Yet the feel-good torch relay was lurching towards catastrophe. On March 10, 2008, when Buddhist monks in Tibet protested the long-term Chinese occupation there, China cracked down hard, resulting in an estimated a hundred and forty deaths. Two weeks later, the torch run began in ancient Olympia in Greece, where pro-Tibet protestors disrupted a speech by a Chinese official. Similar protests plagued the relay in Istanbul, London, and Paris, as it pursued its twenty-one-stop, six-continent itinerary.
The torch, which was supposed to stand for world peace and unity, had become the center of raging controversy. Coke braced for its sole American stop in mid-April in San Francisco, where eighty runners would carry it, accompanied by a blue-clad Chinese paramilitary squad called the Flame Protection Unit. Trained in marksmanship, martial arts, and hand-to-hand combat, its members had roughed up some protestors in England, leading a British Olympics official to call them “thugs.”
Activists hanging a “Free Tibet” sign from the Golden Gate Bridge were arrested. Majora Carter, a forty-one-year-old environmental activist who had won a “genius award” from the MacArthur Foundation, was chosen by Coca-Cola as one of the runners (Coke was pushing its “green” initiatives). Surrounded by the blue Chinese guards, she carried the flaming torch aloft in her left hand, but as she jogged, she unfurled a Tibetan flag hidden up her right sleeve. She waved the flag for five seconds before a guard wrested it from her. The San Francisco police relieved her of the torch.
A Coke spokesman said, “It’s unfortunate that Ms. Carter used an invitation to participate in the torch relay as a platform to make a personal political statement.” Coke issued a carefully worded press release “expressing deep concern for the situation on the ground in Tibet,” but saying that it would be “inappropriate . . . to comment on the political situation of individual nations.” The Company reaffirmed its belief that “the Olympics are a force for good.”
That was just the beginning of the protests. At Coke’s annual shareholders meeting, held a week later, Lhadon Tethong, head of Students for a Free Tibet, begged Coke to alter the torch route so that it did not go through Tibet on its way to Beijing. “Coke will be underwriting bloodshed in Tibet.” The response: Coke had no control over the torch route.
Because China supplied weapons to Sudan, Dream for Darfur activists wanted Coke to disavow the “Genocide Olympics.” Actress Mia Farrow, speaking for Dream for Darfur, complained that Coca-Cola had “more feel-good slogans and songs than any other company” but refused to take a moral stand. Isdell and Kent pointed out that Coca-Cola had already spent $5 million on safe-water initiatives in Sudan and had promised an additional $7 million over the next three years for humanitarian efforts. “For an organization that has not eased the suffering of a single individual on the ground in Darfur to criticize those who are helping thousands every day is more than ironic,” a Company press release observed.
In April, a Chinese blogger posted a photograph of a 2003 German Coke advertisement showing three Buddhist monks on a roller coaster, with the slogan “Make It Real.” The blogger claimed that these were Tibetan monks, the roller coaster represented freedom, and the slogan meant that Tibet should “realize freedom now.” The web posting concluded, “Coke! Okay. I’ll remember this and won’t drink your crappy product.” Hundreds of Chinese called for a boycott as the misinformation spread.
Despite the protests from both sides, Muhtar Kent remained optimistic. “We know that the Olympics are going to be a turning point for China, its people, and a catalyst for our connection to these vibrant consumers,” he said. Coke issued Olympic-themed cans and bottles in Ethiopian, Russian, Thai, Mandarin, and other languages. For a set of commemorative bottles, Coke paired Chinese artists with global musicians to create a project dubbed WE8, standing for “West Meets East in 2008.” Collectors could buy the aluminum bottles and download corresponding tunes such as “Global Harmony.” During the Olympics, 10,000 people a day visited the Shuang Experience Center, sampling a perfectly chilled Coca-Cola, as did 26 million Chinese along the Olympic torch route in their country.
LEAN, EFFICIENT, AND AGGRESSIVELY HAPPY
As the recession deepened, Muhtar Kent announced plans to save $500 million a year by 2011 by becoming “more efficient, leaner and more adaptive to changing market conditions.” Coke would put the savings back into brand-building. Kent clamped a hiring freeze on North America, laid off some employees in information technology, and eliminated merit pay raises. He stressed efficiencies in the supply chain and encouraged green initiatives that got good press and saved money. Coke and its bottlers began a switch to hybrid vehicles. Thinner, lighter bottles reduced plastic and saved on shipping costs.
The fragmented bottler system was obviously in need of streamlining, especially with proliferating brands—Coke now owned over four hundred of them. After the failure of Lehman Brothers on September 15, 2008, the entire stock market fell off a cliff, with Coke shares declining back to $42. The following week, in Boca Raton, Florida, Kent called a meeting of the top forty Coca-Cola bottlers from around the world “to discuss the shared vision for the future.” With his extensive bottling-side experience, Kent had credibility and probably made forceful points—the meeting was not open to the media.
A month later, giant bottler Coca-Cola Enterprises axed 1,000 employees. As the recession deepened and sales declined in North America, CCE raised retail prices. Big Coke retaliated by charging CCE more for concentrate and cutting $35 million it had promised CCE for promotions. With tensions mounting, Coke and CCE negotiated, hammering out an agreement to consolidate some common supply chain activities and to negotiate mutually agreeable pricing.
The following year, PepsiCo bought its two largest franchise bottlers, which would eventually save hundreds of millions of dollars and allow Pepsi to respond more nimbly to changing market demands. CCE executive John Brock admitted that it would make Pepsi a “more formidable competitor.” Kent reiterated his faith in the bottler franchise system as Coke and CCE pursued “virtual integration” of some operations.
By January 2009, with the recession spreading worldwide, soft drink sales had declined for four consecutive years in the United States, and per capita consumption had been falling since peaking in 1998. Coke responded with a new global marketing campaign, “Open Happiness,” created by Wieden+Kennedy, to replace “Coke Side of Life.” It was a brilliant evolution from the Happiness Factory ad, and it showed that Joe Tripodi, Coke’s new chief marketing officer, had been boning up on Coke history and culture. “Our brand isn’t here to solve world peace or fix the economy,” he said. “We represent a small moment of pleasure in a sometimes very stressful or difficult day.” Just as “The Pause That Refreshes” had worked during the Great Depression, “Open Happiness” fit the global recession of the twenty-first century.
The ads all made the contour Coca-Cola bottle the central focus. In a spot called “Crave,” a young man on a sweltering day keeps seeing images of Coke bottles in shadows, building outlines, a park fountain, a bicycle, and the front grill of a car before quenching his thirst with an ice-cold Coke and an “ahhh,” which appears in skywriting as he walks outside. In another spot, two teens flirt silently in a library until the boy draws a Coke bottle on his arm, which dispenses into a glass the girl has scribbled on her arm. In “Heist,” a popular Super Bowl ad, an army of grasshoppers, yellow jackets, and dragonflies, directed by a ladybug, make off with a Coke bottle during a picnic.
The whimsical ads worked, provoking a smile and reminding viewers that Coke was a coveted beverage, an effervescent, inexpensive way to make them (and insects) happy. The ads also met Muhtar Kent’s mandate to economize. None of them used words, so they could be aired globally without modification, other than translating the tagline, “Open Happiness.”* Two months later, the Company released a pop song featuring Cee Lo Green and other rock stars singing “Open Happiness,” set to the lilting tune from the Coke ads but not referring to Coca-Cola in the lyrics, in imitati
on of “I’d Like to Teach the World to Sing” from 1971. With puerile feel-good lyrics (“It’s a brand new day, / Open up a little happiness today”), it rose to number 37 on the pop charts, nestled between Beyoncé and Pink, and was later released in other languages internationally. It became the most popular song in China.
The Company chose this opportune moment to drop “Classic” from the Coke name. It had been used only in the United States and was an unwelcome reminder of the 1985 New Coke disaster that had made the designation Coca-Cola Classic necessary.
The Company aired a Coke Zero ad during the 2009 Super Bowl, a remake of the classic Mean Joe Greene commercial. In this version, a boy offers wounded football player Troy Polamalu his Coke Zero. But before Polamalu can drink it, two Coke brand managers grab it, saying, “Coke Zero stole our taste; they are not stealing our commercial!” The football player tackles the brand man, then guzzles the drink, rips off the brand manager’s shirt, and tosses it to the kid. Very funny.
While admitting that 2009 was going to be a challenging year, Muhtar Kent insisted that it was an excellent time to “expand the base of the business,” since “the airwaves are less crowded and the media costs are lower.” As consumers economized (and obesity critics complained about oversized servings), Coke offered a sixteen-ounce bottle for ninety-nine cents as an alternative to the twenty-ounce top seller, whose $1-plus cost was hurting sales. It also introduced “mini-can” soft drinks containing ninety calories. The marketers hoped that consumers would not notice that Coke cost more per ounce in the smaller servings.
Coke promoted its energy drinks, with Full Throttle sponsoring drag races and NASCAR driver Kyle “Rowdy” Busch touting NOS. But Monster and Red Bull dominated the category, with Rockstar a distant third and Coke’s two brands lagging far behind. Coca-Cola consequently made a deal to distribute Monster, terminating its previous deal with Rockstar. Meantime, 5-Hour Energy was making inroads as a small two-ounce “shot” of caffeine and vitamins. Students willingly shelled out $3 for the foul-tasting brew, which cost twenty times more per ounce than Coca-Cola. Coke responded with an NOS-branded energy shot.
To counter Pepsi’s bottled Frappuccino success, Coke partnered with Italian espresso-maker illy to create a ready-to-drink coffee, illy Issimo, introducing it in Whole Foods outlets. Coke had bombed with Planet Java and Coca-Cola Blak, however, and was only cautiously promoting this new canned coffee. Trying to jump-start its ailing Nestea sales, the Company sponsored CTRL, an Internet “webisode” series produced by NBC Universal Digital Studio in which a downtrodden office worker discovers that, by drinking Nestea and using his computer, he can move back in time, become invisible, and read other people’s minds. Nestea, billed as “Liquid Awesomeness,” was integral to the plot, but CTRL failed to produce awesome new sales.
More promising was Coke’s field test of its Freestyle vending machine, which it touted as the “fountain of the future.” The cooler, whose sleek exterior was created by an Italian car designer, allowed consumers to create over a hundred custom-made beverages with a touch screen; they could ask, for instance, for a peach Coke, raspberry Coke Zero, lime Powerade, strawberry Sprite, or vanilla Fanta, and it would squirt into a paper cup. The top-secret project, code-named “Jet” in 2005, became public when Coke began to test-market it late in 2008 at Willy’s Mexicana Grill in metro Atlanta. Early results were promising, with people lining up to try the Freestyle. On a hidden video camera, one woman was captured kissing the machine. In 2009, Coke tested more Freestyles in Atlanta and Southern California restaurants.
2020 VISION
The annual Coca-Cola shareholders meeting of April 2009 was held at the Gwinnett Center just north of Atlanta so that local investors could celebrate the final transition of power. Neville Isdell retired as chair of the board, handing that mantle to CEO Muhtar Kent, who now ruled alone. Isdell was pleased to leave the Company in good shape. “The car is back on the road and going forward,” he said. “Muhtar has to make it go faster.” Isdell looked back on his career with satisfaction. “I have visited 145 countries, met and supped with men and women of history, and, just as important, spent time with people of many cultures at every level of economic status. . . . I have truly lived on the Coke side of life—happy, optimistic, and to the degree that it is in any way possible, innocent.”
Not everyone agreed. At the Coke shareholders meeting, Ray Rogers popped up as usual to denounce Coke executives as “among the world’s worst liars, scam artists, and white-collar criminals,” adding assertions that included Chinese workers being overworked and underpaid and accusations of murder and intimidation of Colombian union employees. Outside a protest sign advised, “Don’t Drink Killer Coke Zero. Zero Ethics! Zero Justice! Zero Health!”
Kent didn’t appear to be rattled. He was more concerned that first-quarter revenue had fallen 3 percent, with a stronger dollar hurting international profits. The North American volume was down 2 percent, but global sales were up 2 percent. “This business was built for times like these,” Kent said. The Open Happiness campaign was just getting started. Don’t worry, be happy!
As 2009 progressed, Kent’s optimism seemed justified. When the Chinese government nixed an attempted Coca-Cola purchase of Huiyuan Juice Group, Coke instead promoted its Minute Maid brands more heavily with flavors such as grape with aloe, pitched in TV ads by Hong Kong pop singer Eason Chan. Another new drink, Minute Maid Pulpy Super Milky, a dairy-juice combo with coconut bits, was an instant hit. The Company introduced Vitaminwater in China. Coke Zero not only sponsored the Chinese version of the popular Aion Internet fantasy but also embedded a Coke character in the game. Sprite was the top-selling soft drink in China. Kent announced that Coke would invest an additional $2 billion in the Chinese market over the next three years.
Coke launched other drinks tailored for specific countries. In Indonesia, for instance, it promoted Frestea Green My Body, in flavors of aloe vera/orange blossom or ginger/ ginseng, targeting active, hip twenty-somethings. In Japan, I LOHAS bottled-water ads showed a lightweight bottle (ecoru shiboru, “environmental squeeze”) twisted to reduce size for easy recycling. In Russia, the Company sold Rich, a pureed fruit drink squeezed from a tube like toothpaste, and Krushka & Bochka Kvass, its version of the classic beverage made from fermented rye bread. In western Europe, Coke bought Abbey Well bottled water; took part ownership of Innocent Drinks, a smoothie and juice brand; and introduced 4-ounce Burn Energy Shots. In Mexico, where per capital consumption of Coke products reached an unbelievable six hundred and sixty-five 8-ounce servings, the Company planned to invest another $5 billion over the next five years. Coke’s Del Valle juice brands sold throughout Latin America. In Africa, Coke committed $12 billion over the next decade.
In the United States, Coke’s premium not-from-concentrate juice brands—Simply Orange, Simply Lemonade, Simply Apple, and others—breached the magic $1 billion annual sales level. Coke Zero continued, for the fourth year, to deliver double-digit volume growth in North America and launched global co-promotional campaigns with the James Bond flick Quantum of Silence and with Avatar, the epic science fiction film that broke box office records. Coke Zero was now available in 133 markets around the world.
Coke’s aggressive marketing hype harvested lawsuits as well as sales. An Australian panel said Coke had misled consumers with ads assuring them that Coke products wouldn’t make them fat or rot their teeth. Under the so-called Jelly Bean rule, which held that it wasn’t legitimate to fortify junk foods, the FDA asserted that Diet Coke Plus (with vitamins) was mislabeled, and two New Jersey consumers sued, complaining that the drink was not healthy as implied. Coke prevailed. Its Powerade Ion-4 sports drink with additional electrolytes claimed superiority over Gatorade: “Don’t settle for an incomplete sports drink.” Pepsi sued and lost, but Coke withdrew the ads anyway. Coke’s Vitaminwater also squared off against Gatorade, with ads showing football players dumping a bucket of Gatorade, with the caption “Out with the old . . . in with th
e new.”
The Center for Science in the Public Interest filed a class-action lawsuit over Coke’s health claims for Vitaminwater, calling it “snake oil” and “sugar water” and pointing out that a twenty-ounce bottle contained eight teaspoons of sugar and a hundred and twenty-five calories. “Vitamins + water = all you need” on the label was deceptive, as was the name itself. It would be more accurate to call it Vitaminsugarwater. Vitaminwater varieties such as Defense, Revive, Endurance, and Focus claimed to boost the immune system, promote healthy joints, reduce the risk of eye disease, or improve mental focus. So did Pepsi’s SoBe Lifewater brands, such as B-Strong, Electrify, and Immunity, but CSPI sued only Coca-Cola because it was the segment leader. The lawsuit would remain unresolved for years.
Meanwhile, Coke attracted devoted followers without even trying. In August 2008, Dusty Sorg, a twenty-nine-year-old aspiring Los Angeles actor, created a Facebook page for his favorite drink. Within a month, his Coke page had 750,000 friends, and by the spring of 2009, it had 3.3 million fans, second only to President Barack Obama’s Facebook page, with its 6 million followers. As the Sorg-created page grew, Facebook administrators flagged the site for obscenities and asked Coca-Cola to take it over. Not wanting the Company to be seen as a heavy-handed corporate bully, Coke marketing men invited Sorg to Atlanta and made a deal. Sorg would continue to run the site. Coke would monitor for obscenities or nude photos but would not even censor pro-Pepsi comments. The Company would, however, post “new opportunities” for products, promotions, and events on the site.
In 2009, global sales volume increased by 3 percent and for the first time Coca-Cola cleared over $8 billion in cash profit. The Company used $1.5 billion to repurchase its own stock, with shares climbing close to $60 in December. The previous month, Muhtar Kent hosted an elaborate two-day presentation for analysts, journalists, and top investors, capped by a gourmet meal incorporating Coca-Cola as a key ingredient, washed down by a sampling of foreign Coke beverages and Freestyle vending machine choices. Kent and his key executives offered their “2020 Vision,” with a key goal of doubling Coca-Cola Company sales volume to over 3 billion servings a day.
For God, Country, and Coca-Cola Page 76
