For God, Country, and Coca-Cola

by Mark Pendergrast

  In 2009, a much more serious threat surfaced. The Senate Finance Committee discussed a possible tax on sweetened soft drinks as a way to help pay for health care reform. The Center for Science in the Public Interest proposed a twelve-cent tax on twelve-ounce sodas, estimating that it would generate $160 billion in the next decade. The idea was to raise money for good causes while reducing obesity through lower consumption.

  A study conducted in 2008 by the Harvard School of Public Health showed that soft drink purchases at Boston’s Brigham and Women’s Hospital declined 26 percent when prices on soft drinks were raised by 35 percent. An educational campaign at the hospital by itself had little impact, but combined with price hikes, it further reduced consumption. “A very aggressive response—such as a notable increase in the price of soda—may be needed to steer people toward healthier options,” concluded Dr. Jason Block, who conducted the research.

  The aggressive response instead came from Coca-Cola, which ramped up its budget to lobby the federal government from around $3 million in 2008 to over $12 million in 2009. Coke also provided funding for the American Beverage Association (ABA), the soft drink trade group, and Americans Against Food Taxes, a corporate front group that ran television ads against the regressive “sin tax” that would hit low-income consumers the hardest.

  The federal soda tax went nowhere, as did most state efforts. In 2010, New York Governor David Paterson proposed a penny-per-ounce soda tax, but under pressure he backed off. The New York State Assembly Rules Committee submitted a similar bill. The ABA mounted an ad blitz on radio, television, and newspapers, and the bill was defeated. In June 2010, the Washington state legislature passed a budget-balancing bill that included a two-cent tax on twelve-ounce sweetened beverages. Within three months, the Stop the Food & Beverage Tax Hikes coalition (funded by the ABA) gathered enough signatures to put Initiative 1107, a repeal proposition, on the ballot that November. The ABA spent nearly $17 million pushing for its passage, and the soda tax disappeared. Similar efforts to tax soft drinks in the District of Columbia, Texas, Kansas, Hawaii, Mississippi, Philadelphia, and elsewhere were defeated.

  Despite massive lobbying, a two cents-per-bottle tax on soda, water, and beer miraculously passed in June 2010 in Baltimore, Maryland. The ABA spokesman wasn’t too upset, observing that the tax would expire in three years, “so you couldn’t call it a complete loss.” Coke could console itself, however, that the Save the Children organization, which had pushed for a soft drink tax to prevent childhood obesity, reversed itself in October 2010. The non-profit said that the policy change had nothing to do with its discussions with Coca-Cola about a major grant. The following year, the Coca-Cola Foundation gave Save the Children $75,000 for safe-water programs.

  HAPPINESS AMBASSADORS

  As these controversies swirled in 2010, three young people were making a mad dash around the world as “Happiness Ambassadors” for Coca-Cola. The idea behind Expedition 206 was for the three Coke representatives to travel to all two hundred and six countries and territories in which Coke sold products. As part of the Open Happiness campaign, in each locale, armed with laptops, iPhones, Blackberries, and video cameras, they asked natives deeply meaningful questions such as “What makes you happy?” and “What do you like to do for fun?”

  From the outset, Coke marketers sought online consumer involvement, with citizens of a hundred and fifty countries voting to pick the winners—Tony Martin, thirty, an American teaching kindergarten in Germany; Kelly Ferris, twenty-three, a university student from Brussels; and Antonio Santiago, twenty-four, a university student from Mexico City. Coke then took online suggestions about where to go and what to do. As they toured the world, the three Happiness Ambassadors posted on Expedition206.com and Coke’s Facebook page, which now had over five million fans; sent brief Twitter updates; and uploaded YouTube videos.

  While it was difficult to measure the program’s impact on sales, it got plenty of attention, both on the ground and in cyberspace, racking up 6.5 million media mentions around the globe. In China, 1 billion online followers traded digital Expedition 206 stamps. The ever-smiling Coke ambassadors were building “brand love,” as Coke marketers put it. By the time they arrived back at Atlanta’s World of Coca-Cola on December 29, 2010, the three representatives were exhausted but apparently still friends. They had visited a mere 186 countries, bypassing security risks such as Somalia, Iraq, and Afghanistan, and missing others because of weather or logistics. Still, they had covered 275,000 miles. And what did they learn? Family, food, drink, and soccer (not necessarily in that order) were what made people happy.

  “We did something we’d never done before,” said Clyde Tuggle, Coke’s chief PR man. “We basically turned over the public relations for our brand to the consumers.” Ha. The trip was, of course, tightly choreographed and planned to garner as much positive publicity for Coca-Cola as possible. Yet Tuggle had a point. Coke was pioneering a new marketing approach. The Happiness Ambassadors were part of many Coke efforts to involve consumers interactively. For instance, in 2010 Sprite launched its first global marketing campaign, allowing online fans to remix and mash up songs and to create their own short animated movies.

  The Sprite campaign was aimed at teenagers, who would make up a third of the world’s population by 2020. “Our success in growing our sparkling category today depends on our ability to grow and connect with teens, the generation of tomorrow,” Muhtar Kent emphasized. The following year, a global Coca-Cola Music teen campaign launched with “24hr Session,” in which American pop band Maroon 5 holed up in a London studio and, with input from fans around the world, wrote a song downloadable for free from the Coke website, called “Is Anybody Out There?” Coca-Cola knew that plenty of adolescent listeners were out there. “You’re exactly what I wanted,” sang the band, “and exactly what I need.” Coke wanted that sentiment to apply to its products.

  For the first 100,000 downloads, Coke made a donation to its African safe-water initiative, linking its marketing to do-good efforts. Similarly, the Happiness Ambassadors had visited the 2010 Winter Olympics in Vancouver, calling attention to Coke’s much-touted “zero waste” Olympic presence. All Coke products, sold in PlantBottles, were delivered by hybrid trucks and electric carts to HFC-free coolers. Compactors mashed empties on site for quick delivery to a recycling facility that turned them into clothing donated to a homeless shelter, and all Coke staff wore such recycled-bottle shirts.

  The three Happiness Ambassadors showed up that summer in South Africa at the 2010 World Cup, where Coke mounted “the biggest integrated marketing campaign executed by any company in the world,” according to Joe Tripodi, Coke’s marketing chief. The effort grew out of a song by K’naan, a singer/songwriter born in 1978 in Somalia as Keinan Abdi Warsame. He fled the war-torn country for Canada at age thirteen and later wrote “Wavin’ Flag,” a bittersweet song about his hopes for his native land: “We struggling, fighting to eat, / And we wondering, when we’ll be free. . . . When I get older, I will be stronger, / They’ll call me Freedom, Just like a wavin’ flag.”

  Coke’s admen loved the song’s jaunty beat and refrain, and the “oh-oh-oh-oh-oh” chorus suggested “Open Happiness.” They paid K’naan to revise the lyrics to match the upbeat “Celebration” theme they had chosen for the World Cup: “In the streets our heads are liftin’, / As we lose our inhibition. / Celebration, it surrounds us, / Every nation all around us. . . . When I get older, I will be stronger, / They’ll call me Freedom, Just like a wavin’ flag.”

  The song, which didn’t mention Coca-Cola in the lyrics, became a sensation, with Coke producing versions incorporating seventeen different local languages, rock stars, and sexy dancers, though they all began with a Coke-emblazoned soccer ball and K’naan singing. Clearly identified with Coke, the song hit number one in Mexico, Austria, China, Germany, and Switzerland, and was among the top pop songs around the world. Before the competition, K’naan traveled with the solid gold World Cup trophy to eighty-four co
untries, singing for Coke.

  With 26 billion viewers, the World Cup commanded a larger world audience than the Olympics and many times more than the Super Bowl. Soccer, as the Happiness Ambassadors had documented, made people happy, at least when their team won. Coke also recycled footage from the 1990 World Cup, in which Roger Milla of the Cameroons performed a spontaneous celebratory dance. The Company found the now-bald Milla and showed him drinking Coke in the stands in a commercial highlighting celebratory soccer dances. Powerade got its share of World Cup attention, too, with its first global marketing campaign.

  “We’re not doing this because we love soccer,” Joe Tripodi admitted. “We’re doing this because we think soccer is the best conduit” for what he called Coke’s “visual identity system,” combining energy, rhythm, celebration, and happiness—with Coke at the center. “We wanted to make sure we had some kind of sustainability angle,” so Coke gave money to the player deemed to have the best goal celebration in each match for him to donate to an African school for a safe-water project. “We have a simple story, compelling and authentic,” Tripodi said, “that we’ve scaled around the world.” He called this approach “liquid and linked”—liquid because it could flow in so many directions, and linked because the celebration theme was common to all stories.

  FIXING NORTH AMERICA

  Although Coke was fizzing internationally, rejuvenating the North American market remained Muhtar Kent’s biggest challenge. In 2009, carbonated soft drinks had declined for the fifth straight year in this market. In the first quarter of 2010, Coke’s worldwide sales volume was up 3 percent, but it fell 2 percent in North America. “Growing here is not optional,” said Kent. “It is essential to the health and future of our entire global system.”

  As part of the cure, Kent shocked analysts, revealing in late February 2010 that The Coca-Cola Company had negotiated an epochal $12.3 billion dollar deal to purchase Coca-Cola Enterprises in North America. When Pepsi had bought out its two biggest bottlers the previous year, Kent had emphasized his commitment to the franchise bottling system, but now he seemed to be reversing himself. “We are still ardent believers in our franchise system,” he insisted. “The Coca-Cola Company will work closely with its bottling partners to create an evolved franchise structure for the unique needs of the North American market.” Perhaps he meant that Big Coke intended to fix the bottling system and spin it off to franchisees again in a few years. By eliminating duplication and streamlining delivery systems, Coke estimated that it would save $350 million over four years. When the deal was completed, CCE’s 59,000 employees in North America began working for Big Coke in the newly named Coca-Cola Refreshments division. The merger went remarkably smoothly, with few job losses. The deal allowed CCE to retain its thriving European Coke bottlers, acquiring those in Norway and Sweden from Big Coke, with the right to buy German operations in the future.

  With full control over most of its distribution in the United States, Coca-Cola focused on filling not only every nook, but also every appropriate cranny for its products. Sure, Coke and Sprite dominated the beverage aisle in the supermarket, but Dasani might be in the produce section, Vitaminwater on the organic food shelf, Diet Coke in a pharmacy cooler, and Fanta in dollar stores. To facilitate impulse buying, Coke wanted its drinks to be in the deli department or near pre-made dinners. Coke store reps had to fill out a Right Execution Daily (RED) form for scoring by a district manager.

  The CCE merger allowed Coke to rush new North American drinks into the market, and Coke’s Venturing and Emerging Brands (VEB) team hoped to supply them. Deryck van Rensburg, the South African native who headed the 15-member team, stressed that VEB was trying “to identify the next big thing” by importing other promising Coke products from overseas and by partnering with nimble entrepreneurs outside the Company. One might be the next billion-dollar-a-year brand, but most would remain niche players. With over 3,500 non-alcoholic beverages in the United States alone, and some 300 new brands introduced each year, the choices were mind-boggling. VEB was responsible for illy Issimo canned coffee and for the importation of Russian kvass; Vio, a carbonated skim milk; Cascal, a fermented French soda with cherry and currant flavors; Relentless, a British energy drink aimed at white-collar workers; and Sokenbicha, a Japanese blended no-calorie tea. VEB facilitated the partial purchase of Zico coconut water.

  VEB’s most successful venture thus far was Coke’s stake in Honest Tea, which the Company later bought outright. Aside from helping with distribution, Coke took a hands-off approach to such purchases, retaining founder Seth Goldman as head of Honest Tea. A problem arose, however, over his label’s prominent claim, “No High-Fructose Corn Syrup,” the sweetener used in Coca-Cola. Big Coke objected to the implied criticism of its sweetener, since HFCS is virtually identical to cane sugar, chemically speaking. Goldman refused to change the label, and Coke backed down.

  In his 2006 book, The Omnivore’s Dilemma, Michael Pollan observed that “productive and protean” corn was processed into various additives to our food, but HFCS was the most valuable, with the average American consuming sixty-five pounds a year. “We subsidize high-fructose corn syrup in this country,” he noted, “but not carrots.” Though HFCS and sugar were equally culpable for the obesity epidemic, many consumers preferred “natural” sugar to processed corn sweetener. Both Coke and Pepsi were in pursuit of the “holy grail” of a natural low-calorie sweetener, but the best option, stevia, left a bitter aftertaste, so it was used only in select drinks, such as Powerade Play and Vitaminwater Zero.

  Even without a more effective sweetener, the North American market finally turned the corner in the second quarter of 2010, posting 2 percent growth. “It’s not an aberration,” Kent insisted. “We’ve been working on this for two years. I was totally confident it would come.” When the next quarter yielded similar results, the Coke CEO crowed, “People once again believe in our business in North America.”

  Even when he traveled, Kent always kept a sheet of paper with recent sales trends for Coca-Cola, Sprite, energy drinks, sports drinks, juices, coffees, teas, and other drinks. “For the first time in a long time, there’s no red on that sheet,” he said in February 2011. For the third quarter, North American sales were up. “Two years ago, when we talked of growth in the U.S., people thought I was trying to go to the moon in a glider,” Kent gloated.

  WINNING THE COLA WAR

  In March 2011, when Beverage Digest, a soft drink trade journal, published its annual soda ranking, Diet Coke had surpassed Pepsi to become the number two soft drink in the United States. Even though the sales for Coca-Cola, the leader, had dipped by 0.5 percent in 2010, and Diet Coke by 1 point, sales of Pepsi had declined 4.8 percent. It was a humiliating result for the perennial runner-up. “Pepsi lost the cola war last week,” Advertising Age announced.

  As Coca-Cola prepared to celebrate the one hundred and twenty-fifth anniversary of the first serving of Pemberton’s Coca-Cola at Jacobs Pharmacy on May 8, 1886, the resurgent Company once again appeared to be an unstoppable juggernaut. That week, when U.S. Navy Seals killed Osama bin Laden, they discovered that he drank Coca-Cola in his bunker.

  To kick offthe May 2011 anniversary, Coke sold commemorative bottles along with an ad campaign to celebrate “125 years of sharing happiness,” 125 days of free prizes through MyCokeRewards.com, and a celebratory message during the 125th lap of the Coca-Cola 600 NASCAR race. Coke draped its twenty-six-story North Avenue tower in Atlanta in white sheets, then put on a light show, turning the building into a giant cup of ice being filled with Coca-Cola, followed by classic advertisements.

  For the rest of 2011, the Company surged on. Polishing its halo, it created a $31 million Coca-Cola Japan Reconstruction Fund after the earthquake/tsunami. In partnership with the World Wildlife Fund, it committed $2 million to help protect polar bear habitat and vowed to match an addition $1 million in consumer donations.*

  Two more Coke brands crested the annual billion-dollar-sales mark: Del Valle a
nd Minute Maid Pulpy, the first such huge seller originating in China, an emerging market. Coke launched a global campaign to sell Fanta, already a $12 billion-a-year brand, to teenagers, featuring cartoon multicultural characters and the slogan “More Fanta, Less Serious.” The admen stressed that they were basically storytellers, and in this case, the story was playfulness.

  During the year, over fifteen hundred futuristic Freestyle vending machines, now offering a hundred and twenty-five flavors, expanded into eighty U.S. markets, sending back daily data about consumer choice. A fifth of those surveyed said that they would switch restaurants or convenience stores to use the Freestyle.

  The Coca-Cola Company was no longer merely a soft drink business. In December 2011, when Coke paid nearly $1 billion for half of Aujan Industries, a Saudi Arabian company that made Rani, a line of fruit drinks, such purchases had become almost routine. Around the world, the Company sold thirty-five hundred non-alcoholic beverages with five hundred brands, three times as many as ten years before.

  The corporation was moving beyond the cola wars, but the Coke brand remained iconic, and the storyline for the flagship brand was happiness. “If you’re able to own that emotion in people’s mindspace, that’s a very power thing,” observed Joe Tripodi. In a brilliant move, at the end of 2011 the Company moved the Coca-Cola formula from the SunTrust bank, where it had resided since 1925, to a vault inside the World of Coca-Cola Museum. That would, as Muhtar Kent put it, “unlock some of that magic” associated with the formula, reinforcing its sacred status. By year’s end, Coke’s Facebook page had over thirty million fans, a number that would nearly double in the next twelve months.