9.Advertise an image, not a product. As one Coke advertiser liked to remind his creative staff, “We’re selling smoke. They’re drinking the image, not the product.” It was Archie Lee who established a golden age of Coke advertising in the 1920s and 1930s after watching his four-year-old daughter and her friends fighting over her old stuffed Pooh bear. “It isn’t what a product is,” Lee concluded, “but what it does.” Lee positioned Coca-Cola as a gracious product, “the pause that refreshes,” providing a social binder. People who drank Coke were always happy, energetic, wholesome, and friendly. With variations, other advertising greats later embellished that message.
10.Welcome an arch-rival. Although some Coke employees might not like to admit it, Pepsi has been good for Coca-Cola. “If Pepsi-Cola didn’t exist, I would try to invent it,” Roberto Goizueta once said. “It keeps us, and them, on our toes and keeps us lean. We’re magnificent competitors.” People love stories from the “cola wars,” and wise marketers from both companies recognize that the publicity fostered by fierce competition is good for sales, regardless of which company appears to be winning an individual battle.
11.Use celebrity endorsements wisely—but sparingly. From its earliest years, Coca-Cola hired celebrity sponsors, hoping that consumers would identify with baseball great Ty Cobb or actress Hilda Clark. By the 1930s, movie stars from Clark Gable and Cary Grant to Jean Harlow and Joan Crawford were pushing Coke, and in the late 1960s singers ranging from Neil Diamond and Leslie Gore to Ray Charles and Aretha Franklin crooned that things went better with the soft drink. There are dangers, however, in relying too heavily on celebrity endorsements. For one thing, viewers may remember more about the star than the product. Coca-Cola has always remained the real star of its commercials.
12.When you do use celebrities, use some local celebs. While you make a universal appeal, use selected local musicians and actors to promote your product. During the 2010 World Cup, Coke adapted the “Wavin’ Flag” song with K’naan in seventeen different local languages, using appropriate national rock stars and sexy dancers, though they all began with a Coke-emblazoned soccer ball and K’naan singing.
13.Appeal to universal human desires. Ever since the 1950s, Coke has created “pattern advertising” that, with little or no modification, can appeal to any culture in the world. Nowadays Coke marketers call the approach being “liquid and linked.” The Coke message has universal appeal—by drinking this product, you will be self-assured, happy, popular, sexy, youthful, and well coordinated. To reinforce the message, Coke sponsors every sporting event imaginable, from sumo to soccer, as well as musical extravaganzas around the globe.
14.Get ’em young. Of course, the sports and music promotions are meant to engage teenagers, among others. Obviously, if you can achieve loyalty among youthful consumers, you’ve possibly fostered lifelong consumption. In 1894, Coca-Cola postcards depicted three sailor-suited five-year-old boys proclaiming, “We drink Coca-Cola.” After the U.S. government sued the Company in 1911—partly because it provided caffeine, an addictive drug, to children—the Company halted all overt advertising to anyone under twelve. This did not stop bottlers from giving away free tablets and rulers with an engraved logo, nor did it prevent Coca-Cola from co-opting the image of Santa Claus in the 1930s, firmly establishing him as a fat, jolly gentleman clad in Coca-Cola red, with a decided preference for the proper soft drink.
15.Develop cultural sensitivity. If you intend to sell your product around the world, do not trap yourself in an “Ugly American” image. In the 1920s when Robert Woodruff authorized the drink’s global spread, he attempted to make the drink a German drink in Germany, a French drink in France. The company signed bottling contracts with prominent natives and encouraged the development of a soft drink infrastructure so that the trucks, bottles, pallets, and signs were all produced by local firms. The only thing the company typically sold, and the only thing that had to be imported, was the Coca-Cola concentrate. Thus, the company could proudly and accurately point out how much it contributed to local economies. Through the years, Coca-Cola has developed a group of savvy, culturally sensitive managers from all parts of the world, transferring them frequently in an attempt to transfuse universal Coke values while at the same time providing a broader background for the managers.
16.Hire aggressive lawyers. If you succeed, you will undoubtedly need lawyers to protect your trademark, defend your good name, and scare off potential competitors. Coca-Cola lawyer Harold Hirsch practically invented modern trademark-patent law. Before and after World War II, Coca-Cola hired local attorneys throughout the world in an attempt to stifle imitators and competitors and to defend the company against widespread rumors about its ill effects on health. Coke remains one of the more litigious companies.
17.Don’t break the law. Although Coca-Cola officials or bottlers have indeed resorted to bribery and kickbacks in the past—and, according to some allegations, bottlers have hired paramilitaries in Latin America to eliminate unionized employees—the company does, by and large, live up to its squeaky-clean image. There is no percentage in illegal activities that could besmirch the company’s good name. It simply isn’t worth it to risk the reputation of a huge multinational concern.
18.Become masters of influence. Just because you don’t break the law doesn’t mean you must sit back and act like an angel. Robert Woodruff was a master of backroom influence. He practically owned Georgia Senator Walter George and Atlanta Mayor William B. Hartsfield. Woodruff befriended presidents. In fact, he and his cronies arguably created President Dwight D. Eisenhower, even helping him decide whether to run as a Republican or a Democrat. Similarly, Coke CEO Paul Austin gave Jimmy Carter a crucial boost into the White House. Do not, however, abuse your influence by asking too much of politicians. Just clarify that your product’s spread serves the national interest. You don’t even need to ask for specific help. The mere impression that Coca-Cola chummed with Carter was, for instance, enough to open doors.
19.Be patient but implacable. Plan for the long haul. Coca-Cola managers know that they will ultimately sell their fizzy product in every country in the world. It is only a matter of time. There will be temporary setbacks due to war, famine, or politics, but they will always maintain contacts, always remain civil, always be prepared to take advantage of any situation. Thus, when the Arabs boycotted the company in the 1960s because Coke allowed an Israeli franchise, Coca-Cola immediately began a campaign of re-entry that paid off in Egypt during the Carter administration. Similarly, Coca-Cola is back in India following the 1977 expulsion. Ditto China, the former USSR, Nicaragua, Vietnam, and Myanmar. Some day, Cuba and North Korea. Do not be seduced into pursuing short-term gains at the expense of long-term vision. There will be bumps along the road, but set your goals on the horizon.
20.Adhere to simple commandments. None of Robert Woodruff’s guiding principles—many enumerated here—were terribly complicated. Woodruff himself was practically illiterate; according to associates, he never finished a book in his life. His genius lay in looking at the big picture and in concentrating on a few elemental truths.
21.Be flexible enough to change. You must strike a balance between tradition and change. If Coca-Cola has ever displayed an Achilles’ heel, its reluctance to adjust to current conditions is it. Asa Candler almost delayed too long before removing the last trace of cocaine from the drink. Woodruff fought hard against producing the King Size Coke of the 1950s, against bringing out other flavors, against using rock music in ads, against lifting the nickel price barrier—all necessary changes. Roberto Goizueta, determined to shake up the staid company in the 1980s, believed in the necessity of change, and was proved correct when he authorized the introduction of Diet Coke, a heretical product because it assumed the sacred Coke name. When he tampered with the original formula in the 1985 New Coke debacle, however, Goizueta was flexible enough to change back in time to avert disaster. To maintain this valuable flexibility, a certain amount of neurosis helps. “The world belongs
to the discontented,” Woodruff liked to say.
22.Don’t use defensive, negative advertising. Maybe for an Avis or a Pepsi, comparative ads make sense. Maybe. You’re still giving your opponent free publicity, however. Every time Coke has stooped to such tactics, it has looked silly, including Asa Candler’s attempts to justify caffeine’s presence in the drink. When Coke mocked the Pepsi Challenge taste tests by showing chimpanzees trying to decide which tennis balls were fuzzier, the Atlanta firm looked like the choice chump, not the chimps.
23.Diversify only when necessary. When Roberto Goizueta took over as CEO in 1981, he diversified by purchasing Columbia Pictures, a move that made sense at the time. Before the decade was out, however, he unloaded it on Sony for a healthy profit and refocused solely on beverages. Coca-Cola, whose stock performance has been historically extraordinary, is one of the least diversified companies in the world. “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,” Goizueta used to say. But that’s silly when soft drinks offer a better profit margin than any alternatives.
24.Pay attention to the bottom line. This seems such an obvious point, yet until Goizueta arrived it wasn’t something anybody at Coke thought much about. In the paranoid anti-Pepsi culture, Coke men were more concerned with share-of-market figures than with profits. Goizueta discovered, among other things, that the highly regarded soda fountain sector was actually losing money because of costly capital expenditures on metal five-gallon drums.
25.Terrify your employees. Perhaps that’s putting it a bit strong, but traditional Coca-Cola CEOs from Asa Candler to the present have encouraged a climate of respect and awe. Austere Paul Austin put it well: “A certain degree of anxiety and tension has to exist for people to function at the highest level of their potential.” Certainly, Woodruff the Boss inspired terror and adoration. Neville Isdell and Muhtar Kent were warmer individuals, and Don Keough was a backslapper, but it was not wise to cross any of them.
26.Promote from within. The best Coca-Cola managers, almost without exception, have come up through the ranks, inculcated with the Company mission. They have received the transfusion of Coke syrup. Grooming for management traditionally included a form of Coca-Cola boot camp, inductees emerging from a day on the bottling line with bloody knuckles and aching backs. Don Keough arrived at Coke in the 1960s along with Duncan Foods, but it was twenty years before he achieved high status at the company, by which time he sounded more like a traditional soft drink man than anyone. It was Neville Isdell, a Coke veteran, who came out of retirement in 2004 to turn the company around.
27.Recognize that all publicity is good publicity—at least when there is enough residual goodwill. Because Coca-Cola already meant so much to so many, the 1985 flavor change actually helped the Company, even though it blew $4 million in the process. When management bowed to public pressure and brought back Coca-Cola Classic, the encore beverage scored heavily against Pepsi. This was the same drink that had been steadily losing market share for twenty years prior to New Coke. The experience of nearly losing their old friend caused many consumers to renew their loyalty to Coke—so that many observers thought that Goizueta and the Company had stage-managed the whole affair. As Don Keough admitted, they weren’t that smart, but they did learn that even negative publicity can ultimately help a well-entrenched product.
28.Use cash wisely. Robert Woodruff, scared by the debt he inherited in 1923 when he took over the company, took great pride in accumulating a cash hoard. Consequently, the conservatively run company was never in danger of being over-leveraged. Under Goizueta, however, the company finally took on a reasonable debt load. With bottom-line logic, Goizueta and financial wizard Doug Ivester realized that it made sense to borrow money if it could then be reinvested at a substantially higher rate of return. One simple method: repurchase your own stock, thereby driving the price further up. Under Neville Isdell and Muhtar Kent, Coke used its cash to buy into other thriving beverages.
29.Form joint ventures. Another wise use of cash involved breaking a long-standing Company commandment: thou shalt not own bottling plants. Ever since Asa Candler gave away the bottling rights in 1899, the Company had viewed itself primarily as a syrup spigot. The bottlers, whose profit margin was narrower than the Company’s, prospered on their own. The Company owned selected plants, but only to serve as training grounds for rotating managers, and these plants never did very well. The conventional wisdom held that bottlers performed better as independent entrepreneurs. In 1981, Goizueta was forced to break this taboo in the Philippines, where Pepsi had chewed off 70 percent of the cola market. By purchasing 30 percent of the franchise, the Company negotiated the right to manage the bottling. Within a few years, Neville Isdell, using traditional, aggressive motivation and marketing tactics, turned the market share numbers on their head. Taking the Philippines as a precedent, Goizueta and Ivester pursued successful joint ventures around the world. In 2010, Muhtar Kent negotiated the Coke purchase of anchor bottler Coca-Cola Enterprises in North America.
30.Think globally, but act locally. This catchphrase originated with Goizueta, though other CEOs snapped it up in the trendy 1980s and used it as their own. Regardless of the phrase’s provenance, Coca-Cola demonstrated its wisdom, dipping into the Company’s own history for guidance. In China and Indonesia, for instance, the first task involved building a strong infrastructure—concentrate factories, glass manufacturers, bottling plants, trucks, point-of-purchase signage—in American terms, time-warping back to 1905. In the former West Germany and Japan, on the other hand, the Company already had a well-established business, but, as in the United States of the 1970s, too many bottlers were vying in small territories. The task there was to consolidate.
31.Pursue the halo effect. In the troubled early 1970s, Coke CEO Paul Austin tried to create what he termed “the halo effect” for Coca-Cola. By that, he meant that the firm should appear to be in the vanguard of the environmental movement and progressive in race relations, setting up model programs for its Minute Maid migrant workers and creating nutritional soft drinks. None of Austin’s ancillary do-good businesses ever amounted to much, but the Company has continued to promote the halo effect, which makes sense. It also really does promote good causes, through philanthropy, educational support, public health efforts such as safe-water programs, recycling and other green environmental programs, and relief aid after natural disasters.
32.Put the enemy on your team. A good way to co-opt enemies is to recruit them. Neville Isdell invited former European Union anti-trust official Mario Monti to join Coke’s international advisory board and grabbed Alexis Herman, the chair of the task force to monitor the Company’s racial diversity, for the Coca-Cola board of directors.
33.React quickly to crises. When the media or Internet gossip pick up a negative story about your company, rumors and innuendo can spread like wildfire. When in 1999 schoolchildren in Belgium believed that Coca-Cola made them sick, CEO Doug Ivester thought the problem would blow over and was slow to react. Even though the Coke products probably did not make anyone sick, his apologies were tardy. Roberto Goizueta was almost too late in bringing back Coke Classic after the New Coke disaster.
34.Understand that there is no saturation point. This is especially true for a product people imbibe. It is remarkable that Big Coke and its bottlers have managed to continue to increase sales even in the United States, through innovative marketing and product placement and choice. The Company specializes in beverages, but now offers some 500 brands and 3,500 drinks worldwide. The moral? Don’t rest on your laurels; set ambitious but attainable goals.
35.Involve your customers. Coke marketers now talk about their “liquid and linked” approach, meaning that their message is linked by a common theme and can flow in many directions. The stress is on interactivity, with consumers actually participating. When Coke sent three young “Happiness Ambassadors” around the world in 20
10, for instance, fans could follow them on Facebook and suggest places for them to go. 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.
NOTE ON SOURCES
To save space in this third edition, which has already reached biblical proportions, I include this bibliographic essay in lieu of specific citations and a full bibliography. Consult the second edition (2000) for citations and sources up to that time. They are also available at www.markpendergrast.com on the Coca-Cola subpage.
Books Directly Related to Coca-Cola: Frederick Allen, Secret Formula (1994), a well-documented history of Coca-Cola. Bill Backer, The Care and Feeding of Ideas (1993), by the brilliant ad man who created the Real Thing. Michael Blanding, The Coke Machine: The Dirty Truth Behind the World’s Favorite Soft Drink (2010), a critical look at the Company. Charles Howard Candler, Asa Griggs Candler (1950), a biography by Asa’s son. William T. Campbell, Big Beverage (1952), a novel by a Coke bottler. Mike Cheatham, “Your Friendly Neighbor”: The Story of Georgia’s Coca-Cola Bottling Families (1999). Ricardo Cortés, A Secret History of Coffee, Coca & Cola (2012), a well-researched, short illustrated book. Lawrence Dietz, Soda Pop (1973). Charles Elliott, Mr. Anonymous: Robert W. Woodruff of Coca-Cola (1982), by a close friend and hunting buddy. Exclusive Territorial Allocation Legislation, Hearings Before the Subcommittee on Antitrust and Monopoly (1973). John Paul Freeman, “The Real Thing” (1986), a dissertation about Coke advertising from 1969 to 1976. Henry J. Frundt, Refreshing Pauses: Coca-Cola and Human Rights in Guatemala (1987), about death squads and unions. Elizabeth Candler Graham, The Real Ones (1992), by a great-great-grandchild of Asa Candler. David Greising, I’d Like the World to Buy a Coke: The Life and Leadership of Roberto Goizueta (1998). Constance Hays, The Real Thing: Truth and Power at Coca-Cola (2005), by a New York Times reporter, focusing on Ivester and Daft. Anne Hoy, Coca-Cola: The First Hundred Years (1986), an authorized, richly illustrated coffee table book. James L. Hunt, Relationship Banker (2009), about Eugene Stetson, covers 1919 sale of Company; Neville Isdell with David Beasley, Inside Coca-Cola (2011), by former Coke CEO. E. J. Kahn Jr., The Big Drink (1960), a delightful compilation of the New Yorker writer’s articles on Coca-Cola, and Robert Winship Woodruff (1969), Kahn’s revealing book on Woodruff. J. C. Louis and Harvey Yazijian, The Cola Wars (1980), well researched and critical. Migrant and Seasonal Farmworker Powerlessness, Hearings Before the Subcommittee on Migratory Labor (1971). Thomas Oliver, The Real Coke, the Real Story (1986), by an Atlanta newspaper reporter about New Coke. Allan Petretti, Petretti’s Coca-Cola Collectibles Price Guide (2008), the classic guide. John A. Riley, A History of the American Soft Drink Industry (1958). Pat Roddy Jr., 75 Years of Refreshment (1983), a history of a Tennessee Coke bottler. Rowland Sanders, Papa Coke: Sixty-Five Years Selling Coca-Cola (1986), by a Coke veteran. Randy Schaeffer and Bill Bateman, Coca-Cola: The Collector’s Guide (1995), by two knowledgeable Pennsylvania collectors. Bill and Jan Schmidt, The Schmidt Museum Collection of Coca-Cola Memorabilia (1983); though the museum no longer exists, the book is a good resource. Transport and General Workers Union, Latin American Bureau, Soft Drink, Hard Labor: Guatemalan Workers Take on Coca-Cola (1987), about death squads and unions. Mark Thomas, Belching Out the Devil: Global Adventures with Coca-Cola (2008), a critical book by a British comedian-activist. Ross Treseder, As I Remember (1973), a Coke veteran’s memoirs. Pat Watters, Coca-Cola: An Illustrated History (1978), by an Atlanta writer. Della Wager Wells, George Waldo Woodruff (1987). Sergio Zyman, The End of Marketing As We Know It, by a former Coke marketing man.
For God, Country, and Coca-Cola Page 83
