’re already sort of already truly wasted. I mean, their lethargy probably can’t be penetrated by any commercial message.” Thus, even though OK was designed to appeal to “their concerns and their angst and their anxiety,” it might not be enough.

  Teenagers weren’t quite as disaffected or stupid as Zyman and Pirko thought. “The better you understand something, the more OK it turns out to be,” one can proclaimed. Teenagers surveyed by the Atlanta newspaper simply found it confusing. None of the teens liked the taste. The most positive comment one could summon was: “It’s better than water.” They didn’t like the name, either, which made it sound as if the soda wasn’t worth drinking. Consumers were supposed to call 1�
��800-I-FEEL-OK to report “coincidences” of OKness. Though millions of kids did call, just to see what happened, the calls didn’t substantially increase sales. A little more than a year later, OK Soda was quietly pulled from the market.

  Supported by a massive ad campaign, Fruitopia did somewhat better than OK Soda, but even with new flavors—Tangerine Wavelength, Apple Raspberry Embrace, and Tropical Consideration—it never really contributed to Coke’s bottom line. When Coke decided to imitate Ken Kesey and send psychedelically painted “Magic Buses” across the country to promote Fruitopia, a twenty-year-old sniffed. “It’s sort of like they were really looking too hard for something to sell us,” she said. “Them pitching it as an out-of-body, out-of-mind experience seems kind of trite to me.” The Coke-Nestle partnership didn’t work well, either. In 1994, the two companies closed the corporate office in Tampa but agreed to continue joint beverage ventures.

  BOOSTING THE CORE BRANDS

  While Sergio Zyman was chasing New Age chimeras, he also tried to recharge the Company’s major brands—Coca-Cola, Diet Coke, and Sprite. Here, his efforts were apparently more successful. Zyman continued to use CAA as the creator of many ads, including “Hypnosis,” which played on the old fears of subliminal messages, with the announcer intoning: “You are getting thirsty, very thirsty. . . . Disregard all other soft drink advertising and drink only Coca-Cola.” Others featured the popular polar bears flying off a ski jump and sliding bare-backed down a luge run, to promote Coke’s sponsorship of the 1994 Lillehammer Winter Olympics. Critic Bob Garfield, usually a hard sell, loved the new ads, hailing them as superior to Coke’s previous efforts of the last thirty years. Since most of them had been under development when Sealey left, however, Zyman couldn’t legitimately take much credit.

  In fact, Zyman had considered dumping CAA entirely, but Mike Ovitz intervened with Goizueta, who loved the polar bears. Nonetheless, Zyman began to farm out work to other boutique agencies such as Fallon McElligott, Wieden+Kennedy, and Bartle Bogle Hegarty. Eventually, he would hire some twenty-five different agencies to do ads for various company beverages. Zyman, who enjoyed the exercise of power, played one agency off against another. He also hired his own marketing people—most of them without soft drink experience—and placed them around the world, reporting directly to him. “It’s very exciting to have all these creative agencies around,” one anonymous ad man observed, “but holding them to the same brand values can prove almost impossible.” Another critic called the Coke approach “profoundly flawed.”

  Flawed it may have been, but 1994 produced positive results for Coca-Cola Classic, whose sales drove an impressive 7 percent annual increase in case unit volume in the United States. The increased sales probably had less to do with advertising than with the return of the “contour” bottle in a plastic container with a fatter waist than the old hobbleskirt bottle. Chemist, engineer, and marketer Ray Morgan, who had joined Coke in 1969 right out of college, had already proven that proprietary packaging could make a huge difference—first with Fresca, then with the dimpled green Sprite bottle. In 1990, when Doug Ivester took over the North American sector, Morgan pitched him with the idea of a twenty-ounce contour bottle for Coca-Cola Classic. Ivester enthusiastically approved the project. In March 1994, when the bottles hit Chicago test markets, they outperformed anyone’s wildest expectations, boosting sales by 224 percent in a matter of weeks. By the end of the year, the contour bottle was available across three-quarters of the United States, and it went international the following year. Even though Zyman had little to do with the contour bottle, he called it “the best-known package in the world, with the possible exception of the egg.”

  Zyman could, however, take more credit for the resurgence of Sprite, which had traditionally been sold for its intrinsic qualities as a bubbly lemon-lime drink like 7-Up. Zyman repositioned Sprite as a youth drink with an attitude. While his “anti-hype” approach had flopped with OK Soda, it worked for Sprite. “Image Is Nothing,” ads proclaimed. “Thirst Is Everything. Obey Your Thirst.” Funky ads showed camels sipping Sprite, and the Company linked the drink to its NBA sponsorship.

  Diet Coke remained a problem child, however. Zyman dumped Lintas, the old agency, in favor of Lowe and Partners, which debuted new ads in 1994 with the bland slogan, “This Is Refreshment.” Most of the new Diet Coke spots were aimed at “liberated” women, some of whom simply seemed angry and self-absorbed. In one ad, a young woman threw all of her boyfriend’s belongings at him, including his cowboy hat, which she stomped on. Then she swigged her Diet Coke. In another spot, the camera panned over a trail of shed clothing, down to the underwear, but instead of leading to a bedroom scene, it ended with a woman enjoying a solitary hot bath with her Diet Coke. While the spots had plenty of attitude, they apparently didn’t sell many soft drinks.

  The only successful ad relied on good old-fashioned sexism, although of the reverse variety. Women office workers gathered at the window to ogle a sweaty construction worker, a hunk who stripped off his shirt, downed his Diet Coke and smiled at them, as Etta James sang, “I Just Wanna Make Love to You.” “They drink in his every ripple,” one critic wrote. “When it’s over, you almost feel the need for a cigarette ad.” The hunk, thirty-three-year-old model Lucky Vanous, quickly became a celebrity, appearing in People magazine, doing the talk circuit, and appearing on TV shows. A Lucky Vanous calendar and workout video appeared. Taking advantage of their newly created star, Coke sponsored a radio contest in which thirty women won a lunch with Lucky Vanous by writing the best “Diet Coke fantasy.” When he showed up in Atlanta to lunch with the two winners there, Vanous attracted a crowd of three hundred drooling women. Even more converged on him at the New York City lunch. “I mean, look at that!” one woman swooned. “With a body like that, a hunk like that. . . . He’s making me hot.” Apparently a guileless if not terribly brainy man, Vanous told an interviewer that he didn’t indulge in soft drinks. “But if I were to drink one,” he added, “I’d drink a Diet Coke.”

  Despite the hunk phenomenon and other innovative commercials (in one spot, a swimming elephant stole the soft drink from a raft, paying for it with a few peanuts), Diet Coke sales stagnated, along with the rest of the diet drink segment. The baby boomers were no longer quite so obsessed with their weight, it appeared. During the 1980s, Diet Coke had surged to claim a 10 percent share of the total U.S. soft drink market, but now it slipped to 9.7 percent. “Eventually, any category—no matter how hot—will hit its peak,” a bottler observed philosophically. Had that happened to diet drinks? He hoped not, but he doubted any advertising would help much.

  IVESTER THE WOLF

  In July 1994, Roberto Goizueta finally recommended Doug Ivester to the board as president and chief operating officer, officially anointing him as his heir apparent. Outwardly, the round-faced Ivester, forty-seven, appeared to be a quiet, almost introverted accountant. Unlike the aristocratic Cuban-born Goizueta, Ivester was a Georgia boy. A textile factory mechanic’s son, Ivester was raised in New Holland, Georgia, as a good, hard-working Southern Baptist. If he got an A, his father commented, “They give A-pluses, don’t they?” Ivester worked as a Kroger bag boy to pay his way through the University of Georgia. After auditing Coke’s books for an accounting firm, he joined the Company in 1979. Inside the Company, he was known as a reclusive workaholic. Like Robert Woodruff, he was childless, and some felt that he treated Coca-Cola as his love child. “His hobby is work,” observed one acquaintance. After a celebratory dinner with Ivester and the board, Goizueta called him at home at 9 p.m. and got his answering machine. Ivester had gone back to work until 11 p.m.

  But Ivester soon proved that he was not such a nerdy introvert. Indeed, his quiet manner hid a fierce competitive spirit. On October 25, 1994, Ivester gave his first speech to “InterBev94” in Atlanta, where the beverage industry held its annual convention that year. As Ivester took the stage, the lights dimmed and the baaing of sheep bleated over the loudspeakers. Videos showed panicked she
ep running back and forth, intercut with commercials from Pepsi, Gatorade, and other Coke competitors. In his speech, Ivester lambasted other soft drink firms. “Sheep are only comfortable right up against each other,” he said. “They are only capable of looking a few inches past their noses. When troubled, they cry loudly and back into each other.” Worst of all, he observed, they panic and engage in price wars that hurt everyone.

  But Ivester saved his utter contempt for the private-label soft drinks, which he called “parasites” who relied on the major brands to advertise for them. “The parasites in the soft drink world latch onto normal organisms,” he said. “They have never helped build the business, never created new products or packages, and have given nothing back to the community.” Their only positive attribute was that, in a Darwinian sense, they helped weed out the weaker sheep. Private-label parasites, Ivester observed, were losing ground in 1994, and he intended to make sure that trend continued, by being neither a sheep nor a parasite, but a wolf—noble, independent yet loyal, turf-oriented, and fond of mutton. “Are there any soft drink wolves?” Ivester asked rhetorically. “I hope you are looking at one now.”

  The new Coke president told his audience that it would be nice if he could earn their friendship, but that wasn’t really his priority. “This is what I really want,” he said, leaning forward. “I want your customers, I want your shelf space across the country, your share of customers’ stomachs, and I want every single bit of beverage growth potential that exists out there.” Ivester ended his dramatic speech with another question. “Will I act like a sheep, parasite, or a wolf? At the Coca-Cola Company, we answer it something like this.” Immediately, the auditorium resonated to the eerie sound of howling wolves.