Salt Sugar Fat

by Michael Moss

  Still, as good as Coke is—with a world-class formula of incredible power—it became clear to Dunn in his years at Coca-Cola that there was more than sensory power behind the soaring sales. Coke’s allure, he realized, is derived as much from what goes onto the can or bottle as from what goes into it. This is the logo, the brand known as Coke. “Everybody asks, why couldn’t you just match Coke by finding out what’s in it,” Dunn said, holding up an imaginary can as he spoke. “But once you take the trademark off, it’s a different brand.” Studies have found that people like Coke much better when they know what they are drinking is in fact Coke and not one of the knockoff colas sold by grocery chains.

  Coke’s efforts in marketing its brand were restrained through much of the 1970s, when Dunn was watching his father establish the sports endorsement business at Coke. But 1980 was a watershed for Coke, just as it was for America’s obesity rate, which had started to surge. That year, Coke switched from using table sugar to high-fructose corn syrup, which was less expensive and blended more readily with the flavoring concentrate. The revered but aging chairman, Robert Woodruff, chose an unsmiling taskmaster, the Cuba-born Roberto Goizueta, to be the new CEO. This was also the year that Coke intensified its marketing, more than doubling the money it spent on advertising, reaching $181 million by 1984.

  The executive who commanded the company’s marketing at the time, Sergio Zyman, was known as a merciless pursuer of the consumer. With Zyman leading the charge, Coke hired Bill Cosby to tout Coke as “the real thing,” which implied Pepsi was not. It designed 12-packs to look like cheerfully wrapped gifts during the Christmas season, and then, being an equal-opportunity marketer, targeted Muslims by shifting its advertising to run at night during the Ramadan holiday, when they abstain from food and drink until sundown. “The job of marketing is to sell lots of stuff and make lots of money,” Zyman wrote in The End of Marketing as We Know It, his account of the battles with Pepsi. “It is to get people to buy more of your products, more often, at higher prices. In fact, though some marketers will tell you it’s impossible, the real job of a marketer is to sell everything that a company could profitably make, to be the ultimate stewards of return on investment and assets employed.”

  To illustrate the global scope of Coke’s take-no-prisoners approach to marketing, Zyman tells the story of the crisis Mexico found itself in when the government devalued the peso in 1994. He was skiing, he writes, when he heard the grim news, and he got to a phone as fast as he could to call Douglas Ivester, Coke’s president. He urged Ivester to make sure that Coke’s operators in Mexico did not cut their marketing campaigns. Overnight, the rich became poorer and the poor got hungry, struggling with the soaring prices. But Zyman saw that as more reason to work harder at getting them both—rich and poor—to drink Coke. “We were no longer in a battle for share of market or share of mind,” Zyman explained. “We were in a battle for disposable income. We were going to have to compete with every other product and service in the Mexican marketplace; the idea was to get in and make sure that consumers remembered to buy Coke.” The strategy worked perfectly. Coke sales didn’t slump with Mexico’s economy; in fact, they grew—three times as fast as the competition, as Mexicans from all walks of life responded to Coke’s advertising.*

  The targeting that Coke performed in the United States was no less ruthless or importunate. “Why does Coke market?” Dunn asked me. “Why does McDonald’s market? The answer is because you’re either going forward or you’re going backwards. You do big conceptual maps, and you look at the different attributes of what you are selling, and the communication strategies. The communication is very much about, ‘How do I want to be seen as relevant to my target consumer, relative to my primary competitors.’ Relevance, salience, and competitive position all go into what Coke is today.”

  The intensified targeting by Coca-Cola focused on two metrics. The first was per capita consumption, or how much Coke people drank, on average, each year. This told Coke how it was doing relative to the growing population. It wasn’t enough just to be selling more Coke. The “per caps,” as the average person’s consumption was known, had to be going up. The second metric was market share, or how much of the world’s total soda consumption Coke owned. “Everything else flowed out of those two things,” said Dunn. “If you were growing per caps, and you were capturing market share, you’d make money.” For Coca-Cola stockholders, the years from 1980 to 1997 were especially sweet. Sales more than quadrupled from $4 billion to $18 billion. The per caps were equally impressive. By 1997, Americans were drinking 54 gallons of soda a year, on average, and Coke controlled almost half of the soda sales, with a 45 percent share. The rising consumption, which had more than doubled from 1970, also had staggering implications for the nation’s health. With diet sodas accounting for only 25 percent of the sales, the sugary soda that people drank each year—more than 40 gallons—delivered 60,000 calories and 3,700 teaspoons of sugar, per person.

  By 1994, Coke’s marketing efforts became even more intense, driven by competition from new sources: sweetened teas and sports drinks. Even bottled water was making it hard to push the per caps for soda any higher. More and more, Dunn found himself participating in efforts that directed Coke’s marketing muscle toward particularly poor and vulnerable parts of the country where consumption seemed to know no bounds. Places like New Orleans, where people were drinking twice as much Coke as the national average. Or Rome, Georgia, where the per cap hit 1,000—nearly three Cokes a day. Coca-Cola executives never used the word addiction to describe this behavior, of course. The food industry prefers not to speak of addiction. Instead, when describing their most valued customers, they chose a term that evokes an image of junkies pursuing their fix.

  In the war room atmosphere of Coke’s headquarters in Atlanta, these consumers were not called “loyal customers.” They were called “heavy users,” and their importance to Coca-Cola was rooted in a principle named for an Italian economist, Vilfredo Pareto. He created a mathematical formula to describe the unequal distribution of wealth in his country, having observed that 80 percent of the land in Italy was owned by 20 percent of the people, and like many other things, the consumption of Coke worked the same way. Eighty percent of the world’s soda was consumed by 20 percent of the people. “Your heavy-user base is, by definition, very important to the business,” Dunn said.

  “The other model we use was called ‘drinks and drinkers.’ How many drinkers do I have, and how many drinks do they drink. If you lost one of those heavy users, if somebody just decided to stop drinking Coke, how many drinkers would you have to get, at low velocity, to make up for that heavy user. The answer is a lot. It’s more efficient to get my existing users to drink more.”

  One of Dunn’s lieutenants, Todd Putman, who worked at Coca-Cola from 1997 to 2000, said he was astonished by the ferociousness with which the company pursued consumers. The goal became much larger than merely beating the rival brands; Coca-Cola strove to outsell every other thing people drank, including milk and water. “It was a mind-bending paradigm shift for me,” Putman said. “We weren’t trying to get share of market. We weren’t trying to beat Pepsi or Mountain Dew. We were about trying to beat everything.”

  And when it came to per caps for Coke, Putman said, the marketing division’s efforts boiled down to one question: “How can we drive more ounces into more bodies more often?”

  One aspect of this pursuit involved playing with the price to jack up demand. The country, as Dunn put it, became a “battlefield grid.” On the same Memorial Day weekend, for instance, a liter of Coke might sell for $1.59 in San Francisco but only ninety-nine cents in Los Angeles, based on the company’s reading of consumer demand and habits during that holiday. In pursuing heavy users, however, Coke went beyond mere pricing. It began going after the group of people who had not yet decided if they were Coke or Pepsi lovers. These were the future heavy users, whose habits and brand loyalty were still unformed and pliable, and Coke pursued them like i
t had pursued nothing before.

  “Teenagers became the battleground for early brand adoption,” Dunn said.

  There was one caveat in Coca-Cola’s pursuit of kids in which Dunn, at first, could find a measure of comfort. The company was an early adopter of self-imposed curbs on its advertising, and it drew a bright line at marketing to kids under twelve. Coke abstained from placing its advertising on any programs—television, radio, mobile phones, or the Internet—where more than half of the viewers were eleven years old or younger. In 2010, they made this policy even stricter by lowering the threshold: Coke will now walk away from programs where only a third of the viewers are under twelve.

  The company touts this policy as part of a sweeping agenda in social responsibility that includes everything from the efficient use of energy to preserving water supplies in regions of water scarcity to a program it calls “active healthy living,” which ranges from offering kids low-calorie drinks including bottled water to running an ad campaign called Move to the Beat that promotes dancing as a means of exercise. “There are more than 680 million teens on the planet,” Coca-Cola says on its website. “An investment in their future is one of the most critical investments we can make.”

  The advertising policy was a point of pride to Coca-Cola employees, Dunn said, and he credits the company for taking this stance. But the self-imposed restraint on children, he pointed out, had its limits. In reality, it applied only to media advertising, not the invaluable marketing that Robert Woodruff had first identified: kids in their special moments. “If you think in terms of Coke’s presence in ballparks and every place kids go, there was certainly marketing to kids going on,” Dunn said. Moreover, once those kids turned twelve, even before they could be officially called teenagers, they were lumped with the 680 million teenagers on the planet who were fair game for every last ounce of marketing firepower Coke could muster.

  “Magically, when they would turn twelve, we’d suddenly attack them like a bunch of wolves,” said Putman.

  In many ways, teenagers are even fatter targets than younger kids. Starting at twelve, kids have more allowance to spend, travel to and from school on their own, and often leave the school grounds for lunch. Most critically, they begin to form the likes and dislikes that will define them for the rest of their lives. Coke studied these metrics, of course, and planned its campaigns accordingly. “Say kids started drinking 250 soft drinks a year,” Dunn told me. “They tend to carry that consumption behavior all the way through their life. Then it was a brand battle from that point on, because the core brand decision—i.e., I’m a Coke drinker, I’m a Pepsi drinker, I’m a Mountain Dew drinker—tends to be made by the time people are in their mid to late teens.”

  As important as teenagers were to Coke in establishing loyalty to the brand, much of the company’s marketing effort was directed at young adults, where the goal was to sustain and grow consumption rates. In this matter, Coke left nothing to chance. It created an entity whose task is to guide the marketers toward their targets with laser precision. Called the Coca-Cola Retailing Research Council, it plumbs the social science of shopping to identify the ways in which both teens and adults can be made more vulnerable to persuasion. Soda already rivals bread in grocery sales and easily tops other staples like milk, cheese, and frozen foods. In 2005, however, the council produced one of the largest studies ever undertaken about America’s shopping habits, and it was loaded with tips and advice for grocers to increase their soda sales further still. The study included a “shopper density map,” done up in bright yellows and reds to mark the “hot spots” where most shoppers go. Whisked through the front doors, they typically start on the right side of the supermarket—moving counterclockwise and, in a surprise, from back to front. Thus, the main racks of soda should be placed toward the rear of the store, on the right side. By contrast, much of the center of store has light traffic, the report warns, calling this area the “Dead Zone.”

  Coca-Cola, in this study, also urges grocers to find ways to catch shoppers off guard. Federal health officials who are fighting the obesity epidemic advise consumers never to enter a grocery store without a shopping list, which helps to ward off the impulse to load up on sugary, salty, and fatty snacks. But Coke’s study offers the grocer numerous strategies for snagging even the wariest consumer. “Engage the shopper early,” the study says, with giant, eye-catching displays of soda, up front on the right for maximum traffic. These should be parked outside the aisle where sodas are usually found. Nor should gum, candy, and magazines get exclusive use of the most valuable part of the store, the checkout zones, where impulse buying is at its highest. Tall coolers loaded with Coke should be placed right next to the cash registers. “Sixty percent of supermarket purchase decisions are completely unplanned,” the Coke study says. “Anything that enables the shopper to make a faster, easier, better decision” will help spur these unplanned purchases.

  Over the years, Coca-Cola has also paid careful attention to how sales are affected by the gender, race, and age of consumers. Dunn told me that Coke deepened its demographic knowledge by mining the customer loyalty cards of grocery chain shoppers. It learned, for instance, that African Americans tend to like drinks that are not only sweeter but fruit-flavored too. “We could tell you by shopping basket, by market, by demographic, what people bought,” Dunn said. “And then we made targeted offers to those people based on what they’d be most likely to consume. Buy two liters of Coke and get a free bag of potato chips, or whatever it was.”

  The company’s shopper study cites the sweet tooth of minorities, along with the benefits of marketing soda in combination with other grocery items. It also lumps American shoppers into five basic groups—from rural to suburban upscale to urban ethnic—and provides details on each group’s drink preferences so that grocers can calibrate their displays. The new energy drinks have the best chance with the “urban upscale” shopper, while the “urban ethnic” and “rural” shoppers remain slightly more loyal to soda. Depending on its clientele, “each store has a unique DNA,” the report says.

  Perhaps the greatest influence that Coca-Cola has had on American shopping habits is in the arena of the convenience store, or “C-stores,” as they are known in the trade. These range from mom-and-pop groceries in the inner city to the national chains of drive-up food-and-gas stores in the suburbs. Besides convenience, they sell foods that have the heaviest loads of salt, sugar, and fat. To nutritionists, these stores are to obesity what drug dens were to the crack epidemic. The C-stores attract young kids and teenagers because they are closer to home and sell single drinks. Inside is a layout calculated to grab these kids at every turn. The staples—the bags of rice, canned soup, and bread—are all in the rear of the store. Up front, typically right by the door, are the stacks of soda bottles, joined by the racks of chips and pastries, with the soda cooler on one wall and inexpensive candies next to the cash register to snatch up any leftover change. In big cities like New York and Philadelphia and Los Angeles, there are thousands of corner stores strategically located near the schools, to catch kids coming and going.

  As powerful a force as the C-stores might be in the nation’s health, they didn’t get that way without considerable help. Indeed, the number of C-stores surged in the 1980s as a direct result of the marketing strategies developed by Coke and Pepsi, along with the snack food manufacturers, like Frito-Lay and Hostess. These companies have divisions of employees or contractors who visit and service the convenience stores every week to deliver their products. Paid by how much they sell, these workers stock and clean their displays, maximizing their visibility by making sure no other items encroach on their space. In fact, such companies actually own the racks and the coolers. I met one C-store owner in Philadelphia who tried to improve the nutritional profile of his offerings by positioning bananas up front, only to be scolded by a soda delivery crew, who claimed this space as their own. But it’s the rare C-store owner who would look upon the deliverers with anything but the utmo
st affection. The soda and snacks are not just the most profitable items in the C-store; they make the C-stores the cash cows that they are. Grocery industry officials told me that C-stores are now bought and sold by syndicates who make loans at exorbitant rates, which only deepens the owner’s need for profits.

  The industry marketing strategy that begat this boom in C-stores has a name: “up and down the street,” as in driving the delivery truck up and down the streets of a neighborhood, from one C-store to the next. For the soda and snack companies, the goal in this wasn’t just selling more goods; they wanted to win the loyalty of the kids who frequent these stores. “Up and down the street” became a rally cry among marketers, something they returned to time and again to boost sales and expand their customer base. “Coke was doing it and Pepsi was doing it, and the candy guys were figuring out the same thing,” Dunn said. “All the food companies started to engineer a strategy around immediate consumption, and as they put more effort into it, the sales in those stores went up, and there was a huge build out of convenience stores. So now you go to a city like Atlanta, and on every corner there’s a convenience store.”

  “You start to get into the question of what drives what,” Dunn said. “Does the preference for soda and snacks drive the availability of soda and snacks, or does availability drive the preference? None of the players stop to think about whether people should really be eating a bag of chicken wings and a bag of potato chips and a 2-liter Coke. They’re thinking, ‘Is this going to get me an increase in sales?’ ”