The Coca-Cola Company

views updated May 23 2018

The Coca-Cola Company

One Coca-Cola Plaza
Atlanta, Georgia 30313
U.S.A.
Telephone: (404) 676-2121
Toll Free: (800) 468-7856
Fax: (404) 676-6792
Web site: http://www.cocacola.com

Public Company
Incorporated: 1892
Employees: 28,600
Sales: $18.81 billion (1998)
Stock Exchanges: New York Boston Cincinnati Midwest Pacific Philadelphia Frankfurt Zurich
Ticker Symbol: KO
NAIC: 312111 Soft Drink Manufacturing; 311930 Flavoring Syrup and Concentrate Manufacturing; 311411 Frozen Fruit, Juice, and Vegetable Manufacturing; 312112 Bottled Water Manufacturing

The Coca-Cola Company is the world’s number one maker of soft drinks, holding 51 percent of the global market. Coca-Cola’s red and white trademark is probably the best-known brand symbol in the world. Headquartered since its founding in Atlanta, Coca-Cola makes two of the top three soft drinks in the world, Coca-Cola Classic at number one and Diet Coke at number three. The company also operates one of the world’s most pervasive distribution systems, offering its more than 160 beverage products in nearly 200 countries worldwide. Nearly two-thirds of sales are generated outside North America, with revenues breaking down as follows: North America, 37 percent; Greater Europe (which includes parts of Eurasia, such as Russia), 26 percent; Middle and Far East, 21 percent; Latin America (including Mexico), 12 percent; Africa, three percent; and other regions, one percent. Among the company’s products are a variety of carbonated beverages, sports drinks, juices, teas, coffees, and bottled water, under such brands as Fanta, Sprite, Mr. PiBB, Mello Yello, TAB, Surge, Citra, POWERaDE, Fruitopia, Saryusaisai, Aquarius, Bonaqa, and Dasani. Coca-Cola owns the Minute Maid Company, a leading North American maker of juices and other beverages, including Hi-C fruit drinks, Five Alive citrus drinks, Bright & Early breakfast beverages, and Bacardi mixers. Moreover, the company, through its Schweppes Beverages unit, also holds the rights to such brands as Schweppes, Canada Dry, Dr Pepper, and Crush in 157 countries, primarily located outside North America and Europe. Coca-Cola’s development into one of the most powerful and admired firms in the world has been credited to proficiency in four basic areas: consumer marketing, infrastructure (production and distribution), product packaging, and customer (or vendor) marketing.

Creation of a Brand Legend

The inventor of Coca-Cola, Dr. John Styth Pemberton, came to Atlanta from Columbus, Georgia, in 1869. In 1885 he set up a chemical laboratory in Atlanta and went into the patent medicine business. Pemberton invented such products as Indian Queen hair dye, Gingerine, and Triplex liver pills. In 1886 he concocted a mixture of sugar, water, and extracts of the coca leaf and the kola nut. He added caffeine to the resulting syrup so that it could be marketed as a headache remedy. Through his research Pemberton arrived at the conclusion that this medication was capable of relieving indigestion and exhaustion in addition to being refreshing and exhilarating.

The pharmacist and his business partners could not decide whether to market the mixture as a medicine or to extol its flavor for its own sake, so they did both. In Coca-Cola: An Illustrated History, Pat Watters cited a Coca-Cola label from 1887 which stated that the drink, “makes not only a delicious … and invigorating beverage … but a valuable Brain Tonic and a cure for all nervous affections.” The label also claimed that “the peculiar flavor of Coca-Cola delights every palate; it is dispensed from the soda fountain in the same manner as any fruit syrup.” The first newspaper advertisement for Coca-Cola appeared exactly three weeks after the first batch of syrup was produced, and the famous trademark, white Spenserian script on a red background, made its debut at about the same time.

Coca-Cola was not, however, immediately successful. During the product’s first year in existence, Pemberton and his partners spent around $74 in advertising their unique beverage and made only $50 in sales. The combined pressures of poor business and ill health led Pemberton to sell two-thirds of his business in early 1888. By 1891, a successful druggist named Asa G, Candler owned the entire enterprise. It had cost him $2,300. Dr. Pemberton, who died three years earlier, was never to know the enormous success his invention would have in the coming century.

Candler, a religious man with excellent business sense, infused the enterprise with his personality. Candler became a notable philanthropist, associating the name of Coca-Cola with social awareness in the process. He was also an integral part of Atlanta both as a citizen and as a leader. Candler endowed Emory University and its Wesley Memorial Hospital with more than $8 million. Indeed, the university could not have come into existence without his aid. In 1907 he prevented a real estate panic in Atlanta by purchasing $ 1 million worth of homes and reselling them to people of moderate income at affordable prices. During World War I, Candler helped to avert a cotton crisis by using his growing wealth to stabilize the market. After he stepped down as the president of Coca-Cola, he became the mayor of Atlanta and introduced such reforms as motorizing the fire department and augmenting the water system with his private funds.

1891–1919: Rapid Growth Under the Candlers

Under Candler’s leadership, which spanned a 26-year period, the Coca-Cola Company grew quickly. Between 1888 and 1907, the factory and offices of the business were moved to eight different buildings in order to keep up with the company’s growth and expansion. As head of the company, Candler was most concerned with the quality and promotion of his product. He was particularly concerned with production of the syrup, which was boiled in kettles over a furnace and stirred by hand with large wooden paddles. He improved Pemberton’s formula with the help of a chemist, a pharmacist, and a prescriptionist. In 1901, responding to complaints about the presence of minute amounts of cocaine in the Coca-Cola syrup, Candler devised the means to remove all traces of the substance. By 1905, the syrup was completely free of cocaine.

In 1892, the newly incorporated Coca-Cola Company allocated $11,401 for advertising its drink. Advertising materials included signs, free sample tickets, and premiums such as ornate soda fountain urns, clocks, and stained-glass lampshades, all with the words “Coca-Cola” engraved upon them. These early advertising strategies initiated the most extensive promotional campaign for one product in history. Salesmen traveled the entire country selling the company’s syrup, and by 1895 Coca-Cola was being sold and consumed in every state in the nation. Soon it was available in some Canadian cities and in Honolulu, and plans were underway for its introduction into Mexico. By the time Asa Candler left the company in 1916, Coke had also been sold in Cuba, Jamaica, Germany, Bermuda, Puerto Rico, the Philippines, France, and England.

An event that had an enormous impact on the future and very nature of the company was the 1899 agreement made between Candler and two young lawyers that allowed them to bottle and sell Coca-Cola throughout the United States: the first bottling franchise had been established. Five years later, in 1904, the one-millionth gallon of Coca-Cola syrup had been sold. In 1916 the now universally recognized, uniquely contour-shaped Coke bottle was invented. The management of all company advertising was assigned to the D’Arcy Advertising Agency, and the advertising budget had ballooned to $1 million by 1911. During this time, all claims for the medicinal properties of Coca-Cola were quietly dropped from its advertisements.

World War I and the ensuing sugar rationing measures slowed the growth of the company, but the pressure of coal rations led Candler’s son, Charles Howard, to invent a process whereby the sugar and water could be mixed without using heat. This process saved the cost of fuel, relieved the company of the need for a boiler, and saved a great amount of time since there was no need for the syrup to go through a cooling period. The company continued to use this method of mixing into the 1990s.

Although Candler was fond of his company, he became disillusioned with it in 1916 and retired. One of the reasons for this decision was the new tax laws which, in Candler’s words, did not allow for “the accumulation of surplus in excess of the amount necessary for profitable and safe conduct of our particular business.” (It has also been suggested that Candler refused to implement the modernization of company facilities.)

1919–55: The Woodruff Era

Robert Winship Woodruff became president of the company in 1923 at the age of 33. His father, Ernest Woodruff, along with an investor group, had purchased it from the Candler family in 1919 for $25 million, and the company went public in the same year at $40 a share. After leaving college before graduation, Woodruff held various jobs, eventually becoming the Atlanta branch manager and then the vice-president of an Atlanta motor company, before becoming the president of Coca-Cola.

Company Perspectives:

As the world’s largest beverage company, we refresh the world. We do this by developing superior soft drinks, both carbonated and noncarbonated, and profitable nonalcoholic beverage systems that create value for our Company, our bottling partners, our customers, our share owners and communities in which we do business. In creating value, we succeed or fail based on our ability to perform as worthy stewards of several key assets: (1) Coca-Cola, the world’s most recognized trademark, and other highly valued trademarks; (2) The world’s most effective and pervasive distribution system; (3) Satisfied customers, who make a good profit selling our products; (4) Our people, who are ultimately responsible for building this enterprise; (5) Our abundant resources, which must be intelligently allocated; (6) Our strong global leadership in the beverage industry in particular and in the business world in general.

Having entered the company at a time when its affairs were quite tumultuous, Woodruff worked rapidly to improve Coca-Cola’s financial condition. In addition to low sales figures in 1922, he had to face the problem of animosity toward the company on the part of the bottlers as a result of an imprudent sugar purchase that management had made. This raised the price of the syrup and angered the bottlers. Woodruff was aided in particular by two men, Harrison Jones and Harold Hirsch, who were adept at maintaining good relations between the company and its bottling franchises.

Woodruff set to work improving the sales department; he emphasized quality control, and began advertising and promotional campaigns that were far more sophisticated than those of the past. He established a research department that became a pioneering market research agency. He also worked hard to provide his customers with the latest in technological developments that would facilitate their selling Coca-Cola to the public, and he labored to increase efficiency at every step of the production process so as to raise the percentage of profit from every sale of Coca-Cola syrup.

Through the 1920s and 1930s such developments as the six-pack carton of Coke, which encouraged shoppers to purchase the drink for home consumption, coin-operated vending machines in the workplace, and the cooler designed by John Stanton expanded the domestic market considerably. Also, by the end of 1930, as a result of the company’s quality control efforts, Coca-Cola tasted exactly the same everywhere.

Considered slightly eccentric, Woodruff was a fair employer and an admired philanthropist. In 1937, he donated $50,000 to Emory University for a cancer diagnosis and treatment center, and over the years gave more than $100 million to the clinic. He donated $8 million for the construction of the Atlanta Memorial Arts Center. Under his leadership the Coca-Cola Company pioneered such company benefits as group life insurance and group accident and health policies, and in 1948 introduced a retirement program.

Woodruff was to see the Coca-Cola Company through an era marked by important and varied events. Even during the Great Depression the company did not suffer thanks to Woodruff’s cost-cutting measures. When Prohibition was repealed, Coca-Cola continued to experience rising sales. It was World War II, however, that catapulted Coca-Cola into the world market and made it one of America’s first multinational companies.

Woodruff and Archie Lee of the D’Arcy Advertising Agency worked to equate Coca-Cola with the American way of life. Advertisements had, in Candler’s era, been targeted at the wealthy population. In Woodruff’s time the advertising was aimed at all Americans. By early 1950, African Americans were featured in advertisements, and by the mid-1950s there was an increase in advertising targeted at other minority groups. Advertising never reflected the problems of the world, only the good and happy life. Radio advertising began in 1927, and through the years Coca-Cola sponsored many musical programs. During World War II, Woodruff announced that every man in uniform would be able to get a bottle of Coke for five cents no matter what the cost to the company. This was an extremely successful marketing maneuver and provided Coke with good publicity. In 1943, at the request of General Eisenhower, Coca-Cola plants were set up near the fighting fronts in North Africa and eventually throughout Europe in order to help increase the morale of U.S. soldiers. Thus, Coca-Cola was introduced to the world.

Coke was available in Germany prior to the war, but its survival there during the war years was due to a man named Max Keith who kept the company going even when there was little Coca-Cola syrup available. Keith developed his own soft drink, using ingredients available to him, and called his beverage Fanta. By selling this beverage he kept the enterprise intact until after the war. When the war was over the company continued to market Fanta. By 1944, the Coca-Cola company had sold one billion gallons of syrup, by 1953 two billion gallons had been sold, and by 1969 the company had sold six billion gallons.

Key Dates:

1886:: Pemberton concocts Coca-Cola, a mixture of sugar, water, caffeine, and extracts of the coca leaf and the kola nut.
1891:: Candler, a druggist, gains complete control of Pemberton’s enterprise.
1892:: Candler incorporates The Coca-Cola Company.
1899:: The first bottling franchise is established.
1905:: Coca-Cola syrup is completely free of cocaine.
1916:: The unique, contour-shaped Coke bottle is introduced.
1919:: Robert Winship Woodruff and an investor group buy the company for $25 million; the company goes public at $40 per share.
1923:: Robert Winship becomes president of the firm.
1943:: Coca-Cola plants are set up near fighting fronts in North Africa and Europe, helping boost American GI spirits and introduce Coke to the world market.
1961:: Sprite makes its debut.
1981:: Roberto Goizueta becomes chairman.
1982:: Columbia Pictures is acquired for $750 million; Diet Coke is introduced to the market.
1985:: Coca-Cola is reformulated; New Coke is rejected by consumers, and the company brings back the original formula, calling it Coca-Cola Classic.
1987:: Company sells its entertainment business to Tri-Star Pictures.
1990:: Sales surpass the $10 billion mark for the first time.
1997:: Douglas succeeds Goizueta as chairman and CEO.
1999:: Company acquires the rights to sell Schweppes, Canada Dry, Dr Pepper, and Crush brands in 157 countries, not including the United States, Canada, Mexico, and most of Europe.
2000:: Coca-Cola announces that Ivester will step down as CEO, to be replaced by COO Douglas N. Daft.

1955–81: Diversification, New Products, and Foreign Expansion

The years from the end of World War II to the early 1980s were years of extensive and rapid change. Although Woodruff stepped down officially in 1955, he still exerted a great amount of influence on the company over the coming years. There were a series of chairmen and presidents to follow before the next major figure, J. Paul Austin, took the helm in 1970; he was followed by Roberto Goizueta in 1981. In 1956, after 50 years with the D’Arcy Advertising Agency, the Coca-Cola Company turned its accounts over to McCann-Erickson and began enormous promotional campaigns. The decade of the 1950s was a time of the greatest European expansion for the company. During this decade Coca-Cola opened approximately 15 to 20 plants a year throughout the world.

The company also began to diversify extensively, beginning in 1960, when the Minute Maid Corporation, maker of fruit juices and Hi-C fruit drinks, was acquired by Coca-Cola. Four years later the Duncan Foods Corporation also merged with the company. In 1969 Coca-Cola acquired the Belmont Springs Water Company, Inc., which produced natural spring water and processed water for commercial and home use. The following year the company purchased Aqua-Chem, Inc., producers of desalting machines and other such equipment, and in 1977 Coca-Cola acquired the Taylor Wines Company and other wineries. These last two companies were sold later under Goizueta’s leadership.

In addition to its diversification program, the Coca-Cola Company also expanded its product line. Fanta became available in the United States during 1960 and was followed by the introduction of Sprite (1961), TAB (1963), and Fresca (1966), along with diet versions of these drinks. One reason that Coca-Cola began to introduce new beverages during the 1960s was competition from Pepsi Cola, sold by PepsiCo, Inc. Pepsi’s success also motivated the Coca-Cola Company to promote its beverage with the slogan “It’s the Real Thing,” a subtle, comparative form of advertising that the company had never before employed.

Things did not always run smoothly for Coca-Cola. When Coke was first introduced to France, the Communist party, as well as conservative vineyard owners, did what they could to get the product removed from the country. They were unsuccessful. Swiss breweries also felt threatened, and spread rumors about the caffeine content of the drink. More consequential was the Arab boycott in 1967 which significantly hindered the company’s relations with Israel. In 1970 the company was involved in a scandal in the United States when an NBC documentary reported on the bad housing and working conditions of Minute Maid farm laborers in Florida. In response, the company established a program that improved the workers’ situation. In 1977 it was discovered that Coca-Cola, for various reasons, had made $1.3 million in illegal payments over a period of six years, mostly to executives and government officials in foreign countries.

During the 1970s, under the direction of Chairman J. Paul Austin and President J. Lucian Smith, Coca-Cola was introduced in Russia as well as in China. To enter the Chinese market, the company sponsored five scholarships for Chinese students at the Harvard Business School, and supported China’s soccer and table-tennis teams. The beverage also became available in Egypt in 1979, after an absence there of 12 years. Austin strongly believed in free trade and opposed boycotts. He felt that business, in terms of international relations, should be used to improve national economies, and could be a strong deterrent to war. Under Austin, Coca-Cola also started technological and educational programs in the Third World countries in which it conducted business, introducing clean water technology and sponsoring sports programs in countries too poor to provide these benefits for themselves.

Austin’s emphasis was on foreign expansion. Furthermore, under Austin’s management the company became more specialized. Where Woodruff was aware of all facets of the company, Austin would delegate authority to various departments. For instance, he would give general approval to an advertising scheme, but would not review it personally. Smith was responsible for the everyday operations of the company, and Austin would, among other things, set policies, negotiate with foreign countries, and direct the company’s relations with the U.S. government.

1981–97: The Goizueta Era

Roberto Goizueta became chairman in 1981, replacing Austin. The Cuban immigrant immediately shook up what had become a risk-averse, tradition-obsessed, barely profitable company. Less than a year after becoming chairman, he made two controversial decisions. First, he acquired Columbia Pictures for about $750 million in 1982. Goizueta thought that the entertainment field had good growth prospects, and that it would benefit from Coca-Cola’s expertise in market research. Secondly, without much consumer research, Goizueta introduced Diet Coke to the public, risking the well-guarded trademark that until then had stood only for the original formula. Something had to be done about the sluggish domestic sales of Coca-Cola and the intense competition presented by Pepsi. In 1950, Coke had outsold Pepsi by more than five to one, but by 1984 Pepsi had a 22.8 percent share of the market while Coke had a 21.6 percent share. Goizueta’s second 1982 gamble paid off handsomely when Diet Coke went on to become the most successful consumer product launch of the 1980s, and eventually the number three soft drink in the entire world.

In 1985 Goizueta took another chance. Based on information gathered from blind taste tests, Goizueta decided to reformulate the 99-year-old drink in the hope of combating Pepsi’s growing popularity. The change to New Coke was not enthusiastically greeted by the U.S. public. Apparently Goizueta did not take into account the public’s emotional attachment to the name “Coca-Cola” and all that it stood for: stability, memories, and the idea of a “golden America.” Within less than a year the company brought back the “old” Coke, calling it Coca-Cola Classic. New Coke was universally considered the biggest consumer product blunder of the 1980s, but it was also viewed in a longer term perspective as a positive thing, because of the massive amount of free publicity that the Coke brand received from the debacle.

In September 1987, Coca-Cola agreed to sell its entertainment business to TriStar Pictures, 30 percent of which was owned by Coca-Cola. In return, Coca-Cola’s interest in TriStar was increased to 80 percent. Coca-Cola’s holding in TriStar was gradually distributed as a special dividend to Coca-Cola shareholders until the company’s interest was reduced to a minority, when TriStar changed its name to Columbia Pictures Entertainment and sought its own listing on the New York Stock Exchange. Although the company’s flirtation with entertainment appeared to be ill-advised, Coca-Cola ended up with $1 billion in profits from its short-term venture.

In a 1984 article in the New York Times, Goizueta stated that he saw Coca-Cola’s challenge as “continuing the growth in profits of highly successful main businesses, and [those] it may choose to enter, at a rate substantially in excess of inflation, in order to give shareholders an above average total return on their investment.” Goizueta projected that by 1990 his new strategy would nearly double the company’s net income to $1 billion. His prediction came true in 1988. Two years later revenues surpassed the $10 billion mark.

In the mid-1980s, Coca-Cola reentered the bottling business, which had long been dominated by family-operated independents. Coca-Cola began repurchasing interests in bottlers worldwide with a view toward providing those bottlers with financial and managerial strength, improving operating efficiencies, and promoting expansion into emerging international markets. The trend started domestically, when the parent company formed Coca-Cola Enterprises Inc. through the acquisition and consolidation of two large bottlers in the South and West in 1986. The parent company acquired more than 30 bottlers worldwide from 1983 to 1993. By then, the market value of the company’s publicly traded bottlers exceeded the company’s book value by $1.5 billion.

Called “one of the world’s most sophisticated and powerful marketing organizations,” the company’s schemes for the 1990s included the 1993 global launch of the “Always Coca-Cola” advertising theme. The new campaign was formulated by Creative Artists Agency, which took over much of the brand’s business in 1992 from longtime agency McCann-Erickson Worldwide. In addition to the new campaign, a 32-page catalog of about 400 licensed garments, toys, and gift items featuring Coke slogans or advertising themes was released. The 1994 introduction of a PET plastic bottle in the brand’s distinctive, contour shape resulted from corporate marketing research indicating that an overwhelming 84 percent of consumers would choose the trademarked bottle over a generic straight-walled bottle. But the company’s primary challenge for the last decade of the 20th century came in the diet segment, where top-ranking Diet Coke was losing share to ready-to-drink teas, bottled waters, and other “New Age” beverages, which were perceived as healthier and more natural than traditional soft drinks. Coca-Cola fought back by introducing its own new alternative drinks, including POWERaDE (1990), the company’s first sports drink, and the Fruitopia line (1994). In 1992 the company and Nestlé S.A. of Switzerland formed a 50-50 joint venture, Coca-Cola Nestlé Refreshment Company, to produce ready-to-drink tea and coffee beverages under the Nestea and Nescafe brand names. Also during this time, Coca-Cola purchased Barq’s, a maker of root beer and other soft drinks.

Goizueta died of lung cancer in October 1997, having revitalized and awakened what had been a sleeping giant. Goizueta had turned the company into one of the most admired companies in the world, racking up an impressive list of accomplishments during his 16-year tenure. Coca-Cola’s share of the global soft drink market was approaching 50 percent, while in the United States Coke had increased its share to 42 percent, overtaking and far surpassing Pepsi’s 31 percent. Revenues increased from $4.8 billion in 1981 to $18.55 billion in 1996; net income grew from $500 million to $3.49 billion over the same period. Perhaps Goizueta’s most important—and influential—contribution to the storied history of Coca-Cola was his relentless focus on the company’s shareholders. The numbers clearly showed that he delivered for his company’s owners: return on equity increased from 20 percent to 60 percent, while the market value of the Coca-Cola Company made a tremendous increase, from $4.3 billion to $147 billion. Perhaps most telling, a $1,000 investment in Coca-Cola in 1981 was worth, assuming that dividends were reinvested, $62,000 by the time of Goizueta’s death.

Late 1990s and Beyond

Goizueta’s right-hand man, Douglas Ivester, was given the unenviable task of succeeding perhaps the most admired chief executive in the United States; it turned out that the first few years of Ivester’s reign would prove more than challenging. Although Coca-Cola remained steadily profitable, it was beset by one problem after another in the late 1990s. Having restructured its worldwide bottling operations under Goizueta, the firm moved into a new phase of growth based on the acquisition of other companies’ brands. Its already dominant market share and a sometimes arrogant and aggressive approach to acquisition led some countries, particularly in Europe, to take a hard line toward the company. In late 1997, for example, Coca-Cola announced it would acquire the Orangina brand in France from Paris-based Pernod Ricard for about $890 million. French authorities, who had fined Coca-Cola for anti-competitive practices earlier that year, blocked the purchase. In December 1998 Coca-Cola announced that it would purchase several soft drink brands—including Schweppes, Dr Pepper, Canada Dry, and Crush—outside the United States, France, and South Africa from Cadbury Schweppes pic for $1.85 billion. After encountering regulatory resistance in Europe, Australia, Mexico, and Canada, the two companies in July 1999 received regulatory approval for a new scaled-down deal valued at about $700 million, which included 155 countries but not the United States, Norway, Switzerland, and the member states of the European Union with the exception of the United Kingdom, Ireland, and Greece. Later in 1999 separate agreements were reached that gave Coca-Cola the Schweppes brands in South Africa and New Zealand.

With nearly two-thirds of sales originating outside North America, Coca-Cola was hit particularly hard by the global economic crisis of the late 1990s, which moved from Asia to Russia to Latin America. In Russia, where the company had invested $750 million from 1991 through the end of the decade, sales fell about 60 percent from August 1998, when the value of the ruble crashed, to September 1999. Rather than retreating from the world stage, however, Ivester viewed the downturn as an opportunity to make additional foreign investments at bargain prices, essentially sacrificing the short term for potentially huge long-term gains. While the economic crisis was still wreaking havoc, Coca-Cola was faced with another crisis in June 1998 when several dozen Belgian schoolchildren became ill after drinking Coke that had been made with contaminated carbon dioxide. Soon, 14 million cases of Coca-Cola products were recalled in five European countries, and France and Belgium placed a temporary ban on the company’s products. The crisis, though short-lived, was a public relations disaster because company officials appeared to wait too long to take the situation seriously, admit that there had been a manufacturing error, and apologize to its customers. Meanwhile, around this same time, four current and former employees had filed a racial discrimination suit against the firm in the United States.

Despite the seemingly endless string of challenges the company faced in the late 1990s, Coca-Cola was also moving forward with new initiatives. In February 1999 the company announced plans to launch its first bottled water brand in North America. Dasani was described as a “purified, non-carbonated water enhanced with minerals.” In October 1999 the company announced that it would redesign the look of its Coca-Cola Classic brand in 2000 in an attempt to revitalize the flagship’s stagnant sales. Labels would continue to feature the iconic contour bottle but with a cap popped off and soda fizzing out. In addition, the Coke Classic slogan “Always,” which had been used since 1993, would be replaced with the tagline “Enjoy,” which had been used on Coke bottles periodically for decades. The company also planned to increase the appearances of the eight-ounce contour bottle, in a particularly nostalgic move. The renewed emphasis on this classic brand icon and the resurrection of the “Enjoy” slogan seemed to be a fitting way for a U.S.—if not global—institution to launch itself into the new millennium.

Principal Subsidiaries

The Minute Maid Company; The Coca-Cola Export Corporation; Coca-Cola Financial Corporation; Coca-Cola Interamerican Corp.; Coca-Cola G.m.b.H. (Germany); Coca-Cola Industries Ltda. (Brazil); Coca-Cola Southern Africa Ltd. (South Africa); Coca-Cola Enterprises Inc. (40%); Coca-Cola Beverages pic (U.K.; 50.5%); Thai Pure Drinks Limited (Thailand; 49%); Embotelladoras Coca-Cola Polar S.A. (Chile; 29%); Coca-Cola Nordic Beverages (Norway; 49%); Coca-Cola Amatil Limited (Australia; 43%); Panamerican Beverages, Inc. (Panama; 24%); Coca-Cola FEMSA, S.A. de C.V. (Mexico; 30%).

Principal Operating Units

Africa Group; Greater Europe Group; Latin America Group; Middle & Far East Group; North America Group.

Principal Competitors

PepsiCo, Inc.; Cadbury Schweppes pic; Dr Pepper/Seven Up, Inc.; Ferolito, Vultaggio & Sons; National Beverage Corp.; Ocean Spray Cranberries, Inc.; Philip Morris Companies Inc.; The Procter & Gamble Company; The Quaker Oats Company; Triarc Companies, Inc.; Unilever pic; Virgin Group Ltd.

The Coca-Cola Company

views updated Jun 08 2018

The Coca-Cola Company

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1 Coca-Cola Plaza
Atlanta, Georgia 30313-2499
USA
Telephone: (404) 676-2121
Fax: (404) 676-6792
Web site: www.cocacola.com

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OVERVIEW

Although the Coca-Cola Company was well known for its carbonated-soft-drink brands, by the late 1980s a different type of beverage was attracting consumers and capturing a rapidly increasing market share: isotonic beverages, or sports drinks. In 1992 Coca-Cola jumped into the sports-drink arena with the introduction of PowerAde. Despite its marketing and promotion efforts, the brand struggled to gain a foothold with consumers. Five years after its launch in 1997, PowerAde had only managed to reach a 15.1 percent market share, far behind powerhouse brand Gatorade, which had a 73 percent share. In 1999 PowerAde eked out just $77 million in sales, while Gatorade claimed $631 million. Adding to Coca-Cola's woes was that, under pressure from its investors, in 2000 the company withdrew its $16 billion bid to acquire Gatorade and its parent Quaker Oats Company, only to see its competitor PepsiCo land the deal for $13.4 billion.

To boost Coca-Cola's struggling PowerAde brand, in 2000 ad agency McCann-Erickson New York created a new marketing campaign that used humorous television spots to send the message that athletes drank PowerAde before, during, and after the game or competition. The campaign featured athletes at all levels, from high school kids to pros, going through pregame rituals and superstitions as they prepared for competition. Each spot included the voice-over "Whatever you do to get up for the game, stay up," and the tagline "Keep playing." A specific budget for the campaign was unavailable, but a report in Adweek noted that Coca-Cola's media spending for PowerAde through November 2000 was $31.2 million.

The television spots were well received by consumers and the advertising industry. One spot, "Bus Ride," featuring high school basketball players on the team bus getting mentally pumped up for their looming game, earned an Adweek magazine Best Spot honor. But the campaign failed to increase PowerAde sales as planned. In 2001 Coca-Cola hired Wieden+Kennedy, a Portland, Oregon-based agency, to create a new campaign for PowerAde. The campaign had the tagline "Very real power," and it featured the Atlanta Falcons football team's quarterback Michael Vick in a series of television spots.

HISTORICAL CONTEXT

Since its introduction in 1886 of a sparkling beverage sold at drugstore soda fountains, Coca-Cola was best known as a producer of carbonated soft drinks. Its brands included the flagship and eponymously named Coca-Cola (Coke) as well as a list of products added to the company's lines over the years, such as Sprite and Tab, added in the 1960s, and Mr. Pibb, added in the 1970s.

In 1967 isotonic drinks—sports beverages that were designed specifically for athletes to replace body fluids and some nutrients lost while exercising—appeared on the market with the introduction of Gatorade. The product quickly grew in popularity with elite athletes and eventually gained acceptance among health-conscious consumers who turned to Gatorade as the beverage of choice to recharge after exercising or playing sports. By 1989 some 40 different sports drinks were on the market, including PepsiCo's Mountain Dew Sport. Sales of sports drinks increased 17 percent from 1988 to 1989, with Gatorade earning the lion's share of the sales. Sports-drink sales hit the $500 million mark in 1990 and were growing quickly. At that time Coca-Cola introduced its own sports drink, a powder that the consumer mixed with water. The product, Max, failed to advance past test markets, but in 1992 Coca-Cola began selling PowerAde with greater success. The company supported the new product's launch with an ad campaign that included displays, posters, and television spots. In a Time magazine article Coca-Cola touted PowerAde as "a drink made for athletes and anyone who works up a sweat."

Winning market share from sports-drink giant Gatorade proved difficult for Coca-Cola's PowerAde. Sales of isotonic drinks hit $801 million in 1999, up 12.8 percent from $712 million in 1998, but PowerAde had captured just $77 million in sales in 1999, versus Gatorade's $631 million. By 2000 Coca-Cola was reevaluating its struggling PowerAde brand and was considering acquisition of Gatorade and the brand's parent, Quaker Oats Company. When it became known that Coca-Cola was considering a $16 billion stock offer that would involve exchanging 1.9 Coke shares for each share of Quaker Oats, investors fled Coca-Cola, sending its stock into a downward spiral. Coca-Cola executives abandoned the plan to buy Quaker Oats. Competitor PepsiCo acquired the company and its Gatorade brand in 2000 for $13.4 billion. With Gatorade under the banner of Coca-Cola's top competitor, PepsiCo, the company redirected its energies toward revamping and promoting PowerAde.

TARGET MARKET

Isotonic sports drinks first targeted serious athletes. But as the beverages became more familiar, athletes of all ages and at all skill levels were increasingly choosing them over carbonated beverages or drinks such as iced tea or plain water to recharge after a workout or competition. According to Coca-Cola, from the time of its introduction PowerAde's target audience had always been young men in the 18- to 30-year-old demographic. A Coca-Cola spokesman said that the company's consistent youth-focused target market was maintained with the "Keep Playing" marketing campaign. He added, however, that in addition to targeting PowerAde's traditional audience, the campaign also began shifting some of the focus to younger consumers and introduced a multiethnic approach to promoting the product.

POWERADE FEATURED DURING ESPN/ABC PROGRAMMING

Coca-Cola and ESPN/ABC entered a marketing partnership in 2000 that would give PowerAde, Coke's sports-drink brand, an increased presence on ESPN, a cable network owned by ABC. As part of the deal, "PowerAde Break" segments would be included during ESPN's popular show SportsCenter, and PowerAde was also featured during select ABC network sports programming. In addition to traditional television advertising, the deal provided an opportunity for Coke and ESPN/ABC to partner on nontraditional marketing efforts such as promoting their brands in high schools and movie theaters.

COMPETITION

PepsiCo joined the sports-drink market in 1994 with its new beverage All Sport. Although the brand, like other sports drinks, targeted athletes of all ages and ability levels, in 1998 the All Sport brand was expanded to include Body Quencher. The new product specifically targeted kids 6 to 15 years old and was offered in kid-friendly flavors such as Fruit Punch, Cherry Slam, and Raspberry Burst. But the All Sport brand failed to attract consumers, and in 1999 its sales slipped 22.4 percent to $31.1 million, or just 3.7 percent of the sports-drink market. By 2000 PepsiCo was reevaluating its role in the sports-drink arena, and the company was considering purchasing Quaker Oats Company and its Gatorade sports-drink brand. Quaker Oats rejected the initial offering of $14 billion that PepsiCo made in November 2000, but one month later Quaker Oats accepted PepsiCo's $13.4 billion offer that included assuming $750 million in debt. PepsiCo's addition of Gatorade to its product mix led the Federal Trade Commission to question whether it violated antitrust regulations, so in 2001 the company sold its All Sport sports-drink brands to Monarch Beverage Company, an Atlanta, Georgia-based company with a drink lineup that included Dad's Root Beer and Moxie, a cola-style carbonated beverage popular in America's New England states.

Gatorade, the original sports beverage, was the market leader in 1999, holding a 79 percent share of the sports-drink market with $631 million in sales. The beverage was developed in 1965 by the University of Florida to help its football players finish an entire game under the hot, humid conditions typical in Florida. The new drink was named Gatorade as a tribute to the school's mascot, the Gators, and in 1967 an agreement was reached with Stokely-Van Camp, Inc., to produce Gatorade. At the time Stokely-Van Camp produced canned vegetables and was best known for its canned pork and beans. During the 1967 Orange Bowl the sports drink burst onto the national scene with the Gators' victory over Georgia Tech; Georgia Tech's coach attributed the win in part to the Florida team's use of Gatorade during the game. Quaker Oats Company purchased Stokely-Van Camp, which included Gatorade, in 1983. Gatorade got another national boost in 1987 when Super Bowl fans watching the game saw New York Giants players pour a full cooler of Gatorade over their coach's head in celebration. In 1991 Gatorade signed on basketball legend Michael Jordan as spokesman and launched its "Be Like Mike" campaign. In a twist as tart as Gatorade's lemon-lime flavor, in the late 1980s Quaker Oats granted PepsiCo licensed manufacturing rights to Gatorade in select countries. About nine years later, in 1998, Quaker Oats sued PepsiCo for using Gatorade's secrets to develop its own sports drink, All Sport. Quaker Oats won the lawsuit but ultimately lost the battle when PepsiCo finalized its purchase of Quaker Oats and the Gatorade brand in 2000.

MARKETING STRATEGY

To promote Coca-Cola's sports drink PowerAde in 2000, the agency McCann-Erickson New York created a campaign that put a humorous spin on the efforts that athletes of all levels, from high school students to professionals, took to get psyched up to play the game. The campaign, which was limited to a series of television spots, focused on the unique superstitions of each athlete and how they worked through them before each game. No specific budget was available for the campaign, themed "Keep Playing," but according to information published in Adweek, Coca-Cola's marketing budget for PowerAde through November 2000 was $31.2 million.

In April a television spot titled "Bus Ride" aired. It showed a high school basketball team in a school bus on its way to play in a game. A screen graphic read: "Monroe H.S. basketball team 44 minutes before tipoff." The kids rhythmically beat on the backs of the bus seats with their fists, and a voice-over stated: "Whatever you do to get up for the game, stay up." The spot closed with the tagline "Keep Playing."

Subsequent television spots that aired through 2000 featured national and international athletes from a variety of sports. The spots included "Sheldon," "Wrestler," and "Garlic." The "Sheldon" spot depicted Buffalo Bills football player Sheldon Jackson sitting in the team locker room. Dressed only in his underwear and his football shoulder pads, Sheldon was shown painting his fingernails purple, a pregame routine that he had begun while playing college ball to help him focus on the upcoming competition. In "Wrestler" South African amateur wrestler Steven Van Eden was depicted standing in front of a mirror beating on himself before a match. Part of his ritual included tossing a threatening sneer at the mirror. The spot "Garlic" showed Flavio Davino, one of Argentina's top professional soccer players, rubbing garlic all over his body and inside his shin guards. This was a pregame ritual that Davino believed would ward off evil spirits. Another spot featured U.S. Olympic track star Maurice Green writing his goal race time on a piece of paper and putting it inside his running shoe. A spot that did not air on American television featured a Korean basketball team, not pounding on the backs of bus seats like the U.S. high school basketball team but chanting in front of an alter. Like the initial television spot, "Bus Ride," each commercial included the screen graphic "Whatever you do to get up for the game, stay up." Background music was by the 1960s garage-rock band the Monks.

OUTCOME

Adweek advertising critic Barbara Lippert described as "amusing" the PowerAde television spots showing athletes preparing to play by working through their various pregame superstitions. In 2000 the television spot "Bus Ride," which showed a bus full of high school basketball players on the way to a game, was named a Creative Best Spot by Adweek. At the end of 2000, however, despite the advertising effort by McCann-Erickson, PowerAde was still a struggling brand. In 2001 Coca-Cola introduced a new marketing campaign with the tagline "Very real power," created by Portland, Oregon-based agency Wieden+Kennedy. Serving as celebrity spokesman in the television spots was the Atlanta Falcons football team's quarterback Michael Vick.

OBEY YOUR THIRST CAMPAIGN (1998)

OVERVIEW

First marketed in 1961 by the Coca-Cola Company, the lemon-lime soft drink Sprite was in the late 1990s one of the fastest growing carbonated soft drinks in the United States and around the world. As of mid-1998 Sprite was the number-three soft drink in the world and the number-five soft drink brand in the United States. From 1994 to 1998 the brand experienced global double-digit growth. This period of dramatic expansion coincided with the launch of the brand's ad campaign "Obey Your Thirst."

Introduced in 1994, the "Obey Your Thirst" campaign—created by Lowe & Partners/SMS of New York—established Sprite's distinct brand personality through humorous, tongue-in-cheek spots that reinforced the "trust your instincts" concept. The campaign aimed to speak directly to the drink's target market, teenagers, rather than talking down to them.

From its inception "Obey Your Thirst" relied on the power of a 1990s trend toward "anti-advertising." The commercials in this campaign parodied those for other products that used hype and image-building to appeal to consumers. "Consumers are jaded by advertising," declared Lee Garfinkel, cochairman and chief creative officer at Lowe & Partners/SMS. "In order to reach certain people, advertising that doesn't take advertising too seriously is appreciated by the consumer."

The "certain people" that Garfinkel had in mind were mostly teenagers, particularly inner city teenagers. To go along with its ads, Sprite marketers designed an aggressive marketing campaign to appeal to this demographic. Co-promotions with the National Basketball Association (NBA), including appearances by some of its emerging stars in Sprite commercials, helped erect an image for Sprite as the brand of hip, sometimes cynical young people everywhere.

HISTORICAL CONTEXT

Sprite started out in a niche category—lemon-lime soft drinks—but by the mid-1990s had clearly broken away and transcended into a mainstream brand. In 1994 Sprite passed the one-billion unit case mark worldwide—a significant milestone in terms of the size of the brand. An aggressive marketing strategy aimed at urban youth has been credited with Sprite's explosive growth. Since 1994 Sprite has been the official soft drink of the NBA, a growing worldwide sports property that has been particularly popular with youth. Adding to Sprite's appeal, its packaging was distinctive and attention getting; graphics introduced in 1994 added a crisp blue color to Sprite's traditional green.

In 1994 Sprite retired its upbeat ad campaign "I Like the Sprite in You" for an edgier approach designed to appeal to Generation X. The new tag line, in its full iteration, read: "Image is nothing. Thirst is everything. Obey your thirst." Among the first commercials in the campaign, targeted at teens and young adults, was one featuring basketball star Grant Hill in a parody of pretentious fashion commercials. Oddball humor, the use of basketball endorsers, and the appeal to youth culture were to remain staples of the "Obey Your Thirst" campaign.

By 1996 Coca-Cola USA was spending $55.7 million to advertise Sprite in the United States alone. The brand's innovative spots helped Sprite move $1.2 billion cases worldwide that year, and the beverage zoomed to the number-four position among U.S. soft drinks. Still, the parent company looked to increase its ad budget for 1997. "The more the brand grows, the more we spend," declared Sergio Zyman, Coca-Cola's chief marketing officer, in the pages of the Atlanta Journal-Constitution. In a bid to spur even further growth, Coca-Cola ordered a tune-up of the Sprite advertising strategy. In April 1997 the company unveiled five new Sprite commercials under the "Obey Your Thirst" rubric. The new spots, created in partnership with Lowe & Partners/SMS, were said to mark a creative new direction for the brand.

TARGET MARKET

By sharpening the focus and defining Sprite's personality—energetic, edgy, and straightforward—Sprite's marketers made the brand more relevant to its target audience. The goal of Sprite advertising in the 1990s seemed simple—to convey that Sprite was a thirst-quenching drink with an attitude that connected with teenagers. This approach proved to be very appealing to young people who did not want to be "marketed to" in the traditional sense. Sprite's commercials humorously poke fun at hard-sell tactics while focusing on one basic premise: Sprite may not make consumers more popular, more beautiful, or even NBA superstars, but it will quench their thirst.

Sprite's marketers designed this message to be pertinent around the world. The brand's "edge" and unpretentious attitude were crafted to speak to youth in all different cultures. According to official company press materials, "Teens around the world share the desire to be able to express themselves and make their own choices. Sprite aims to encourage and represent this attitude."

COMPETITION

Once considered a "niche" product, Sprite in the 1990s was no longer viewed as competing in the lemon-lime category but rather as competing against other mainstream soft drinks. In fact, Sprite sales surpassed those of its principal lemon-lime competitor, 7-Up, in 1993. But there still was one niche market that Sprite advertisers continued to try to capture: young people. With "Obey Your Thirst," Coca-Cola USA aimed Sprite ads at specific age groups. At the same time, rival soda maker PepsiCo Inc. was turning away from this practice. It believed that trying to execute a niche strategy in the soft drink industry carried too many risks because companies invariably fail to reach any customers outside the target audience.

In 1996 the Sprite brand concluded one of its most spectacular years of market performance. Sales surged an impressive 17.6 percent, displacing venerable Diet Pepsi along with Mountain Dew and Dr. Pepper to become America's fourth-ranked soft drink. 7-Up, in eighth place, dropped 0.2 percent in volume. "Sprite has been highly successful … much of it at the expense of 7-Up," observed Paine Webber analyst Emanuel Goldman in the Atlanta Journal-Constitution. Sprite's strong performance, together with the robust sales of Coke and Diet Coke, gave Coca-Cola USA three of the four top soft drink brands for the first time since 1985.

In response to the challenge from Sprite, Dr. Pepper/Seven Up Inc. in 1997 announced plans to reformulate 7-Up, making it less sweet and giving it a crisper taste. Industry analysts expected the reformulation to make 7-Up taste more like Sprite. The company also planned to introduce new graphics for 7-Up packages as well as a new advertising campaign.

MARKETING TO "GEN X" HAS ITS DOWNSIDE

Sprite has reaped much success from its "Obey Your Thirst" commercials playing to the cynical attitudes of 1990s youth. The ads gained their satirical punch from the debunking of other ads that relied on hype and image building. This approach was said to appeal to jaded Generation X consumers raised in an age of media manipulation. But playing to the apathy of the public has not always been successful. In fact, as Coca-Cola USA discovered when it tried to market the first Generation X soft drink, it can backfire spectacularly.

The concoction was called OK Soda and was the brainchild of Coca-Cola USA marketing chief Sergio Zyman (who would later develop the New Age beverage Fruitopia). Introduced in selected cities in mid-1994, OK Soda brandished matte-gray cans featuring downbeat drawings by underground comic book artists. The emblazoned slogans were equally doleful. "What's the point of OK soda?" read one representative caption. "Well what's the point of anything?"

Advertising for the seemingly depressing drink was created by the prominent Portland ad house of Wieden & Kennedy. A 1-800-I-FEEL-OK hotline was offered, where callers could record comments, listen to the cynical (and agency-crafted) ramblings of others, and take a Generation X "personality test." OK Soda's advertising message failed to overcome its reputed deficiencies of taste. The nine-city campaign failed, and the product was quietly withdrawn from circulation.

MARKETING STRATEGY

In addition to relating a straightforward message that Sprite was a light, crisp, and refreshing beverage, Sprite marketers wanted to convey that Sprite was not pretentious. Since the introduction of the "Obey Your Thirst" campaign in 1994, the Sprite brand spoke to legitimacy and integrity, encouraging consumers to trust their instincts and, in a sense, saying to teenagers, "Exercise your own judgment." The earliest "Obey Your Thirst" commercials parodied the pomposity and pretense of commercials for other products. Specifically in Sprite's crosshairs were spots for Canon cameras featuring tennis star Andre Agassi, in which the tennis star declares, "Image is everything." A series of humorous Sprite spots inverted this concept and those of similar commercials.

Coca-Cola USA's 1997 advertising strategy for Sprite retained the "Obey Your Thirst" tag line and the irreverent, icon-bashing tone of previous spots for the brand. The newer spots continued to poke fun at other company's ads. But they also took on an edgier tone, as Coca-Cola USA sought to meet its goal of capturing 50 percent of domestic market share by the turn of the century.

There were five new spots in all, all created by Lowe & Partners/SMS. Perhaps the most daring—and the most critically well-received—was a commercial that parodied Coca-Cola's own commercials from the 1980s by providing information on Jooky, a mythical newfangled soft drink. A group of youthful party goers are shown living it up with their Jookies on the beach when the camera pans back to show two slack-jawed gawkers watching the "commercial" on television. When they pop the tops on their own Jookies, however, no party breaks out. "Oh, man," says one. "Mine's busted." The voice-over then instructs: "Trust your taste buds, not commercials."

The other spots in the campaign were similar in tone. One poked fun at product demonstrations. Another took aim at the venerable Budweiser frogs, showing a bear eating out of a tin can while a frog snacked on a slimy worm. In another, perennial "Obey Your Thirst" pitchman Grant Hill fends off offers from an agent to do television shows, books, and record albums. The spot was seen as an oblique parody of Pepsi commercials featuring basketball star Shaquille O'Neal. A third commercial told visitors to Hollywood to bring along their own Sprite because "a place this concerned with image just doesn't have any." This was a clear spoof of the popular Visa credit card commercials that urge viewers to "bring along your gold card" to various hot spots.

Accompanying the new ads was a packaging overhaul. The Sprite "dimple bottle" was designed to differentiate the brand from other beverage choices, particularly in the important single-serve segment. The proprietary plastic packaging, featuring vertical rows of "bubbles" indented on the bottle wall, was reminiscent of Sprite's familiar green glass bottles and was designed to reflect the brand's "cool, refreshing" personality. Sprite launched the new packaging in grocery and convenience stores with a flier announcing, "We're smiling so wide our dimples are showing."

Building a brand relevant to consumers sometimes involved more than traditional advertising tactics. Sprite endeavored to reflect its distinct, straightforward personality through a complete marketing mix in a way that was relevant to teenagers. Accordingly, a series of cross-promotions with youth-oriented enterprises was launched. Three popular NBA players—Kobe Bryant of the Los Angeles Lakers, Juwan Howard of the Washington Wizards, and number-one draft pick Tim Duncan of the San Antonio Spurs—all agreed to give away their team jerseys and basketball shoes to 150 winners of the Sprite "Own 'Em" contest. In addition, six grand prize winners got to drive away in a sport utility vehicle that had actually been driven by the players. Consumers could win instantly by looking under the cap of 20-ounce and one-liter bottles of Sprite or by checking the inside packs of Sprite 12-pack and 24-pack can wraps to reveal prizes. Launched in November 1997 to coincide with the start of the NBA season, the promotion ran through the end of March 1998.

Keeping with its basketball theme, Sprite marketers also launched the Sprite Playground at NBA Jam Session, an interactive attraction offering a wide variety of basketball activities for fans to test their skills, play out-of-the-ordinary games, and win prizes. The activities area, which traveled to various state fairs around the United States during the summer of 1997—was surrounded by NBA photos and life-size player images. The strong connection between Sprite and professional basketball was explained by Pina Sciarra, Sprite brand manager for Coca-Cola USA, in a company press release: "Sprite is the only soft drink that embodies the lifestyle and attitude of NBA players."

Other national "Obey Your Thirst" promotions also sought to appeal to urban youth. An under-the-cap promotion teamed Sprite with apparel manufacturers Fishpaw Industries and Shabazz Brothers Urbanwear, both of whose clothing lines appealed to inner-city youths as well as markets outside the urban boundaries. In this promotion consumers had a one in six chance of winning free products, or they could win apparel from Fishpaw and Shabazz by simply twisting off the cap and reading the message imprinted under the top of 16-ounce, 20-ounce, and one-liter bottles of Sprite. The Sprite "Under the Cap 'Obey Your Thirst' Promotion" began March 1, 1997, and ran through September 30, 1997.

In a promotion aimed more specifically at the African-American community, Coca-Cola USA signed on as a major advertiser and exclusive soft drink sponsor of the annual Soul Train Music Awards show on March 7, 1997, in Los Angeles's Shrine Auditorium. Soul Train was a popular, nationally syndicated television dance and music show founded by Don Cornelius. A "Sprite Nite" celebrity party was held on the eve of the Soul Train Music Awards show and was televised live on Black Entertainment Television (BET). In addition to performances by rhythm-and-blues and hip-hop artists, the Sprite Image Breaker of the Year Award was presented. Coca-Cola USA aired commercials for Sprite and Coca-Cola Classic during the awards program.

OUTCOME

Measured in sales impact, "Obey Your Thirst" was a successful campaign. The "Obey Your Thirst" message helped Sprite secure 5.8 percent of the national soft drink market in 1996, up from 5.1 percent the previous year. In 1997 Sprite's global volume jumped by 13 percent while domestic volume increased 10 percent. Beverage industry analysts were impressed with Sprite's ability to create sustained growth in a competitive sector. "Coke's marketing of Sprite has been laser-like in its focus and very successful," John Sicher, the editor of Beverage Digest, told a writer for Newsday.

Some advertising critics, however, found the strategy behind the ads too cynical. "If image is nothing and taste is everything," asked Bob Garfield in Advertising Age magazine, "why is not one of the ads about taste? Why are none of the ads about anything intrinsic to Sprite? Why does the famous athlete send up use Grant Hill, a famous athlete?" The answer, according to Garfield, was because "as far as this advertising is concerned, image is not nothing. Image is everything."

OBEY YOUR THIRST CAMPAIGN (2004)

OVERVIEW

In late 2003 the Coca-Cola Company's lemon-lime soft-drink brand, Sprite, reigned as America's fifth-best-selling soft drink and the highest-grossing lemon-lime soda in America. Even though Sprite appeared to be the clear leader over all lemon-lime soft drink brands, its market share was rapidly slipping to Sierra Mist, a lemon-lime soft drink sold by the Pepsi-Cola Company. Reusing its long-running tagline that was conceived by the ad agency Lowe & Partners in 1994, Sprite released a new variation of the "Obey Your Thirst" campaign to keep its product relevant to its 16- to 24-year-old target demographic.

The WPP Group's advertising agency Ogilvy & Mather released three television spots in February 2004 that introduced Sprite's new mascot, Miles Thirst, a 10-inch-tall puppet. Hoping to attract the youth of the hip-hop and basketball cultures, Miles Thirst's wardrobe consisted of flashy hip-hop garb. The wisecracking puppet proclaimed his love for Sprite in two television spots. In a third commercial, titled "LeBron," LeBron James, the National Basketball Association (NBA) all-star, gave Miles Thirst a tour of his decadent home. The puppet appeared unimpressed until James led him into his kitchen, which was equipped with a Sprite vending machine. The campaign's 2004 budget was estimated at $45 million. Besides the television spots, media included online advertisement, a Miles Thirst website, and the passing out of free posters, magnets, stickers, and T-shirts featuring Miles Thirst. The campaign and tagline ended in 2005 after Sprite dropped Ogilvy & Mather for the Miami-based advertising agency Crispin Porter + Bogusky.

Overall success for the 2004 campaign was mild. Besides collecting a Bronze One Show Award in the category of Promotional and Point of Purchase Posters in 2004, the campaign was also appreciated by a majority of its target market. "Obey Your Thirst" commercials were "liked a lot" by 18 to 24 year olds, according to the weekly consumer poll Ad Track, conducted by USA Today. Unfortunately for Sprite, sales fell 3 percent in 2004, and its overall 5.7 percent share of the soft-drink industry was dwindling.

HISTORICAL CONTEXT

After Lowe & Partners created the "Obey Your Thirst" campaign in 1994, Sprite enjoyed strong market growth into the late 1990s. It was the fastest-growing Coca-Cola brand in 1997 and sold 6 percent more cases over the previous year. By 2001, however, sales had begun to wane, and Coca-Cola executives feared that Sprite and other Coca-Cola brands were falling out of style with the younger crowd. Hoping a different ad agency would reenergize its lemon-lime brand, Coca-Cola awarded its Sprite advertising account to Ogilvy & Mather in 2001. To bolster Sprite's image Coca-Cola also paid NBA superstar Kobe Bryant to endorse the lemon-lime soft drink. Bryant was featured in commercials that used the tagline "Obey your thirst," along with an additional tagline, "What's your thirst?" Tom Pirko, president of the beverage-industry consulting firm Bevmark, told Advertising Age, "Coke has been attacked as being dowdy and ultra-conservative, so they want to stay relevant." Sprite stopped airing commercials featuring Bryant in 2003 after a 19-year-old Colorado woman accused him of rape.

The 2003 television spot "Rikkia" was the first Sprite advertisement released by Ogilvy & Mather. It featured the race-car star Rikkia Miller speeding around the racetrack to music by the rock group the Donnas. Miller also provided a voice-over for "Rikkia" in which she explained her love for racing. Just before drinking a Sprite at the spot's conclusion, Miller looked into the camera and asked, "What's my thirst?"

Sprite's sales jumped 12 percent in the second quarter of 2003 after the brand released its new flavor Sprite Remix, a lemon-lime soda with a twist of tropical fruit "Sprite is a great brand, but it has been in decline for several years. It badly needs a shot in the arm," John Sicher, editor and publisher of Beverage Digest, an industry publication, told the Dow Jones News Service. "Remix will help, but additional aggressive steps are also necessary." That same year Sprite negotiated a $2 million-per-year endorsement contract with basketball all-star LeBron James. Hoping to regain relevance within its target market, Sprite in February 2004 released a version of "Obey Your Thirst" that featured James along with Sprite's new mascot, a puppet named Miles Thirst.

TARGET MARKET

"Obey Your Thirst" targeted 16 to 24 year olds. According to KPMG Consumer Markets Insider, a company that analyzed different industry trends, teenagers did not respond to advertisements in the same way as adults. Teenagers typically listened to "brand ambassadors," young celebrities or fellow teenagers that established credibility amongst their peers. To endorse the soft drink, Sprite hired NBA star LeBron James, who was only 20 years old during the 2004 leg of "Obey Your Thirst." The new Sprite mascot, Miles Thirst, a 10-inch puppet dressed in hip-hop clothing such as oversized watches, baggy pants, and gold chains, was also featured in Sprite advertisements in 2004 and 2005. "Thirst was the perfect choice for Sprite," John Carroll, group director for Sprite, told the PR Newswire. "Not only does Thirst represent everything Sprite stands for, he recognizes and represents the aspects of youth culture that are inherent to Sprite drinkers. Plus, you couldn't ask for a better last name."

Although Miles Thirst was an African-American puppet, the campaign did not solely target an African-American demographic. "Hip-hop is a $1 billion-a-year industry that could not survive on just black people," Shawn Prez, president of the urban-marketing group Power Moves, remarked in USA Today about Miles Thirst and his hip-hop appeal. "When you're making this kind of money, [hip-hop] has crossed gender, race and age groups. The white audience for hip-hop is much larger than the black audience at this point." In 2004 white, suburban teenage males spent more money on hip-hop products than any other group, according to USA Today.

COMPETITION

Ranking third in soft-drink sales (behind Coca-Cola and PepsiCo, Inc.), Dr Pepper/Seven Up, Inc., struggled to bolster its own flagship lemon-lime brand, Seven Up, in 2004. Young & Rubicam Advertising had handled Seven Up's $25 to $45 million yearly advertising budget since 1995. Initial campaign taglines touted Seven Up as the "uncola," referencing the drink's lack of cola, an ingredient found in Pepsi and Coca-Cola soft drinks. Next, the "Are You an Un?" campaign was launched, but it was quickly discontinued in 1999 after its appeal to 12 to 24 year olds proved ineffective. The sales of Seven Up's 192-ounce cases dropped from 174 million sold in 2002 to 126 million sold in 2003. In 2004 Seven Up advertisements featured the tagline "Make 7Up Yours." The avoidance of using "un" or "cola" was an attempt by Young & Rubicam to make Seven Up appeal to younger consumers unfamiliar with the cola reference.

LEBRON JAMES

Born on December 30, 1984, LeBron James was the youngest NBA basketball player to receive the Rookie of the Year award (2003–2004). The six-foot-eight-inch forward, who began endorsing the lemon-lime soft drink Sprite in 2003, was one of only three rookies in NBA history to average 20 points a game.

According to Gary A. Hemphill, senior vice president of the Beverage Marketing Corporation, which offered research and consulting services to the soft-drink industry, the drop in Seven Up sales resulted from the growing success of Sierra Mist, a lemon-lime soft drink sold by Pepsi under the tagline "shockingly refreshing." After the brand was introduced in early 2001, its sales climbed 89.3 percent between 2002 and 2003. The successful new competitor prompted Seven Up and Sprite to rethink their marketing strategies. Sprite created commercials with Miles Thirst. Hoping to regain its slipping market share, Seven Up approached several different advertising agencies outside of Young & Rubicam.

MARKETING STRATEGY

In 2003 Sprite signed a $12 million dollar, six-year deal with the NBA Rookie of the Year LeBron James. Ogilvy & Mather also created a mascot for Sprite, Miles Thirst, a wisecracking puppet whose mouth remained closed while speaking. Reno Wilson, an actor who had frequently appeared on the hit television program The Cosby Show, provided Miles Thirst's voice. The puppet portion of "Obey Your Thirst" kicked off on February 14, 2004, when three commercial spots, "LeBron," "Two Sprites," and "What's Better Than Sprite?" aired during the NBA All-Star game. In all the spots Miles Thirst was shown in several different wardrobes reflecting hip-hop fashions. Ogilvy & Mather hoped the combination of James's endorsement and a humorous Sprite-loving puppet would compel 16 to 24 year olds to drink Sprite.

In the 30-second spot titled "LeBron," James gave Miles Thirst a tour of his luxurious home. The spot mimicked the MTV program Cribs, in which celebrities allowed MTV camera crews to tour their houses. During "LeBron," Miles Thirst appeared disinterested in James's furnishings, which included a king-size waterbed and a plasma television. The puppet became suddenly excited about the tour when he noticed a giant Sprite vending machine in James's kitchen. In the spot "Two Sprites," Miles Thirst explained to curious onlookers why he preferred to have two extra-large Sprites in the cup holders of his movie theater seat. "Never be too far away from the big, thirst-quenching taste of Sprite," the puppet explained The commercial's humor hinged on the beautiful women flanking Thirst at the spot's conclusion. The spot "What's Better than Sprite?" featured Thirst challenging his friends to name one thing better than Sprite. Suddenly two beautiful women passed, prompting Thirst to rephrase the challenge: "Alright! Name two!" Miles Thirst ended each spot by demanding, "Show me my motto." The screen then displayed the tagline "Obey your thirst."

Adweek magazine's Barbara Lippert wrote of the campaign, "The set-up—a sexualized vinyl doll spouting street lingo—could easily devolve into an obvious, annoying, pandering and even racist attempt to get-down-in-the-hood-with-the-bros. Instead, it's quick, funny and real enough." Other critics were not as pleased. The Rainbow/Push Coalition, a discrimination watchdog group founded by the Reverend Jesse Jackson, accused the puppet of propagating negative African-American stereotypes. "We've had some conversations with Coke about Miles. We let them know that we think the character is ill-advised," Janice Mathis, a Rainbow/Push vice president, told Brandweek.

The website www.milesthirst.com was created for the campaign. Miles Thirst also appeared on MTV as a guest, and 1,500 Miles Thirst dolls were mailed to "key trend influencers around the country," according to USA Today. In May 2004 Ogilvy & Mather released further commercials with Miles Thirst explaining Sprite's "Thirst Out" promotion, in which consumers could win video rentals, digital music downloads, and mobile-phone ring tones.

OUTCOME

Lisa Speakman, senior brand manager for Sprite at Coca-Cola, told Brandweek that the 2004 segment of "Obey Your Thirst" was the highest rated in recent Sprite history. "Our internal brand-health scores are increasing on the Sprite brand. This indicates the marketing is having its desired effect over time," she said in April 2004. The campaign also garnered a Bronze One Show Award for Promotional and Point of Purchase Posters in 2004. Despite higher ratings and an advertising-industry award, however, the campaign failed to halt Sprite's drop in sales. The soft-drink's sales dipped 3 percent in 2004, according to Beverage Digest, a publication covering the nonalcoholic-beverages industry.

Sprite was not the only lemon-lime soft drink to lose sales in 2004. Seven Up was knocked from the list of top-10 soda brands, a change that many analysts attributed to the rising popularity of Pepsi's Sierra Mist, a lemon-lime drink released in 2001. Sierra Mist sales grew 89.3 percent in 2003 compared with 2002. Sprite's 2005 sales slump prompted Coca-Cola to end Ogilvy & Mather's advertising for its Sprite brand and to discontinue its "Obey your thirst" tagline.

SOFT-DRINK EMPIRE

The Coca-Cola Company was the world's largest producer of soft drinks in 2004. With nearly 400 brands in more than 200 countries, the soft-drink mogul owned the lemon-lime brand Sprite, the citrus drink Squirt, Dasani water, the sport drink Powerade, and even the entire suite of Fanta brands.

REAL CAMPAIGN

OVERVIEW

Despite being the top soft-drink company in the world, the Coca-Cola Company showed signs of struggle in the 1990s, when consumers worldwide started demonstrating a strong preference for healthier beverages. Coca-Cola's subsequent marketing efforts, including the 2003 "Real" campaign, reflected this change.

The multimillion-dollar "Real" campaign, which used a combination of music and celebrity presence to promote Coke Classic, was reminiscent of Coca-Cola ads from the 1960s to the '90s. The "Real" campaign's message itself, that Coke is the "Real" thing, was a reminder of the company's long heritage. The campaign's numerous television and radio spots, as well as print ads, were targeted toward a teen and young-adult market, just as Coke advertising had long been. It was with these consumers in mind that the company signed on such actors as Penelope Cruz and Courtney Cox Arquette, as well as musicians Common and Mya, to promote the product.

The campaign was attention grabbing, catching the eyes and ears of its target audience. Most consumers who were polled claimed to like the ads "a lot." The press seemed equally entertained by the campaign, raving about its advertising success, especially compared with the past three botched advertising attempts that Coke had recently endured. In fact, many ad critics thought the "Real" campaign marked the first Coke advertising success in a decade. The success, however, was not a financial one. Despite the campaign's popularity, sales of Coke products, especially Coke Classic, continued to dwindle. Coke Classic in 2003 experienced a disheartening 3 percent decrease in sales. "Real" ran until 2005, when it was replaced by "Make It Real," an extension of the previous campaign.

HISTORICAL CONTEXT

In May 1886 Jacobs' Pharmacy in Atlanta sold the first serving of Coca-Cola. Invented by John Pemberton (a Civil War veteran and pharmacist), the soft drink contained syrup, sugar, and carbonation, along with the caffeine-rich kola nut and the drug cocaine. The name Coca-Cola was invented by Pemberton's bookkeeper, Frank Robinson, who also wrote the distinct script that has been sprawled on all Coca-Cola products to date. The beverage was not an instant success. In its first year at Jacobs' Pharmacy, approximately nine servings were sold each day. Pemberton ended up with a $20 loss overall. But success, though not immediate, was right around the corner.

By the late 1890s Coca-Cola had become one of America's most popular fountain drinks. And soon thereafter it was being sold all across the United States and Canada. Advertising played a key role in Coca-Cola's early success, and for some time to come advertising would continue to contribute to its success. Its 1930s Santa advertising helped to create the modern image of Saint Nick, as well as an increased personal connection between consumers and Coke. In 1971 (while war persisted in Vietnam) a similar result was found with a television commercial showing young people gathered on a hilltop in Italy, singing, "I'd like to buy the world a Coke." More than two decades later the "Always Coca-Cola" campaign, which introduced the very popular Coke-drinking polar bears, also ended with positive results. But advertising success would not come so easily in the future.

"Always Coca-Cola" continued through 2000, when it was replaced by "Coca-Cola. Enjoy." Neither campaign met with success. In 2001 Coca-Cola launched "Life Tastes Good," but the campaign was pulled in the wake of the terrorist attacks of September 11, 2001. Largely because of consumers' increasing preference for healthier beverages, sales of Coca-Cola were steadily declining. But perhaps consumers simply missed the polar bears and the entertaining campaign that featured them. With the thought that consumers might be won over by another successful advertising campaign, Coca-Cola threw millions into its 2003 "Real" advertising campaign.

TARGET MARKET

Since the 1990s Coke Classic had experienced a decrease in market share and volume in the beverage industry, especially among its younger consumers. Largely as a result of a nationwide focus on obesity and other health issues, which resulted in healthier eating habits (especially among the young), tastes for beverages changed. According to Beverage Digest, during each year between 1996 and 2000, Coke Classic's sales either fell flat or reflected a decline. In 2000 there was a 0.1 percent increase. Younger people simply drank less cola than had earlier generations, preferring instead such beverages as bottled water, juices, and flavored sodas.

Coke's 2003 "Real" campaign targeted the younger generation the company felt it was losing. While many longtime consumers had remained loyal to Coke, most of these represented an aging population. Young adults, in contrast, had the potential to be targeted for years to come. Because of this Coke's "Real" campaign had a celebrity-heavy focus. Such big names as Cruz and Cox Arquette starred in new Coke commercials. The campaign premiered its first advertisement (the television commercial "Real Compared to What") during the 2003 American Music Awards, an event that typically drew a young audience.

COMPETITION

The Coca-Cola Company's three main competitors were PepsiCo, Cadbury Schweppes, and Nestlé. Presenting the most challenging competition for Coca-Cola was PepsiCo, which had also long ago branched out beyond cola. Coke had extended its reach far into the "other beverages" market with Fanta, Sprite, Barq's, Minute Maid, and Dasani water, among others, to a tune of some 400 drink brands in all, including coffees, juices, sports drinks, waters, and teas. PepsiCo had similarly expanded its "other beverages" market, having acquired, for example, Tropicana orange juice and Aquafina water (the top seller of bottled water in the United States). But PepsiCo also had gone beyond beverages by adding a number of nonbeverage food products, including Frito-Lay (the world's number one distributor of corn chips and potato chips) and Rold Gold Pretzels.

NINETEENTH-CENTURY BIG-BUDGET ADVERTISING

In 1892, six years after Coca-Cola was first sold (for five cents a glass, in Atlanta's Jacobs' Pharmacy), the company had an advertising budget of $11,401 (accounting for inflation this would represent $234,006.49 in 2005). A budget of this size was highly unusual for the time. The advertising agenda included hiring salesmen to travel across the country to sell Coca-Cola to various businesses. To convince business owners to order the soda, the company often offered free merchandise (for instance, prescription scales and decorative clocks) that displayed the Coca-Cola logo. Another strategy involved the distribution of coupons, which allowed proprietors to try Coca-Cola for free. Lastly Coca-Cola began placing its name everywhere: on newspapers, outdoor posters, wall and barn signs, streetcar cards, and many other places. The combination of these efforts proved quite successful, and before long Coca-Cola had become a household name.

Although Cadbury Schweppes and Nestlé might have seemed the less-obvious competitors of Coke products, they each succeeded in taking market share from the world's leading soft-drink company. Largely associated with its chocolates, British-owned Cadbury, after merging with Schweppes in 1969, became a top competitor in the beverage business. With a long list of beverages offered (including 7 UP, A&W Root Beer, Canada Dry, Dr Pepper, and Hawaiian Punch), Cadbury Schweppes managed to place itself third among the world's top soft-drink providers. Nestlé, the top-selling food company in the world, became the world leader in coffee sales and one of the world's largest makers of bottled water.

Although Coca-Cola was the world's leading soft-drink distributor (with a 44 percent market share in 2003, a clear lead over second-place PepsiCo, at 31.8 percent), some of its competitors brought in significantly larger overall sales. In 2004, for instance, Nestlé's total sales exceeded $76 billion and PepsiCo's was in the neighborhood of $29 billion, while Coca-Cola's was less than $22 billion. (Cadbury Schweppes trailed the pack at approximately $13 billion.)

MARKETING STRATEGY

Coca-Cola wanted to remind consumers of its past, its authenticity, its "realness" in its 2003 "Real" campaign. Created by ad agency Berlin Cameron/Red Cell in New York, the new slogan played off Coca-Cola slogans of the past: "It's the real thing" and "Can't beat the real thing." (Initially the job of coming up with a new campaign was assigned to both Berlin and McCann-Erikson Worldwide Advertising in New York. With its "Real" idea Berlin took over the new campaign.)

Coca-Cola believed the "Real" campaign could return the company to a level of success that at least equaled what it had experienced during its "Always Coca-Cola" campaign years of 1996–98. (During that period the Coca-Cola Company had enjoyed an average 5 percent increase in volume change per year.) To achieve this goal Coke and Berlin relied heavily on a musical and celebrity presence. The campaign debuted with a 90-second "Real Compared to What" television commercial during the 2003 American Music Awards. In the commercial R&B singer Mya and hip-hop artist Common performed a remake of the 1960s jazz hit "Compared to What." The commercial's debut followed the duo's presentation of the Coca-Cola New Music Award to the top unsigned artist or band.

In another television commercial, "Penelope," Cruz walked into a restaurant, guzzled a Coke Classic, burped, and giggled. "The Arquettes" was filmed on a set that copied the real home of Cox Arquette and husband David Arquette. A motive of the commercials was to reveal celebrities during "real" moments in which they enjoyed a "real" soft drink. In all more than a dozen television spots were filmed for the campaign. They featured a variety of celebrities, including late-night talk-show host Craig Kilborn, cyclist Lance Armstrong, and members of Coke's NASCAR racing team.

The campaign also included a major tie-in with the 2003 NCAA basketball tournament and a summer promotion that awarded families trips to theme parks. And in addition to its television presence, "Real" advertising was found in print, online, and on the radio waves. As to the latter Coke went all out, introducing "Coke FM," in which 60-second spots featured well-known musicians. In all mediums the advertising efforts represented an attempt by Coca-Cola to return to the values of past campaigns. Coke wished to reveal its "real" values. As one consulting firm adviser pointed out, the "Real" campaign was something that easily could have been done in any decade since the 1960s. The question was, would consumers go for it?

OUTCOME

Consumers were positive in their ratings of the "Real" advertisements. For instance, shortly after the campaign debuted a Harris study revealed that 25 percent of respondents claimed to "like the ads a lot," while only 8 percent claimed to "dislike the ads." Of those who liked the ads "a lot," the largest presence was among 25- to 29-year-olds, followed by 18- to 24-year-olds. Thus Coke's target market had indeed been reached. Financially, though, the campaign did not measure so successfully. Coca-Cola finished 2003 with a small decline in volume, down 0.2 percent from 2002. The results for Coke Classic were far less desirable: a 3 percent decrease from 2002.

Regardless of the popularity of the "Real" campaign, which generated a multitude of positive press, there was not much hope to promote Coke Classic in a marketplace that was squeezing out sugary colas. Contrary to the campaign's message, consumers, who had been seeking healthier, lighter drinks, might actually have preferred the "unreal" thing. This could later be demonstrated by the notable success of Diet Coke with Lime (2004) and the introduction of other varieties of Diet Coke by 2005, including calorie-free Coca-Cola Zero (designed to taste more like Coke Classic than like Diet Coke).

Even as the "Real" campaign did not send consumers in droves to purchase Coke Classic, Coca-Cola hoped the campaign's popularity would have lasting effects, prompting consumers to purchase the Coca-Cola brand product that better suited their tastes. To launch the new, healthier version of the classic, the 2005 Coca-Cola Zero campaign ("Everybody Chill") took an approach similar to that of the "Real" campaign by reviving the 1971 "I'd Like to Buy the World a Coke" television spot. Thus "Everybody Chill" repeated the trend of looking to the past in the quest to find future customers.

YOU ARE WHAT YOU DRINK CAMPAIGN

OVERVIEW

The marketing of diet products has been fraught with unique challenges because of their focus on physical appearance. Issues such as cultural ideals of beauty, physical health, gender roles, sexuality, and personal identity all hover implicitly or explicitly around the diet products phenomenon. Such concerns constituted only one minefield for the Coca-Cola Company in its advertising of Diet Coke. Another was the word "diet" itself, associated with self-denial. By the mid-1990s few foods or drinks other than diet sodas still carried the label. New products that had no negative "diet" connotations, such as iced teas and flavored waters, began to take market share. Yet Diet Coke's brand equity was entrenched and powerful. Diet Coke, along with regular Coke, was a flagship product for Coca-Cola. Thus, Coca-Cola needed to maintain and strengthen a positive association based on Diet Coke's already significant market share, as well as to maintain and increase that share.

In 1995 Coca-Cola dropped Diet Coke's longtime tag line "Just for the taste of it" and shifted focus from taste to the less direct, lifestyle-oriented benefits of drinking Diet Coke. The company tapped its agency, Lowe & Partners/SMS of New York, for an ad campaign estimated to cost $40 million and that comprised three television spots demonstrating the positive effects of drinking Diet Coke. Using the tag line "You are what you drink," the campaign opened in May 1997 and aired across the United States as well as in the United Kingdom, Canada, South Africa, and Australia. But the campaign's message and humor were misunderstood, negative feedback was received, and Lowe and Coca-Cola quickly retrenched with new spots. These problems occurred, in large part, because of the difficulty of navigating through the treacherous sea of issues attached to the marketing of products tagged "diet."

HISTORICAL CONTEXT

Diet colas had been on the market over 10 years when Coca-Cola introduced Diet Coke in 1982. In the 1960s and 1970s the R. C. Cola Company pioneered the diet cola product category. PepsiCo introduced Diet Pepsi in the 1970s as well. Diet Coke's launch was one of the most successful ever; it rapidly took the lead in market share for diet colas. Better taste was part of that success, as Diet Coke was the first diet cola to use the artificial sweetener NutraSweet. Hence, its first tag line "Just for the taste of it" promoted this benefit. The tag line was to be used on and off for a decade. By April 1988 Diet Coke held 10.1 percent of the $40 billion soft drink market based on supermarket sales, while Diet Pepsi held 6.9 percent.

The diet soft drink category hit its stride in the 1980s, expanding to 30 percent of the soft drink market. During that decade, diet colas drove the growth of the soft drink market, with consumption growing four to five times faster than for sugared sodas. This coincided with changes occurring among the baby boomers: they were aging, and they began exercising with a vengeance and watching calories. But they did not want to give up flavor. "Having it all," it seemed, included undiminishing beauty and fitness as well as enjoyment of food and drink. The tag "Just for the taste of it" fit this mind-set. The implication that the products' taste was good enough to be appreciated for its own sake neutralized the negative association of the word "diet."

The swift growth of the diet drink category stopped abruptly in the 1990s. Sales stayed relatively flat, while the growth of sugared sodas went up. In 1990 diet colas accounted for 21.3 percent of cola sales; this fell to 18.7 percent by 1996. According to USA Today, "both Coca-Cola and Pepsi saw their diet cola shares dip in retail stores two-tenths of a percentage point during the first half of 1997."

Several analysts identified key factors in the sluggish 1990s diet drink sales. John Sicher of Beverage Digest, speaking to USA Today, mentioned "the strong performances by bottled waters and the fact that many dieters now focus more on fat than calories." In the same article, Michael Bellas of Beverage Marketing noted that "health-conscious consumers also have some misgivings about artificial sweeteners and caffeine." Manny Goldman, a Paine Webber analyst speaking on National Public Radio's Morning Edition in May 1997, commented that in the 1990s "people were becoming a little more self-indulgent, and they were concerned with satisfying their own basal desires, like things that taste good. They were willing to take on some calories to do that." The baby boomers were actually mellowing out. The fight against the effects of time and gravity was ultimately unwinnable, so they chose to adapt. In the meantime, a new market, Generation X, was emerging, and their very different mind-set had to be addressed if Diet Coke was to maintain or improve market share.

As these forces played out, Senior Vice President of Marketing Sergio Zyman guided the company's marketing style. Often described as brilliant, mercurial, and temperamental, he was dubbed by Cynthia Mitchell of The Atlanta Journal and Constitution "one of the architects of contemporary advertising." Zyman became known as the person who launched Diet Coke, a huge and immediate success. This was followed in 1993 by the launch of New Coke, a huge and immediate failure. Acting as fall guy, Zyman left the company.

Zyman's approach to the marketing process was innovative and iconoclastic. For example, he increased Coke's agency network to over two dozen shops. Moreover, he rapidly changed the marketing of Diet Coke, a strategy complicated by the fact that the market for diet soft drinks was itself rapidly changing. "It is unpredictability that has confused diet Coke's message to consumers," concluded Benzera and Parpis of BrandWeek.

A summary of the major advertising campaigns of the 1990s illustrates this unpredictability and the resulting fragmentation of brand image. In January 1990 a series of 30-second Diet Coke ads featured celebrities saying goodbye to sugared Pepsi Cola in favor of Diet Coke. The campaign's theme was "The move is on." This was a clear effort to grab soft drink market share: Diet Coke was third overall with 8.9 percent, and Pepsi Cola was second with 18.3 percent. In January 1993 Diet Coke dropped the tag line "Just for the taste of it" and presented two new slogans: "One awesome calorie" and "Taste it all," splitting the message into two different directions. A famous—or infamous—1994 spot created by Lowe & Partners reversed stereotypical gender roles by having office women ogle a shirtless construction worker drinking a Diet Coke on his break.

In 1995 Zyman returned to Coca-Cola and resumed his marketing of Diet Coke. He was "charged with shaking up the company's marketing efforts," noted Mitchell. It is questionable whether the company needed shaking up as much as it needed focus. One relatively conceptual 1995 spot that received critical approval featured a swimming elephant; it was created by the Minneapolis agency Fallon McElligot. Although visually engaging, the spot failed to mesh thematically with other Diet Coke commercials. Another spot produced the same year took a decidedly nonesoteric approach, featuring supermodel Stephanie Seymour dismissing a male admirer at a lunch counter. Diet Coke did grow in 1995 by 3.6 percent, compared with less than 2 percent for other diet soft drinks, but the growth was less than that of Coca-Cola's other soft drinks. And given that the 1995 Diet Coke sales were flat in grocery stores, convenience stores, and gas stations, the miscellany of commercials was not working. Diet Coke's share of the soft drink market dropped three-tenths of a percent from 1991 to 1995.

In 1996 Coke spent $72 million on commercials for Diet Coke. A 1996 campaign from Lowe featured variations on the "Just for the taste of it" jingle, such as "Just for the fun of it." Diet Coke sponsored the Grammy Awards in 1996 and based an early 1997 promotion, "Diet Coke Untapped," on that sponsorship. Then in January 1997 Diet Coke started an $18 million-plus campaign featuring music stars and prizes.

The varied nature of the market required several types of ads. Yet the campaign needed an overarching plan allowing its impact to build over time. This would have required a disciplined strategic partnership between Coca-Cola and the primary agency, Lowe, with consistent direction provided by Coca-Cola as a foundation for the agency's sustained creative activity.

TARGET MARKET

Part of the difficulty of marketing Diet Coke resided in the diversity of its market, each segment of which had it own hot spots and red flags. Because by 1997 the taste issue was no longer news, Coca-Cola needed to focus on the concerns of Diet Coke drinkers and potential drinkers. The company teamed with Lowe early that year to create three new television spots with the tag line "You are what you drink." The spots were based on the premise that the product helped people to look and feel their best.

Specifically, the effort was targeted at what Coca-Cola identified as three "attitudinal groups," distilled from the diverse Diet Coke market. The "fit and confidents" were the younger and hipper group, 20-something men and women who did not need to diet but feared gaining weight. The "reluctant dieters" were men and women in their 30s who wanted to look good without sacrificing taste. The "aggressive dieters" were women 35 and over who worked hard to stay fit. Coca-Cola intended this effort not only to spur greater usage of Diet Coke among current Diet Coke drinkers but also to bring back some lapsed users and pull in some drinkers of regular Coke as well.

COMPETITION

Although many diet sodas have tried to corner the market over the years, Diet Coke and Diet Pepsi have been locked in a head-to-head battle from the start, with Diet Coke gaining and holding the greater market share but Diet Pepsi always too close for comfort, particularly in terms of brand recognition and popularity among retail consumers. Together, Coca-Cola and Pepsi brands controlled 75 percent of the soft drink business by 1997, with their diet colas alone earning more than $10 billion in sales.

An incident occurring in the 1980s exemplifies the intensity of the Diet Coke-Diet Pepsi competition. Diet Coke at that point held 10.1 percent of the soft drink market and Diet Pepsi 6.9 percent. Pepsi produced a TV ad in which boxer Mike Tyson told reporters that Diet Pepsi "beat the taste of Diet Coke" in consumer taste tests. Tyson had just beaten Leon Spinks in a major match, which Pepsi had exclusively sponsored. Coke challenged the methodology behind the claim, demanded that Pepsi produce its research, and asked the networks to withdraw the ads (which they did not). Pepsi submitted documentation to the networks and challenged Coke's own testing methods. Another component of the $4.4 million campaign was a full-page ad in the New York Times showing Tyson holding a can of Diet Pepsi. The ad copy read, "After a couple of pops in the mouth, it was over. Diet Pepsi had won the title. In head-to-head taste tests, Diet Pepsi decisively beat the taste of Diet Coke."

The market share percentages of the two competitors shifted in the mid-1990s even more in Diet Coke's favor. In 1995 Diet Coke was third among all soft drinks in market share, with 8.8 percent, the same as the previous year. Diet Pepsi was fifth, the same place as in 1994, but lost 0.1 percent. By the last quarter of 1996 Diet Pepsi had fallen to seventh place, in spite of a 1.6 percent gain in sales volume. In its previous number four spot was Coca-Cola's soda Sprite. Just $243,000 was spent on advertising Diet Pepsi in 1996, but in early 1997 PepsiCo completely repositioned its strategy with a new $19 million campaign.

MARKETING STRATEGY

In the first half of 1997, Diet Coke kept its number three position in the soft drink lineup, diet sodas overall continued to lose market share, and Diet Pepsi launched its new campaign featuring the slogan "This is diet?" During that time Coca-Cola had performed extensive research and positioning studies that led to the articulation of a new strategy: "Diet Coke helps you look and feel your best." This was based in large part on the fact that, after all was said and done, there was nothing new, such as a better sweetener, on which to construct a more exciting message. Promoting taste alone was no longer an option. Moreover, Diet Pepsi had just launched its taste-oriented "This is diet?" ads. Lowe & Partners/SMS worked with Coca-Cola to produce three TV ads for the campaign, "Aunt Rosalina," "Blizzard," and "Queen." The campaign followed swiftly on the heels of an image revamp for the brand, executed by SBG Partners, San Francisco, which consisted of a silvery new package and new graphics for the drink. It was designed to align the brand with various consumer lifestyles and represented the first genuine strategy for the brand since 1994. Coke executives believed that "the repositioning would re-energize the static diet category," according to MediaWeek. The campaign broke on May 19, timed for the start of the summer season, and ran on network and cable.

DIET COKE TAG LINES

"Just for the taste of it": 1982–1992, 1995–1997.

"One awesome calorie": 1993.

"Taste it all": 1992.

"This is refreshment": 1994.

"You are what you drink": 1997.

The "Blizzard" spot showed two men commenting on women walking by who were bundled up against the cold. The women who drank Diet Cokes through their scarves were the ones the men favored. The "Queen" commercial showed a mirror telling a queen that she no longer was fair; rather, a girl drinking Diet Coke was.

"Aunt Rosalina," the most controversial spot in the series, was set in an Italian village. After watching a parade of beautiful, fit women who stroll by proudly holding cans of Diet Coke, a lovely little girl asks her old aunt, "If I drink Diet Coke, will I be beautiful too?" Aunt Rosalina replies, "I never had a Diet Coke, and look at me." The camera moves to reveal her to be an ugly hag. The ad was rotated with "Blizzard" and "Queen" and received far less weight—166 spots out of 844. Approximately 60 percent of the commercials were shown during primetime, 20 percent during the day, and 10 percent during late night.

The tag line for these commercials, "You are what you drink," was meant to be tongue-in-cheek and light-hearted while conveying the message that drinking Diet Coke could help the consumer look and feel good. In "Aunt Rosalina" this message was reinforced by the attractive women who were drinking Diet Coke. Intentionally they were caricatures rather than characters; the viewer was not expected to think she magically would look that way by drinking Diet Coke. In that sense the ad spoofed in a subtle way the goal of ideal physical beauty. Sergio Zyman, quoted in USA Today, explained that "this latest wave of advertising is less about well-recognized intrinsic attributes of the brand, such as taste and one-calorie refreshment. It is more about how someone feels and the self-confidence they project when they hold a Diet Coke." Zyman told The Wall Street Journal Europe that for Coke to continue to rely on the theme of "taste and one-calorie is kind of beating a dead horse" and that the aim now was to "broaden the definition of Diet Coke. I would like to see people walking around with Diet Coke." Or, as AdWeek's Debrah Goldman put it, the real message of the campaign was "to establish Diet Coke as a fashion accessory, … la Evian."

OUTCOME

Consumer and critical reaction to the commercials was fast and harsh, and the airing of "Aunt Rosalina" ended on July 20, 1997, three months after it began. Coca-Cola received letters from customers criticizing its "sexist" approach. A nationwide poll reported in USA Today of 271 adults who had seen the Diet Coke commercials showed that 10 percent of all respondents liked the ads a lot, but this fell to only 3 percent for 18-to-24 year olds. Fully 21 percent of respondents disliked the spots. But a significant percentage, 16 percent, said the commercials were very effective, and almost two-thirds considered them somewhat effective, indicating conflict over the message. Responses of critics revealed that the intended playfulness of the commercials missed the mark. The milder commentary critiqued the spots for presumptuousness and lack of subtlety. Goldman of AdWeek wrote, "These spots are a classic case of a campaign with its briefs showing. Sure, Coca-Cola wants you to be what you drink, just as other advertisers hope you are what you wear or drive…. But an advertisement's job is to elicit that reaction, not to assume it, or, worse, to pretend that it already exists."

On National Public Radio's Morning Edition, Joshua Levs questioned Coca-Cola's Bob Bertini, who presented the rationale behind the commercials. Then Levs zeroed in: "'You are what you drink'—who wants to be carbonated water, caramel color, aspartame, and potassium benzoate?" That he could even consider such a literal reading of the line—the very week the spot first aired—signaled serious problems with the commercial for Coke. Bob Garfield of Advertising Age opened his review of "Aunt Rosalina" with "This just in: Men are pigs." He interpreted the commercial as affirming that the value of women lies in their slenderness and attractiveness to men. He did not see or accept that the spot's humor actually poked fun at this attitude. The "troubling new spots," he wrote, "remind women how important Diet Coke is in their relentless pursuit of svelteness, men's attraction and self-esteem…. In the end, for all their tongue-in-cheek exaggeration, these spots don't lampoon the cult of beauty. They validate it."

The "feel your best" component of the message seemed to have evaporated. The media budget was reduced as a result of this negative response, and creative development was undertaken to rectify the situation. Lowe produced two commercials, "Big Wrestlers," which featured Sumo wrestlers who sincerely compliment each other's appearance despite their tremendous size, and "It's Him," centered on an invisible man who is admired by attractive women in a bar, presumably because of his confidence and demeanor. These new spots, however, were attempts to breathe life into positions consumers had already rejected; "look and feel your best" had died. They received little weight in the last quarter of 1997 and were shelved in early 1998.

Shortly after "Aunt Rosalina" flopped, Wieden & Kennedy of Portland, Oregon, was assigned six 30-second Diet Coke commercials in a last-ditch attempt to get some traction. This spurred media speculation that Wieden would become the new agency for the brand. The spots were not well received. After that Coca-Cola recognized the need to step back and undertake "extensive research … to determine a strategy and long-term direction for the brand." Two earlier spots produced by Lowe were aired then and continued to be aired through the summer of 1998.

In March 1998 Sergio Zyman resigned from Coca-Cola. The man who replaced Zyman, Charles S. Frenette, was Zyman's opposite in terms of personality and operations background. Frenette continued to work with Lowe & Partners. He indicated that he planned to take a longer-term strategic approach to the Coke-Lowe partnership, so critical for the marketing of Diet Coke during times of cultural and demographic upheaval.

The Coca-Cola Company

views updated Jun 27 2018

The Coca-Cola Company

310 North Avenue, NW
Atlanta, Georgia 30313
U.S.A.
(404) 676-2121

Public Company
Incorporated: September 5, 1919
Employees: 38,520
Sales: $8.669 billion
Market Value: $17,929 billion
Stock Index: New York Frankfurt Zurich Basle

The ubiquity of Coca-Cola in the world today makes it difficult to comprehend that the beverage and the company that produces it have a definite history. Now, a century after its creation, Coca-Cola is sold in approximately 140 countries and is advertised in over 80 different languages. Its red and white trademark is probably the best-known trademark on earth. And the Coca-Cola Company, the largest soft drink company in the world, which for a long time was a one-product concern, has in recent decades diversified into such industries as food products, entertainment, and clothing.

The inventor of Coca-Cola, Dr. John Styth Pemberton, came to Atlanta from Columbus, Georgia in 1869. Since 1885, when he set up a chemical laboratory and went into the patent medicine business, Atlanta has been the headquarters of the Coca-Cola Company. Pemberton invented such products as Indian Queen hair dye, Gingerine, and Triplex liver pills. In 1886 he concocted a mixture of sugar, water, and extracts of the coca leaf and the kola nut. He added caffeine to the resulting syrup so that it could be marketed as a headache remedy. Through his research Pemberton arrived at the conclusion that this medication was capable of relieving indigestion and exhaustion in addition to being refreshing and exhilarating.

The doctor and his business partners could not decide whether to market the mixture as a medicine or to extol its flavor for its own sake. In Coca-Cola: An Illustrated History, Pat Waiters cites a Coca-Cola label from 1887 which states that the drink, “makes not only a delicious... and invigorating beverage... but a valuable Brain Tonic and a cure for all nervous affections.” The label also claims that “the peculiar flavor of Coca-Cola delights every palate; it is dispensed from the soda fountain in the same manner as any fruit syrup.”

The first newspaper advertisement for Coca-Cola appeared exactly three weeks after the first batch of syrup was produced, and the famous trademark, white Spenserian script on a red background, made its debut at about this time.

Coca-Cola was not, however, immediately successful. During its first year in existence Pemberton and his partners spent $73.96 advertising this unique beverage, and made a mere $50.00 from sales. The combined pressures of poor business and ill health led Pemberton to sell two-thirds of his business in early 1888. By 1891 a successful druggist named Asa G. Candler owned the entire enterprise; it had cost him $2,300 to purchase the business. Dr. Pemberton, who died three years earlier, was never to know the enormous success his invention would have in the coming century.

Asa Candler, a religious man with excellent business sense, infused the enterprise with his personality. Candler became a notable philanthropist, incidentally associating the name of Coca-Cola with social awareness. He was also an integral part of Atlanta both as a citizen and as a leader. Candler endowed Emory University and its Wesley Memorial Hospital with more than $8 million. Indeed, the University could not have come into existence without his aid. In 1907 he prevented a real estate panic in Atlanta by purchasing $1 million worth of homes and reselling them to people of moderate income at affordable prices. During World War I Candler helped to avert a cotton crisis by using his growing wealth to stabilize the market. After he stepped down as the president of Coca-Cola he became the mayor of Atlanta, and introduced such reforms as motorizing the fire department and augmenting the water system with his private funds.

Under Candiere’s leadership, which spanned a 26 year period, the Coca-Cola Company grew quickly. Between 1888 and 1907 the factory and offices of the business were moved to eight different buildings in order to keep up with the company’s growth and expansion. As head of the company, Candler was most concerned with the quality and promotion of his product. He was particularly concerned with production of the syrup, which was boiled in kettles over a furnace and stirred by hand with large wooden paddles; in fact, he improved Pemberton’s formula with the help of a chemist, a pharmacist and a prescriptionist. In 1901, responding to complaints about the presence of minute amounts of cocaine in the Coca-Cola syrup, Candler devised the means to remove all traces of the substance. By 1905 the syrup was completely free of cocaine.

In 1892 the newly incorporated Coca-Cola Company allocated $11,401 for advertising its drink. Advertising materials included signs, free-sample tickets, and premiums such as ornate soda fountain urns, clocks, and stained-glass lampshades, all with the words “Coca-Cola” engraved upon them. These early advertising strategies initiated the most extensive promotional campaign for one product in history. Salesmen traveled the entire country selling the company’s syrup, and by 1895 Coca-Cola was being sold and consumed in every state in America. Soon it was available in some Canadian cities and in Honolulu, and plans were underway for its introduction into Mexico. By the time Asa Candler left the company, Coke had also been sold in Cuba, Jamaica, Germany, Bermuda, Puerto Rico, the Philippines, France, and England.

An event which had an enormous impact on the future and very nature of the company was the agreement made between Candler and two young lawyers that allowed them to bottle and sell Coca-Cola throughout the United States: the first bottling franchise had been established. Three years later, in 1904, the one millionth gallon of Coca-Cola syrup had been sold. In 1916 the now universally recognized, uniquely-shaped Coke bottle was invented. The management of all company advertising was assigned to the D’Arcy Advertising Agency, and the advertising budget had grown to $1 million by 1911. During this time all claims for the medicinal properties of Coca-Cola were quietly dropped from its advertisements.

World War I and the ensuing sugar rationing measures slowed down the growth of the company, but the pressure of coal rations led Candler’s son, Charles Howard, to invent a process whereby the sugar and water could be mixed without using heat. This process saved the cost of fuel, relieved the company of the need for a boiler, and saved a great amount of time: there was now no need for the syrup to go through a cooling period. This method of mixing is still in use today.

Robert Winship Woodruff became president of the company in 1923 at the age of 33. His father had purchased it from the Candler family in 1919 for $25 million, and the company went public in the same year at $40 a share. After leaving college before graduation, Woodruff held various jobs, eventually becoming the Atlanta branch manager and then the vice-president of an Atlanta motor company, before becoming the president of Coca-Cola.

Having entered the company at a time when its affairs were quite tumultuous, Woodruff worked rapidly to improve Coca Cola’s financial condition. In addition to low sales figures in 1922, he had to face the problem of animosity toward the company on the part of the bottlers as a result of an imprudent sugar purchase that management had made. This raised the price of the syrup and angered the bottlers. Woodruff was aided in particular by two men, Harrison Jones and Harold Hirsch, who were adept at maintaining good relations between the company and its bottling franchises.

Through the 1920’s and 1930’s such developments as the six-pack carton of Coke, which encouraged shoppers to purchase the drink for home consumption, coin-operated vending machines in the workplace, and the cooler designed by John Stanton expanded the domestic market considerably. And, by the end of 1930, as a result of the company’s quality control efforts, Coca-Cola tasted exactly the same everywhere.

Considered slightly eccentric, Woodruff was a fair employer and an admired philanthropist. In 1937 he donated $50,000 to Emory University for a cancer diagnosis and treatment center, and over the years gave more than $100 million to the clinic. He donated $8 million for the construction of the Atlanta Memorial Arts Center. Under his leadership the Coca-Cola Company pioneered such company benefits as group life insurance and group accident and health policies, and in 1948 introduced a retirement program.

Woodruff was to see the Coca-Cola Company through an era marked by important and varied events. Even after the stock market crashed and during the depression the company did not suffer—the result of Woodruff’s cost-cutting measures. When Prohibition was repealed, Coca-Cola continued to experience rising sales. However, it was World War II that catapulted Coca-Cola into the world market and made it one of America’s first multinational companies.

Woodruff and Archie Lee of the D’Arcy Advertising Agency worked to equate Coca-Cola with the American way of life. Advertisements had, in Candler’s era, been targeted at the wealthy population. In Woodruff’s time the advertising was aimed at all Americans. By early 1950 blacks were featured in advertisements, and by the mid1950’s there was an increase in advertising targeted at other minority groups. Advertising never reflected the problems of the world, only the good and happy life. Radio advertising began in 1927, and through the years Coca-Cola sponsored many musical programs. During World War II Woodruff announced that every man in uniform would be able to get a bottle of Coke for five cents no matter what the cost to the company. This was, intentionally or not, an extremely successful marketing maneuver, and provided Coke with good publicity. In 1943, at the request of General Eisenhower, Coca-Cola plants were set up near the fighting fronts in North Africa and eventually throughout Europe in order to help increase the morale of American soldiers. Thus, Coca-Cola was introduced into the world market.

Coke was available in Germany prior to the war, but its survival there during the war years was due to a man named Max Keith who kept the company going even when there was little Coca-Cola syrup available. Keith developed his own soft drink, using ingredients available to him, and called his beverage Fanta. By selling this beverage he kept the enterprise intact until after the war. When the war was over the company continued to market Fanta. By 1944 the Coca-Cola company had sold one billion gallons of syrup, by 1953 two billion gallons had been sold, and by 1969 the company had sold six billion gallons.

The years from after World War II to 1980 were years of extensive and rapid change. Although Woodruff stepped down officially in 1955, he still exerted a great amount of influence on the company over the coming years. There was a series of chairmen and presidents to follow before the next major figure, J. Paul Austin, took the helm in 1970; he was followed by Roberto Goizueta in 1981. In 1956, after 50 years with the D’Arcy Advertising Agency, the Coca-Cola Company turned its accounts over to McKann-Ericson and began enormous promotional campaigns. The decade of the 1950’s was a time of the greatest European expansion for the company. During this decade Coca-Cola opened approximately fifteen to twenty plants a year throughout the world.

The company also began to diversify extensively, beginning in 1960 when the Minute Maid Corporation merged with Coca-Cola. Four years later the Duncan Foods Corporation also merged with the company. In 1969 Coca-Cola acquired the Belmont Springs Water Company, Inc. which produces natural spring water and processed water for commercial and home use. The following year Aqua-Chem, Inc., producers of desalting machines and other such equipment, was acquired, and in 1977 Coca-Cola acquired the Taylor Wines Company and other wineries. These last two companies were sold later under Goizueta’s leadership.

In addition to its diversification program, the Coca-Cola Company also expanded its product line. Fanta became available in the U.S. during 1960 and was followed by the introduction of Sprite, Tab and Fresca, along with diet versions of these drinks. One reason that Coca-Cola began to introduce new beverages during the 1960’s was competition from Pepsi Cola. Pepsi’s success also motivated the Coca-Cola Company to promote its beverage with the slogan “It’s the Real Thing,” a subtle, comparative form of advertising that the company had never before employed.

Things have not always run smoothly for Coca-Cola. When Coke was first introduced to France, the communist party, as well as conservative vineyard owners, did what they could to get the product removed from the country. They were unsuccessful. Swiss breweries also felt threatened, and spread rumors about the caffeine content of the drink. More consequential was the Arab boycott in 1967 which significantly hindered the company’s relations with Israel. In 1970 the company was involved in a scandal in the United States when an NBC documentary reported on the bad housing and working conditions of Minute Maid farm laborers in Florida. In response, the company established a program that improved the workers’ situation. In 1977 it was discovered that Coca-Cola, for various reasons, had made $1.3 million in illegal payments over a period of six years, mostly to executives and government officials in foreign countries.

During the 1970’s, under the direction of chairman J. Paul Austin and president J. Lucian Smith, Coca-Cola was introduced in Russia as well as in China. To enter the China market, the company sponsored five scholarships for Chinese students at the Harvard Business School, and supported China’s soccer and table-tennis teams. The beverage also became available in Egypt in 1979, after an absence there of 12 years. Austin strongly believed in free trade and opposed boycotts. He felt that business, in terms of international relations, should be used to improve national economies, and could be a strong deterrent to war. Under Austin, Coca-Cola also started technological and educational programs in Third World countries in which it conducted business. For example, it introduced clean water technology, and sponsored sports programs in countries too poor to provide these benefits for themselves.

Austin’s emphasis was on foreign expansion. Furthermore, under Austin management of the company became more specialized. Where Woodruff was aware of all facets of the company, Austin would delegate authority to various departments. He would, for example, give general approval to an advertising scheme, but would not review it personally. Smith was responsible for the everyday operations of the company, and Austin would, among other things, set policies, negotiate with foreign countries, and direct the company’s relations with the U.S. government.

Roberto Goizueta became chairman in 1981 replacing Austin. Less than a year later he made two controversial decisions. First, he acquired Columbia Pictures for about $750 million in 1982. Goizueta thought that the entertainment field had good growth prospects, and that it would benefit from Coca-Cola’s expertise in market research. Secondly, without much consumer research, Goizueta also introduced Diet Coke to the public, risking the wellguarded trademark that until then had stood only for the original formula. Something had to be done about the sluggish domestic sales of Coca-Cola and the intense competition presented by Pepsi. In 1950 Coke had outsold Pepsi by more than 5 to 1. By 1984 Pepsi had a 22.8% share of the market and Coke had a 21.6% share. Goizueta’s decisions were correct. Diet Coke is presently American’s number one diet soft drink, and Columbia Pictures has performed well.

In 1985 Goizueta took another chance. Based on information gathered from blind taste tests, Goizueta decided to reformulate the 99-year old drink in the hope of combating Pepsi’s growing popularity. The move was not enthusiastically greeted by the American public. It appears that Goizueta did not take into account the public’s emotional attachment to the name “Coca-Cola” and all that it stands for: stability, memories, and the idea of a “golden America.” Within less than a year the company brought back the “old” Coke calling it Coca-Cola Classic. Coca-Cola continues to produce both brands (Classic Coke considerably outsells “new” Coke), and the company has gained back some of its lost share.

In September of 1987 Coca-Cola agreed to sell its entertainment business to Tri-Star Pictures, which was approximately 30% owned by Coca-Cola. In return, Coca-Cola’s interest in Tri-Star was increased to 80%. Coca-Cola’s holding in Tri-Star will be distributed as a special dividend to Coca-Cola shareholders until the company’s interest is reduced to 49%. It is expected that Tri-Star will then change its name to Columbia Pictures Entertainment, and seek its own listing on the New York Stock Exchange.

The sale of Columbia to Tri-Star was regarded by financial analysts as an attempt to increase the profitability of Coca-Cola’s entertainment company so that it could itself fund other acquisitions.

In an article in the New York Times during 1984 Goizueta stated that he saw Coke’s challenge as “continuing the growth in profits of highly successful main businesses, and (those) it may choose to enter, at a rate substantially in excess of inflation, in order to give shareholders an above average total return on their investment.” Goizueta projected that by 1990 his new strategy would nearly double the company’s net income to $1 billion.

Principal Subsidiaries

Caribbean Refrescos, Inc.; Coca-Cola Bottling Company of Baltimore; Coca-Cola Bottling Enterprises, Inc.; Coca-Cola Bottling Company of California; Atlanta Coca-Cola Bottling Company; Coca-Cola Bottling Company of New England; Coca-Cola Bottling Company of Michigan; Ore-Cal Coca-Cola Bottling Co.; Coca-Cola Interamerican Corp.; L Communications; P Communications; Tandem Acquisition Corp.; Coca-Cola Export Corp.; Refreshment Sales Inc. The company also lists subsidiaries in the following countries: Argentina, Brazil, Canada, Cayman Islands, Colombia, West Germany, Italy, Japan, Spain, and the United Kingdom.

The Coca-Cola Company

views updated May 23 2018

The Coca-Cola Company

310 North Avenue, NW
Atlanta, Georgia 30313
U.S.A.
(404) 676-2121
Fax: (404) 676-6792

Public Company
Incorporated: 1892
Employees: 31,300
Sales: $13.96 billion
Stock Exchanges: New York Boston Cincinnati Midwest Pacific Philadelphia Frankfurt Zurich Geneva Bern Basel Lausanne
SICs: 2087 Flavoring Extracts and Syrups, Nee; 2037 Frozen Fruits and Vegetables; 2033 Canned Fruits and Vegetables

The Coca-Cola Company has consistently ranked among Fortune magazine’s five most admired companies and, with a market value of $58 billion, stood as the fourth-largest company in America and the largest consumer goods company in 1993. That year, after over a century in business, the firm topped $2 billion in annual net income for the first time in its history. Coca-Cola’s red and white trademark is probably the best-known brand symbol on earth; the firm’s flagship product holds 57 percent of the worldwide cola segment. The company’s family of brands held an overwhelming 44 percent of the global soft drink market and were advertised in over 80 different languages by the last decade of the twentieth century. Coca-Cola also operated the world’s most pervasive distribution system, offering the Coca-Cola brand in over 195 countries worldwide. The company’s success has been credited to proficiency in four basic areas: consumer marketing, infrastructure (production and distribution), product packaging, and customer (or vendor) marketing.

The inventor of Coca-Cola, Dr. John Styth Pemberton, came to Atlanta from Columbus, Georgia, in 1869. Since 1885, when he set up a chemical laboratory and went into the patent medicine business, Atlanta has been the headquarters of the Coca-Cola Company. Pemberton invented such products as Indian Queen hair dye, Gingerine, and Triplex liver pills. In 1886, he concocted a mixture of sugar, water, and extracts of the coca leaf and the kola nut. He added caffeine to the resulting syrup so that it could be marketed as a headache remedy. Through his research Pemberton arrived at the conclusion that this medication was capable of relieving indigestion and exhaustion in addition to being refreshing and exhilarating.

The doctor and his business partners could not decide whether to market the mixture as a medicine or to extol its flavor for its own sake, so they did both. In Coca-Cola: An Illustrated History, Pat Walters cited a Coca-Cola label from 1887 which stated that the drink, “makes not only a delicious... and invigorating beverage ... but a valuable Brain Tonic and a cure for all nervous affections.” The label also claimed that “the peculiar flavor of Coca-Cola delights every palate; it is dispensed from the soda fountain in the same manner as any fruit syrup.” The first newspaper advertisement for Coca-Cola appeared exactly three weeks after the first batch of syrup was produced, and the famous trademark, white Spenserian script on a red background, made its debut at about the same time.

Coca-Cola was not, however, immediately successful. During its first year in existence, Pemberton and his partners spent $73.96 advertising their unique beverage, but made only $50.00 from sales. The combined pressures of poor business and ill health led Pemberton to sell two-thirds of his business in early 1888. By 1891, a successful druggist named Asa G. Candler owned the entire enterprise. It had cost him $2,300. Dr. Pemberton, who died three years earlier, was never to know the enormous success his invention would have in the coming century.

Asa Candler, a religious man with excellent business sense, infused the enterprise with his personality. Candler became a notable philanthropist, incidentally associating the name of Coca-Cola with social awareness. He was also an integral part of Atlanta both as a citizen and as a leader. Candler endowed Emory University and its Wesley Memorial Hospital with more than $8 million. Indeed, the University could not have come into existence without his aid. In 1907, he prevented a real estate panic in Atlanta by purchasing $1 million worth of homes and reselling them to people of moderate income at affordable prices. During World War I, Candler helped to avert a cotton crisis by using his growing wealth to stabilize the market. After he stepped down as the president of Coca-Cola, he became the mayor of Atlanta and introduced such reforms as motorizing the fire department and augmenting the water system with his private funds.

In 1892, the newly incorporated Coca-Cola Company allocated $11,401 for advertising its drink. Advertising materials included signs, free sample tickets, and premiums such as ornate soda fountain urns, clocks, and stained-glass lampshades, all with the words “Coca-Cola” engraved upon them. These early advertising strategies initiated the most extensive promotional campaign for one product in history. Salesmen traveled the entire country selling the company’s syrup, and by 1895 Coca-Cola was being sold and consumed in every state in America. Soon it was available in some Canadian cities and in Honolulu, and plans were underway for its introduction into Mexico. By the time Asa Candler left the company, Coke had also been sold in Cuba, Jamaica, Germany, Bermuda, Puerto Rico, the Philippines, France, and England.

An event which had an enormous impact on the future and very nature of the company was the agreement made between Candler and two young lawyers that allowed them to bottle and sell Coca-Cola throughout the United States: the first bottling franchise had been established. Three years later, in 1904, the one-millionth gallon of Coca-Cola syrup had been sold. In 1916, the now universally recognized, uniquely-shaped Coke bottle was invented. The management of all company advertising was assigned to the D’Arcy Advertising Agency, and the advertising budget had ballooned to $1 million by 1911. During this time, all claims for the medicinal properties of Coca-Cola were quietly dropped from its advertisements.

Through the 1920s and 1930s such developments as the six-pack carton of Coke, which encouraged shoppers to purchase the drink for home consumption, coin-operated vending machines in the work place, and the cooler designed by John Stanton expanded the domestic market considerably. And, by the end of 1930, as a result of the company’s quality control efforts, Coca-Cola tasted exactly the same everywhere.

Considered slightly eccentric, Woodruff was a fair employer and an admired philanthropist. In 1937, he donated $50,000 to Emory University for a cancer diagnosis and treatment center, and over the years gave more than $ 100 million to the clinic. He donated $8 million for the construction of the Atlanta Memorial Arts Center. Under his leadership the Coca-Cola Company pioneered such company benefits as group life insurance and group accident and health policies, and in 1948 introduced a retirement program.

Woodruff was to see the Coca-Cola Company through an era marked by important and varied events. Even during the Depression the company did not suffer thanks to Woodruffs cost cutting measures. When Prohibition was repealed, Coca-Cola continued to experience rising sales. However, it was World War II that catapulted Coca-Cola into the world market and made it one of America’s first multinational companies.

Woodruff and Archie Lee of the D’Arcy Advertising Agency worked to equate Coca-Cola with the American way of life. Advertisements had, in Candler’s era, been targeted at the wealthy population. In Woodruffs time the advertising was aimed at all Americans. By early 1950, blacks were featured in advertisements, and by the mid-1950s there was an increase in advertising targeted at other minority groups. Advertising never reflected the problems of the world, only the good and happy life. Radio advertising began in 1927, and through the years Coca-Cola sponsored many musical programs. During World War II, Woodruff announced that every man in uniform would be able to get a bottle of Coke for five cents no matter what the cost to the company. This was an extremely successful marketing maneuver, and provided Coke with good publicity. In 1943, at the request of General Eisenhower, Coca-Cola plants were set up near the fighting fronts in North Africa and eventually throughout Europe in order to help increase the morale of American soldiers. Thus, Coca-Cola was introduced into the world market.

The years from the end of World War II to 1980 were years of extensive and rapid change. Although Woodruff stepped down officially in 1955, he still exerted a great amount of influence on the company over the coming years. There was a series of chairmen and presidents to follow before the next major figure, J. Paul Austin, took the helm in 1970; he was followed by Roberto Goizueta in 1981. In 1956. after 50 years with the D’Arcy Advertising Agency, the Coca-Cola Company turned its accounts over to McCann-Ericson and began enormous promotional campaigns. The decade of the 1950s was a time of the greatest European expansion for the company. During this decade Coca-Cola opened approximately fifteen to twenty plants a year throughout the world.

The company also began to diversify extensively, beginning in 1960, when the Minute Maid Corporation merged with Coca-Cola. Four years later the Duncan Foods Corporation also merged with the company. In 1969, Coca-Cola acquired the Belmont Springs Water Company, Inc., which produced natural spring water and processed water for commercial and home use. The following year the company purchased Aqua-Chem, Inc., producers of desalting machines and other such equipment, and in 1977 Coca-Cola acquired the Taylor Wines Company and other wineries. These last two companies were sold later under Goizueta’s leadership.

In addition to its diversification program, the Coca-Cola Company also expanded its product line. Fanta became available in the United States during 1960 and was followed by the introduction of Sprite, Tab, and Fresca, along with diet versions of these drinks. One reason that Coca-Cola began to introduce new beverages during the 1960s was competition from Pepsi Cola, sold by PepsiCo. Pepsi’s success also motivated the Coca-Cola Company to promote its beverage with the slogan “It’s the Real Thing,” a subtle, comparative form of advertising that the company had never before employed.

Things have not always run smoothly for Coca-Cola. When Coke was first introduced to France, the Communist party, as well as conservative vineyard owners, did what they could to get the product removed from the country. They were unsuccessful. Swiss breweries also felt threatened, and spread rumors about the caffeine content of the drink. More consequential was the Arab boycott in 1967 which significantly hindered the company’s relations with Israel. In 1970, the company was involved in a scandal in the United States when an NBC documentary reported on the bad housing and working conditions of Minute Maid farm laborers in Florida. In response, the company established a program that improved the workers’ situation. In 1977, it was discovered that Coca-Cola, for various reasons, had made $1.3 million in illegal payments over a period of six years, mostly to executives and government officials in foreign countries.

During the 1970s, under the direction of chairman J. Paul Austin and president J. Lucian Smith, Coca-Cola was introduced in Russia as well as in China. To enter the Chinese market, the company sponsored five scholarships for Chinese students at the Harvard Business School, and supported China’s soccer and table-tennis teams. The beverage also became available in Egypt in 1979, after an absence there of 12 years. Austin strongly believed in free trade and opposed boycotts. He felt that business, in terms of international relations, should be used to improve national economies, and could be a strong deterrent to war. Under Austin, Coca-Cola also started technological and educational programs in the Third World countries in which it conducted business, introducing clean water technology and sponsoring sports programs in countries too poor to provide these benefits for themselves.

Roberto Goizueta became chairman in 1981, replacing Austin. Less than a year later he made two controversial decisions. First, he acquired Columbia Pictures for about $750 million in 1982. Goizueta thought that the entertainment field had good growth prospects, and that it would benefit from Coca-Cola’s expertise in market research. Secondly, without much consumer research, Goizueta also introduced Diet Coke to the public, risking the well-guarded trademark that until then had stood only for the original formula. Something had to be done about the sluggish domestic sales of Coca-Cola and the intense competition presented by Pepsi. In 1950, Coke had outsold Pepsi by more than five to one, but by 1984 Pepsi had a 22.8 percent share of the market while Coke had a 21.6 percent share.

In 1985, Goizueta took another chance. Based on information gathered from blind taste tests, Goizueta decided to reformulate the 99-year old drink in the hope of combating Pepsi’s growing popularity. The move was not enthusiastically greeted by the American public. Apparently Goizueta did not take into account the public’s emotional attachment to the name “Coca-Cola” and all that it stood for: stability, memories, and the idea of a “golden America.” Within less than a year the company brought back the “old” Coke, calling it Coca-Cola Classic.

In September of 1987, Coca-Cola agreed to sell its entertainment business to Tri-Star Pictures, 30 percent of which was owned by Coca-Cola. In return, Coca-Cola’s interest in Tri-Star was increased to 80 percent. Coca-Cola’s holding in Tri-Star was gradually distributed as a special dividend to Coca-Cola shareholders until the company’s interest was reduced to a minority, when Tri-Star changed its name to Columbia Pictures Entertainment and sought its own listing on the New York Stock Exchange.

In a 1984 article in the New York Times, Goizueta stated that he saw Coca-Cola’s challenge as “continuing the growth in profits of highly successful main businesses, and [those] it may choose to enter, at a rate substantially in excess of inflation, in order to give shareholders an above average total return on their investment.” Goizueta projected that by 1990 his new strategy would nearly double the company’s net income to $1 billion. His prediction came true in 1988.

In the mid-1980s, Coca-Cola entered the bottling business, which had long been dominated by family-operated independents. Coke began repurchasing interests in bottlers worldwide with a view toward providing those bottlers with financial and managerial strength, improving operating efficiencies and promoting expansion into emerging international markets. The trend started domestically, when the parent company formed Coca-Cola Enterprises Inc. through the acquisition and consolidation of two large bottlers in the South and West in 1986. The parent company acquired over thirty bottlers worldwide from 1983 to 1993. By then, the market value of the company’s publicly-traded bottlers exceeded the company’s book value by $1.5 billion.

Called “one of the world’s most sophisticated and powerful marketing organizations,” the company’s schemes for the 1990s included the 1993 global launch of the “Always Coca-Cola” advertising theme. The new campaign was formulated by Creative Artists Agency, which took over much of the brand’s business in 1992 from longtime agency McCann-Erickson Worldwide. In addition to the new campaign, a 32-page catalog of about 400 licensed garments, toys, and gift items featuring Coke slogans or advertising themes was released. The 1994 introduction of a PET plastic bottle in the brand’s distinctive, contour shape resulted from corporate marketing research indicating that an overwhelming 84 percent of consumers would choose the trademarked bottle over a generic straight-walled bottle. But the company’s primary challenge for the last decade of the twentieth century came in the diet segment, where top-ranking Diet Coke was losing share to ready-to-drink teas, bottled waters, and other “New Age” beverages, which were perceived as healthier and more natural than traditional soft drinks.

In 1993, CEO Goizueta articulated Coca-Cola’s three priorities: the creation of stockholder value, maintenance and building of trademark strength, and emphasis on the long-term. Although the company already had a substantial global presence, great potential for geographic development remained. Coca-Cola’s 1993 annual report noted that the company’s top 16 markets accounted for 80 percent of its volume, but that those markets comprised only 20 percent of the world’s population. Goizueta emphasized that “every single one of the world’s 5.6 billion people [will] get thirsty” every day, and that Coca-Cola planned to do everything in its power to make its branded soft drinks “pleasantly inescapable.”

Principal Subsidiaries:

Bottling Investments Corp.; Carolina Coca-Cola Holding Co.; CRI Holdings, Inc.; Coca-Cola Financial Corp.; Coca-Cola Interamerican Corp.; Coca-Cola Overseas Parent Ltd.; CTI Holdings, Inc.; Coca-Cola Export Corp.; Refreshment Product Services, Inc.; Beverage Products Ltd.; S.A. Coca-Cola Beverages (1991) N.V.; Coca-Cola S.A. Industrial, Comercial Y Financiera; Coca-Cola Industries Ltda.; Recofarma Industria Quimica E Farmaceutica, Ldta.; Coca-Cola Ltd.; Atlantic Industries Ltd.; Conco Ltd.; Coca-Cola de Colombia, S.A.; Coca-Cola GmbH; International Beverages ltd.; Coca-Cola (Japan) Company, Ltd.; Coca-Cola Korea Company, Ltd.; Coca-Cola Nigeria Ltd.; Coca-Cola Poland, Ltd.; Minute Maid S.A.

The Coca-Cola Company

views updated May 17 2018

The Coca-Cola Company

One Coca-Cola Plaza
Atlanta, Georgia 30313-2420
U.S.A.
Telephone: (404) 676-2121
Toll Free: (800) 468-7856
Fax: (404) 676-6792
Web site: http://www.cocacola.com

Public Company
Incorporated: 1892
Employees: 49,000
Sales: $21.04 billion (2003)
Stock Exchanges: New York Boston Chicago National (NSX) Pacific Philadelphia
Ticker Symbol: KO
NAIC: 312111 Soft Drink Manufacturing; 311930 Flavoring Syrup and Concentrate Manufacturing; 311411 Frozen Fruit, Juice, and Vegetable Manufacturing; 311920 Coffee and Tea Manufacturing; 312112 Bottled Water Manufacturing

The Coca-Cola Company is the world's number one maker of soft drinks, selling 1.3 billion beverage servings every day. Coca-Cola's red and white trademark is probably the best-known brand symbol in the world. Headquartered since its founding in Atlanta, Coca-Cola makes four of the top five soft drinks in the world, Coca-Cola at number one and Diet Coke, Fanta, and Sprite at numbers three through five. The company also operates one of the world's most pervasive distribution systems, offering its nearly 400 beverage products in more than 200 countries worldwide. Nearly 70 percent of sales are generated outside North America, with revenues breaking down as follows: North America, 30 percent; Europe, Eurasia, and the Middle East, 31 percent; Asia, 24 percent; Latin America (including Mexico), 10 percent; and Africa, 4 percent. Among the company's products are a variety of carbonated beverages (including the aforementioned brands and many others, such as Fresca, Barq's, and Cherry and Vanilla Coke); sports drinks (POWERade and Aquarius); juices and juice drinks (Minute Maid, Fruitopia, Hi-C, Five Alive, Qoo, Maaza, and Bibo); teas (Sokenbicha and Marocha); coffees (Georgia); and bottled waters (Ciel, Dasani, and Bonaqua). Moreover, the company holds the rights to the Schweppes, Canada Dry, Dr Pepper, and Crush brands outside of North America, Europe, and Australia. Coca-Cola's development into one of the most powerful and admired firms in the world has been credited to proficiency in four basic areas: consumer marketing, infrastructure (production and distribution), product packaging, and customer (or vendor) marketing.

Creation of a Brand Legend

The pharmacist and his business partners could not decide whether to market the mixture as a medicine or to extol its flavor for its own sake, so they did both. In Coca-Cola: An Illustrated History, Pat Watters cited a Coca-Cola label from 1887 which stated that the drink, "makes not only a delicious . . . and invigorating beverage . . . but a valuable Brain Tonic and a cure for all nervous affections." The label also claimed that "the peculiar flavor of Coca-Cola delights every palate; it is dispensed from the soda fountain in the same manner as any fruit syrup." The first newspaper advertisement for Coca-Cola appeared exactly three weeks after the first batch of syrup was produced, and the famous trademark, white Spenserian script on a red background, made its debut at about the same time.

Coca-Cola was not, however, immediately successful. During the product's first year in existence, Pemberton and his partners spent around $74 in advertising their unique beverage and made only $50 in sales. The combined pressures of poor business and ill health led Pemberton to sell two-thirds of his business in early 1888. By 1891, a successful druggist named Asa G. Candler owned the entire enterprise. It had cost him $2,300. Dr. Pemberton, who died three years earlier, was never to know the enormous success his invention would have in the coming century.

Candler, a religious man with excellent business sense, infused the enterprise with his personality. Candler became a notable philanthropist, associating the name of Coca-Cola with social awareness in the process. He was also an integral part of Atlanta both as a citizen and as a leader. Candler endowed Emory University and its Wesley Memorial Hospital with more than $8 million. Indeed, the university could not have come into existence without his aid. In 1907 he prevented a real estate panic in Atlanta by purchasing $1 million worth of homes and reselling them to people of moderate income at affordable prices. During World War I, Candler helped to avert a cotton crisis by using his growing wealth to stabilize the market. After he stepped down as the president of Coca-Cola, he became the mayor of Atlanta and introduced such reforms as motorizing the fire department and augmenting the water system with his private funds.

1891–1919: Rapid Growth Under the Candlers

Under Candler's leadership, which spanned a 26-year period, the Coca-Cola Company grew quickly. Between 1888 and 1907, the factory and offices of the business were moved to eight different buildings in order to keep up with the company's growth and expansion. As head of the company, Candler was most concerned with the quality and promotion of his product. He was particularly concerned with production of the syrup, which was boiled in kettles over a furnace and stirred by hand with large wooden paddles. He improved Pemberton's formula with the help of a chemist, a pharmacist, and a prescriptionist. In 1901, responding to complaints about the presence of minute amounts of cocaine in the Coca-Cola syrup, Candler devised the means to remove all traces of the substance. By 1905, the syrup was completely free of cocaine.

In 1892, the newly incorporated Coca-Cola Company allocated $11,401 for advertising its drink. Advertising materials included signs, free sample tickets, and premiums such as ornate soda fountain urns, clocks, and stained-glass lampshades, all with the words "Coca-Cola" engraved upon them. These early advertising strategies initiated the most extensive promotional campaign for one product in history. Salesmen traveled the entire country selling the company's syrup, and by 1895 Coca-Cola was being sold and consumed in every state in the nation. Soon it was available in some Canadian cities and in Honolulu, and plans were underway for its introduction into Mexico. By the time Asa Candler left the company in 1916, Coke had also been sold in Cuba, Jamaica, Germany, Bermuda, Puerto Rico, the Philippines, France, and England.

An event that had an enormous impact on the future and very nature of the company was the 1899 agreement made between Candler and two young lawyers that allowed them to bottle and sell Coca-Cola throughout the United States: the first bottling franchise had been established. Five years later, in 1904, the one-millionth gallon of Coca-Cola syrup had been sold. In 1916 the now universally recognized, uniquely contour-shaped Coke bottle was invented. The management of all company advertising was assigned to the D'Arcy Advertising Agency, and the advertising budget had ballooned to $1 million by 1911. During this time, all claims for the medicinal properties of Coca-Cola were quietly dropped from its advertisements.

World War I and the ensuing sugar rationing measures slowed the growth of the company, but the pressure of coal rations led Candler's son, Charles Howard, to invent a process whereby the sugar and water could be mixed without using heat. This process saved the cost of fuel, relieved the company of the need for a boiler, and saved a great amount of time since there was no need for the syrup to go through a cooling period. The company continued to use this method of mixing into the 1990s.

Although Candler was fond of his company, he became disillusioned with it in 1916 and retired. One of the reasons for this decision was the new tax laws which, in Candler's words, did not allow for "the accumulation of surplus in excess of the amount necessary for profitable and safe conduct of our particular business." (It has also been suggested that Candler refused to implement the modernization of company facilities.)

1919–55: The Woodruff Era

Having entered the company at a time when its affairs were quite tumultuous, Woodruff worked rapidly to improve Coca-Cola's financial condition. In addition to low sales figures in 1922, he had to face the problem of animosity toward the company on the part of the bottlers as a result of an imprudent sugar purchase that management had made. This raised the price of the syrup and angered the bottlers. Woodruff was aided in particular by two men, Harrison Jones and Harold Hirsch, who were adept at maintaining good relations between the company and its bottling franchises.

Company Perspectives:

The Coca-Cola Company exists to benefit and refresh everyone it touches.

The basic proposition of our business is simple, solid and timeless. When we bring refreshment, value, joy and fun to our stakeholders, then we successfully nurture and protect our brands, particularly Coca-Cola. That is the key to fulfilling our ultimate obligation to provide consistently attractive returns to the owners of our business.

Through the 1920s and 1930s such developments as the six-pack carton of Coke, which encouraged shoppers to purchase the drink for home consumption, coin-operated vending machines in the workplace, and the cooler designed by John Stanton expanded the domestic market considerably. Also, by the end of 1930, as a result of the company's quality control efforts, Coca-Cola tasted exactly the same everywhere.

Woodruff was to see the Coca-Cola Company through an era marked by important and varied events. Even during the Great Depression the company did not suffer thanks to Woodruff's cost-cutting measures. When Prohibition was repealed, Coca-Cola continued to experience rising sales. It was World War II, however, that catapulted Coca-Cola into the world market and made it one of the country's first multinational companies.

Woodruff and Archie Lee of the D'Arcy Advertising Agency worked to equate Coca-Cola with the American way of life. Advertisements had, in Candler's era, been targeted at the wealthy population. In Woodruff's time the advertising was aimed at all Americans. By early 1950, African Americans were featured in advertisements, and by the mid-1950s there was an increase in advertising targeted at other minority groups. Advertising never reflected the problems of the world, only the good and happy life. Radio advertising began in 1927, and through the years Coca-Cola sponsored many musical programs. During World War II, Woodruff announced that every man in uniform would be able to get a bottle of Coke for five cents no matter what the cost to the company. This was an extremely successful marketing maneuver and provided Coke with good publicity. In 1943, at the request of General Eisenhower, Coca-Cola plants were set up near the fighting fronts in North Africa and eventually throughout Europe in order to help increase the morale of U.S. soldiers. Thus, Coca-Cola was introduced to the world.

Key Dates:

1886:: Pharmacist Dr. John Styth Pemberton concocts Coca-Cola, a mixture of sugar, water, caffeine, and extracts of the coca leaf and the kola nut.
1891:: Asa G. Candler, a druggist, gains complete control of Pemberton's enterprise.
1892:: Candler incorporates The Coca-Cola Company.
1899:: The first bottling franchise is established.
1905:: Coca-Cola syrup is completely free of cocaine.
1916:: The unique, contour-shaped Coke bottle is introduced.
1919:: Ernest Woodruff and an investor group buy the company for $25 million; the company goes public at $40 per share.
1923:: Robert Winship Woodruff becomes president of the firm.
1943:: Coca-Cola plants are set up near fighting fronts in North Africa and Europe, helping boost American GI spirits and introduce Coke to the world market.
1960:: The Minute Maid Corporation is acquired.
1961:: Sprite makes its debut.
1981:: Roberto Goizueta becomes chairman.
1982:: Columbia Pictures is acquired for $750 million; Diet Coke is introduced to the market.
1985:: Coca-Cola is reformulated; New Coke is rejected by consumers, and the company brings back the original formula, calling it Coca-Cola Classic.
1987:: Company sells its entertainment business to Tri-Star Pictures.
1990:: Sales surpass the $10 billion mark for the first time.
1997:: Douglas Ivester succeeds Goizueta as chairman and CEO.
1999:: Company acquires the rights to sell Schweppes, Canada Dry, Dr Pepper, and Crush brands in 157 countries, not including the United States, Canada, Mexico, and most of Europe.
2000:: New CEO Douglas N. Daft launches major restructuring involving job cuts of 5,200.
2002:: Company launches Vanilla Coke.
2004:: E. Neville Isdell is named chairman and CEO.

1955–81: Diversification, New Products, and Foreign Expansion

The years from the end of World War II to the early 1980s were years of extensive and rapid change. Although Woodruff stepped down officially in 1955, he still exerted a great amount of influence on the company over the coming years. There were a series of chairmen and presidents to follow before the next major figure, J. Paul Austin, took the helm in 1970; he was followed by Roberto Goizueta in 1981. In 1956, after 50 years with the D'Arcy Advertising Agency, the Coca-Cola Company turned its accounts over to McCann-Erickson and began enormous promotional campaigns. The decade of the 1950s was a time of the greatest European expansion for the company. During this decade Coca-Cola opened approximately 15 to 20 plants a year throughout the world.

In addition to its diversification program, the Coca-Cola Company also expanded its product line. Fanta became available in the United States during 1960 and was followed by the introduction of Sprite (1961), TAB (1963), and Fresca (1966), along with diet versions of these drinks. One reason that Coca-Cola began to introduce new beverages during the 1960s was competition from Pepsi Cola, sold by PepsiCo, Inc. Pepsi's success also motivated the Coca-Cola Company to promote its beverage with the slogan "It's the Real Thing," a subtle, comparative form of advertising that the company had never before employed.

Things did not always run smoothly for Coca-Cola. When Coke was first introduced to France, the Communist party, as well as conservative vineyard owners, did what they could to get the product removed from the country. They were unsuccessful. Swiss breweries also felt threatened, and spread rumors about the caffeine content of the drink. More consequential was the Arab boycott in 1967 which significantly hindered the company's relations with Israel. In 1970 the company was involved in a scandal in the United States when an NBC documentary reported on the bad housing and working conditions of Minute Maid farm laborers in Florida. In response, the company established a program that improved the workers' situation. In 1977 it was discovered that Coca-Cola, for various reasons, had made $1.3 million in illegal payments over a period of six years, mostly to executives and government officials in foreign countries.

During the 1970s, under the direction of Chairman J. Paul Austin and President J. Lucian Smith, Coca-Cola was introduced in Russia as well as in China. To enter the Chinese market, the company sponsored five scholarships for Chinese students at the Harvard Business School, and supported China's soccer and table-tennis teams. The beverage also became available in Egypt in 1979, after an absence there of 12 years. Austin strongly believed in free trade and opposed boycotts. He felt that business, in terms of international relations, should be used to improve national economies, and could be a strong deterrent to war. Under Austin, Coca-Cola also started technological and educational programs in the Third World countries in which it conducted business, introducing clean water technology and sponsoring sports programs in countries too poor to provide these benefits for themselves.

Austin's emphasis was on foreign expansion. Furthermore, under Austin's management the company became more specialized. Where Woodruff was aware of all facets of the company, Austin would delegate authority to various departments. For instance, he would give general approval to an advertising scheme, but would not review it personally. Smith was responsible for the everyday operations of the company, and Austin would, among other things, set policies, negotiate with foreign countries, and direct the company's relations with the U.S. government.

1981–97: The Goizueta Era

Roberto Goizueta became chairman in 1981, replacing Austin. The Cuban immigrant immediately shook up what had become a risk-averse, tradition-obsessed, barely profitable company. Less than a year after becoming chairman, he made two controversial decisions. First, he acquired Columbia Pictures for about $750 million in 1982. Goizueta thought that the entertainment field had good growth prospects, and that it would benefit from Coca-Cola's expertise in market research. Secondly, without much consumer research, Goizueta introduced Diet Coke to the public, risking the well-guarded trademark that until then had stood only for the original formula. Something had to be done about the sluggish domestic sales of Coca-Cola and the intense competition presented by Pepsi. In 1950, Coke had outsold Pepsi by more than five to one, but by 1984 Pepsi had a 22.8 percent share of the market while Coke had a 21.6 percent share. Goizueta's second 1982 gamble paid off handsomely when Diet Coke went on to become the most successful consumer product launch of the 1980s, and eventually the number three soft drink in the entire world.

In 1985 Goizueta took another chance. Based on information gathered from blind taste tests, Goizueta decided to reformulate the 99-year-old drink in the hope of combating Pepsi's growing popularity. The change to New Coke was not enthusiastically greeted by the U.S. public. Apparently Goizueta did not take into account the public's emotional attachment to the name "Coca-Cola" and all that it stood for: stability, memories, and the idea of a "golden America." Within less than a year the company brought back the "old" Coke, calling it Coca-Cola Classic. New Coke was universally considered the biggest consumer product blunder of the 1980s, but it was also viewed in a longer term perspective as a positive thing, because of the massive amount of free publicity that the Coke brand received from the debacle.

In September 1987, Coca-Cola agreed to sell its entertainment business to TriStar Pictures, 30 percent of which was owned by Coca-Cola. In return, Coca-Cola's interest in TriStar was increased to 80 percent. Coca-Cola's holding in TriStar was gradually distributed as a special dividend to Coca-Cola shareholders until the company's interest was reduced to a minority, when TriStar changed its name to Columbia Pictures Entertainment and sought its own listing on the New York Stock Exchange. Although the company's flirtation with entertainment appeared to be ill-advised, Coca-Cola ended up with $1 billion in profits from its short-term venture.

In a 1984 article in the New York Times, Goizueta stated that he saw Coca-Cola's challenge as "continuing the growth in profits of highly successful main businesses, and [those] it may choose to enter, at a rate substantially in excess of inflation, in order to give shareholders an above average total return on their investment." Goizueta projected that by 1990 his new strategy would nearly double the company's net income to $1 billion. His prediction came true in 1988. Two years later revenues surpassed the $10 billion mark.

In the mid-1980s, Coca-Cola reentered the bottling business, which had long been dominated by family-operated independents. Coca-Cola began repurchasing interests in bottlers worldwide with a view toward providing those bottlers with financial and managerial strength, improving operating efficiencies, and promoting expansion into emerging international markets. The trend started domestically, when the parent company formed Coca-Cola Enterprises Inc. through the acquisition and consolidation of two large bottlers in the South and West in 1986. The parent company acquired more than 30 bottlers worldwide from 1983 to 1993. By then, the market value of the company's publicly traded bottlers exceeded the company's book value by $1.5 billion.

Called "one of the world's most sophisticated and powerful marketing organizations," the company's schemes for the 1990s included the 1993 global launch of the "Always Coca-Cola" advertising theme. The new campaign was formulated by Creative Artists Agency, which took over much of the brand's business in 1992 from longtime agency McCann-Erickson Worldwide. In addition to the new campaign, a 32-page catalog of about 400 licensed garments, toys, and gift items featuring Coke slogans or advertising themes was released. The 1994 introduction of a PET plastic bottle in the brand's distinctive, contour shape resulted from corporate marketing research indicating that an overwhelming 84 percent of consumers would choose the trademarked bottle over a generic straight-walled bottle. But the company's primary challenge for the last decade of the 20th century came in the diet segment, where top-ranking Diet Coke was losing share to ready-to-drink teas, bottled waters, and other "New Age" beverages, which were perceived as healthier and more natural than traditional soft drinks. Coca-Cola fought back by introducing its own new alternative drinks, including POWERade (1990), the company's first sports drink, and the Fruitopia line (1994). In 1992 the company and Nestlé S.A. of Switzerland formed a 50–50 joint venture, Coca-Cola Nestlé, Refreshment Company, to produce ready-to-drink tea and coffee beverages under the Nestea and Nescafé, brand names. Also during this time, Coca-Cola purchased Barq's, a maker of root beer and other soft drinks.

Goizueta died of lung cancer in October 1997, having revitalized and awakened what had been a sleeping giant. Goizueta had turned the company into one of the most admired companies in the world, racking up an impressive list of accomplishments during his 16-year tenure. Coca-Cola's share of the global soft drink market was approaching 50 percent, while in the United States Coke had increased its share to 42 percent, overtaking and far surpassing Pepsi's 31 percent. Revenues increased from $4.8 billion in 1981 to $18.55 billion in 1996; net income grew from $500 million to $3.49 billion over the same period. Perhaps Goizueta's most important—and influential—contribution to the storied history of Coca-Cola was his relentless focus on the company's shareholders. The numbers clearly showed that he delivered for his company's owners: return on equity increased from 20 percent to 60 percent, while the market value of the Coca-Cola Company made a tremendous increase, from $4.3 billion to $147 billion. Perhaps most telling, a $1,000 investment in Coca-Cola in 1981 was worth, assuming that dividends were reinvested, $62,000 by the time of Goizueta's death.

Challenging and Stormy Times in the Late 1990s

Goizueta's right-hand man, Douglas Ivester, was given the unenviable task of succeeding perhaps the most admired chief executive in the United States; Ivester's reign turned out to be both brief and stormy. Although Coca-Cola remained steadily profitable, it was beset by one problem after another in the late 1990s. Having restructured its worldwide bottling operations under Goizueta, the firm moved into a new phase of growth based on the acquisition of other companies' brands. Its already dominant market share and a sometimes arrogant and aggressive approach to acquisition led some countries, particularly in Europe, to take a hard line toward the company. In late 1997, for example, Coca-Cola announced it would acquire the Orangina brand in France from Paris-based Pernod Ricard for about $890 million. French authorities, who had fined Coca-Cola for anticompetitive practices earlier that year, blocked the purchase. In December 1998 Coca-Cola announced that it would purchase several soft drink brands—including Schweppes, Dr Pepper, Canada Dry, and Crush—outside the United States, France, and South Africa from Cadbury Schweppes plc for $1.85 billion. After encountering regulatory resistance in Europe, Australia, Mexico, and Canada, the two companies in July 1999 received regulatory approval for a new scaled-down deal valued at about $700 million, which included 155 countries but not the United States, Norway, Switzerland, and the member states of the European Union with the exception of the United Kingdom, Ireland, and Greece. Later in 1999 separate agreements were reached that gave Coca-Cola the Schweppes brands in South Africa and New Zealand.

With nearly two-thirds of sales originating outside North America, Coca-Cola was hit particularly hard by the global economic crisis of the late 1990s, which moved from Asia to Russia to Latin America. In Russia, where the company had invested $750 million from 1991 through the end of the decade, sales fell about 60 percent from August 1998, when the value of the ruble crashed, to September 1999. Rather than retreating from the world stage, however, Ivester viewed the downturn as an opportunity to make additional foreign investments at bargain prices, essentially sacrificing the short term for potentially huge long-term gains. While the economic crisis was still wreaking havoc, Coca-Cola was faced with another crisis in June 1998 when several dozen Belgian schoolchildren became ill after drinking Coke that had been made with contaminated carbon dioxide. Soon, 14 million cases of Coca-Cola products were recalled in five European countries in the largest recall in company history, and France and Belgium placed a temporary ban on the company's products. The crisis, though short-lived, was a public relations disaster because company officials appeared to wait too long to take the situation seriously, admit that there had been a manufacturing error, and apologize to its customers. Meanwhile, around this same time, four current and former employees had filed a racial discrimination suit against the firm in the United States, a suit that was later granted class-action status.

Despite the seemingly endless string of challenges the company faced in the late 1990s, Coca-Cola was also moving forward with new initiatives. In February 1999 the company announced plans to launch its first bottled water brand in North America. Dasani was described as a "purified, non-carbonated water enhanced with minerals." In October 1999 the company announced that it would redesign the look of its Coca-Cola Classic brand in 2000 in an attempt to revitalize the flagship's stagnant sales. Labels would continue to feature the iconic contour bottle but with a cap popped off and soda fizzing out. In addition, the Coke Classic slogan "Always," which had been used since 1993, would be replaced with the tag line "Enjoy," which had been used on Coke bottles periodically for decades. The company also planned to increase the appearances of the eight-ounce contour bottle, in a particularly nostalgic move.

The renewed emphasis on this classic brand icon and the resurrection of the "Enjoy" slogan seemed to be a fitting way for a U.S.—if not global—institution to launch itself into the new millennium. But the company ended 1999 with the surprising news that the beleaguered Ivester would retire in early 2000 after just two and a half years at the helm—a tenure marked perhaps most tellingly by seven straight quarters of earnings declines. Taking over was Douglas N. Daft, a native Australian and 30-year Coke veteran who had headed the company's operating group covering the Middle and Far East and Africa; he was named president and chief operating officer in December 1999 before becoming chairman and CEO the following February.

Continuing Struggles in the Early 2000s

Daft's first year was a hectic one. In January 2000 the company announced a drastic restructuring based on a plan drafted by a Daft-led team. Coca-Cola said it would lay off about 6,000 employees, representing a slashing of the workforce by 20 percent—the largest cutbacks in Coke history. The cuts were later scaled back to about 5,200, but the company still took about $1.6 billion in one-time charges for a plan that aimed to save $300 million in operating costs per year. The restructuring, which centered on marketing, sales, and customer support jobs, was envisioned as a slashing of bureaucracy in an attempt to create a more decentralized company, one in which ideas could more readily bubble up from managers in the field rather than those at the Atlanta headquarters. In November 2000 Daft engineered a tentative deal to take over the Quaker Oats Company for $15.75 billion. This would have added to the Coke portfolio the Gatorade brand, which dominated the sports drink sector, a perennial Coke weakness, and would also have complemented the company's strategy of strengthening its lineup of noncarbonated beverages. But at the last minute, Coca-Cola's board pulled the plug on the deal, mainly concerned that the price was too high. The company's arch-rival PepsiCo quickly swooped in to complete a $13.4 billion acquisition of Quaker Oats. Also in November, Coca-Cola reached an agreement to settle the race-discrimination class-action lawsuit that had been brought against it. The company agreed to a $192.5 million settlement and also to have certain of its employment practices overseen by an outside task force. About 2,000 current and former African American employees were eligible for settlement awards.

Another of Daft's main objectives was pumping up an arid new product pipeline, but he garnered only mixed results. The company found moderate success with the 2001-debuting Diet Coke with Lemon, before making a much bigger splash with Vanilla Coke one year later. The latter received the firm's largest new product launch since the New Coke debacle. To supplement these meager advances—and particularly to try to capture a greater share of the noncarbonated beverage sector, which was growing at a much faster clip than the stagnant carbonated sector—Daft turned to partnerships as a potential source of renewed growth. In January 2001 an agreement was reached with Nestlé S.A. to form a joint venture called Beverage Partners Worldwide. Within a couple of years, this venture was marketing ready-to-drink tea (Nestea, Belté, Yang Guang, and several other brands) and coffee (Nescafé, Taster's Choice, and Georgia Club) products in the United States and about 45 other countries. Coca-Cola and the Procter & Gamble Company (P&G) agreed in March 2001 to create a $4 billion joint venture that would have joined Coke's Minute Maid brand and distribution network with P&G's snack and juice brands. However, Coca-Cola pulled out of the deal just a few months later, having decided to try to build the Minute Maid brand on its own. Then in July 2002 Coca-Cola and Groupe Danone formed a joint venture to produce, market, and distribute Danone's Dannon and Sparkletts bottled-water brands in the United States. In a separate deal, Coke took over the U.S. marketing, sales, and distribution of Danone's Evian water brand, the French firm's biggest seller.

In March 2003 the company slashed another 1,000 jobs from the payroll, half of them at headquarters. Also that year, Coca-Cola was the recipient of more negative publicity when it was revealed that several midlevel employees had rigged a marketing test for Frozen Coke done three years earlier at Burger King restaurants in the Richmond, Virginia, area. The scandal led to the departure of the head of Coke's fountain division, and the company issued an apology to Burger King and its franchisees and offered to pay them $21 million. An early 2004 launch of the Dasani brand into the European market was aborted when bottles in Britain were found to contain elevated levels of bromate, a substance that can cause cancer after long-term exposure.

This latest product recall came as Coca-Cola was in the midst of yet another change at the top. In February 2004 Daft announced his intention to retire following a search for a new chief executive. After considering a number of outside candidates, the company hired a semi-outsider, E. Neville Isdell, in June 2004. An Irish citizen who had grown up in Africa, Isdell was a former senior executive at Coke who had led the company's push into a number of new markets around the globe in the 1980s and 1990s. He left the company in 1998 to become chairman of Coca-Cola Beverages, a major Coke bottler, and then retired in 2001. The new leader was faced with many of the same challenges that his predecessor struggled with little success to overcome: improving marketing, forging better relations with the company's bottlers, and satisfying consumer demand for more healthful beverage products, particularly of the noncarbonated variety.

Principal Subsidiaries

The Minute Maid Company.

Principal Divisions

Foodservice and Hospitality; North & West Africa; Southern & East Africa; East & South Asia; China; India; Southeast & West Asia; Philippines; Japan; South Pacific & Korea; Central Europe, Eurasia & Middle East; Central Europe & Russia; Italy & Alpine; Southeast Europe & Gulf; Germany & Nordic; Northwest Europe; Iberian; Brazil; Latin Center; Mexico; South Latin.

Principal Competitors

PepsiCo, Inc.; Nestlé S.A.; Cadbury Schweppes plc; Groupe Danone; Kraft Foods Inc.

The Coca-Cola Company

views updated May 23 2018

The Coca-Cola Company

founded: 1892

Contact Information:

headquarters: 1 coca-cola plz.
atlanta, ga 30313 phone: (404)676-2121 fax: (404)676-6792 url: http://www.cocacola.com http://www.coke.com

OVERVIEW

The Coca-Cola Company is the largest soft drink marketer in the world, holding 47 percent of the global market for soft drinks. It also produces other beverage and food products. About 90 percent of the company's revenues come from sales of beverages and 10 percent from food products. The Coca-Cola Company is very active internationally. While the company has very strong sales in the United States, 68 percent of its soft drink products are sold outside of North America. The Coca-Cola Company is regarded as one of the best managed companies in the world: in Fortune magazine's fifteenth Annual Survey of corporate reputations, published in March 1997, The Coca-Cola Company was ranked first based on its strong marketing skills, the quality of its products and services, financial soundness, corporate and environmental responsibility, and overall business performance.

COMPANY FINANCES

In its earnings statement, Coca-Cola reported another year of record volume and earnings per share in 1997. Earnings per share increased 19 percent in 1997. Revenue for 1997 totaled $18.87 billion and has risen steadily over the years. In 1993 total revenue was $13.96 billion, and rose in 1994 to $16.17 billion. In 1995 total revenue jumped to $18.02 billion and 1996 saw total revenue at $18.55 billion.

Worldwide, Coca-Cola's unit case volume increased 14 percent and gallon shipments grew 15 percent in the first quarter of 1998. Some revenue increases were offset significantly by the impact of a stronger U.S. dollar. The U.S. dollar in 1997-98 was about 10 percent stronger than a weighted average of foreign currencies in 1996.

Excluding the impact of non-recurring items, operating income grew 10 percent. Additionally, on a local currency basis, Coca-Cola continued to invest aggressively in volume-building marketing initiatives.

Coca-Cola purchased approximately 20 million shares of its own common stock in 1997. In the first quarter of 1998 it purchased another 4 million shares. Since January 1984, Coca-Cola has repurchased 31 percent of its outstanding common shares to create a cumulative total of more than 1 billion shares, at an average cost of approximately $11 per share.

ANALYSTS' OPINIONS

The Coca-Cola Company has long been a favorite of stock market analysts, and many were recommending that investors buy its stock in the mid-1990s. Prudential Securities stated that the company was "being extremely aggressive in certain markets in an effort to capitalize on PepsiCo's vulnerability and overall strategy of shrinking its international soft drink business."

Wheat, First Securities also recommended that clients buy Coca-Cola stock (as of October 1996), citing the continued strength of its marketing programs, particularly the Olympics, innovative packaging initiatives, and the introduction of new products worldwide. Wheat, First Securities also said that The Coca-Cola Company also benefited from strong volume growth produced by solid increases in unit sales of its major brands. The increases were the result of innovative packaging and effective promotional support.

HISTORY

As a company Coca-Cola has grown consistently for more than 100 years. From one soft drink sold in an Atlanta pharmacy, The Coca-Cola Company has grown into an enormous worldwide marketer of many brands of soft drinks and food products. If all the Coca-Cola ever produced were placed in regular size bottles and lined up to form a four-lane highway, that road would wrap around the earth more than 81 times.

Coca-Cola was first produced in Atlanta, Georgia, on May 8, 1886, when pharmacist Dr. John Styth Pemberton mixed a caramel-colored syrup in a three-legged brass kettle in his backyard. After it was combined with carbonated water, Pemberton began selling the product as a fountain drink at Jacob's Pharmacy in Atlanta. The famous "Coca-Cola formula" has been a closely-guarded secret ever since, held in a bank vault.

In 1891 Asa Candler acquired total control of Coca-Cola. The following year Candler and several partners formed The Coca-Cola Company. The new company used advertising and promotion to make Coca-Cola available everywhere, a strategy still used today.

In 1894 the first bottled Coca-Cola was sold. Bottling operations were soon established throughout the United States. Since then The Coca-Cola Company has sold its products in two main ways: through fountain (post-mix) operations, such as those found at movie theaters and fast food restaurants, and through sales of bottled and canned products in stores and vending machines.

In 1919 The Coca-Cola Company was sold by the Candler group for $25 million to Atlanta banker Ernest Woodruff. Four years later Ernest Woodruff's son, Robert Woodruff, was elected president of the company. He would lead the company for more than six decades.

The Coca-Cola Company first moved outside the soft drink industry when it bought the Minute Maid Company in 1960. Other food companies were acquired and merged into what is now Coca-Cola Foods. Today the company is still based in Atlanta, where in 1996 it opened a new tourist attraction, "The World of Coca-Cola Pavilion."

STRATEGY

The Coca-Cola Company's business strategy is simple: make its products available everywhere in the world and trigger purchases (through advertising and promotion) as often and in as many ways as possible. This strategy is clearly successful: in the late 1990s Coca-Cola was one of the world's most recognized brand names and was available in almost 200 countries. The company is famous for its advertising, which has always followed new trends.

As a global company, Coca-Cola adjusts its advertising and marketing programs for different regions of the world. For example, in new markets such as Poland and India, the company focuses on setting up bottling systems. In emerging markets, the company works to build enough bottling plants to meet the rapidly growing demand for its products. In highly developed markets, such as Europe and North America, the company focuses on developing new products, such as low-calorie and "alternative" beverages.

The heart of the Coca-Cola business strategy is its bottler system, which the company says is the single factor most responsible for the global popularity of its products. Many Coca-Cola bottling plants are locally owned and operated by independent business people who hold licenses to bottle and sell Coca-Cola products. However, the largest U.S. bottler—Coca-Cola Enterprises—is 44-percent owned by The Coca-Cola Company. Coca-Cola Enterprises controls 2,500 local bottlers and accounts for about 55 percent of all U.S. bottling volume.

INFLUENCES

The Coca-Cola Company has enjoyed an almost continuous history of success and growth. From 1886 to 1960 it marketed only Coca-Cola, but did so very successfully. In 1960 it introduced its first non-cola products, the Fanta line of flavors, which were followed by other new soft drinks in the 1960s and 1970s. In 1982 it launched diet Coke, the first extension of the Coca-Cola brand name. Diet Coke was extremely successful, and within one year of being introduced was the largest selling low-calorie soft drink in America.

Even Coca-Cola's biggest marketing mistake turned into a success. In 1985, after extensive taste testing, the company announced that it had reformulated its main Coca-Cola brand. Thousands of Coca-Cola drinkers protested the change, and after extensive publicity and media coverage, the company re-introduced the "old" Coca-Cola as Coca-Cola classic. The new product was re-named Coke II. Coca-Cola classic continues to be the top selling soft drink in the United States.

It took 22 years for the Coca-Cola Company to sell the first billion servings of Coca-Cola. In 1998 they were selling a billion drinks a day.

CURRENT TRENDS

Nearly 775 million servings of Coca-Cola products are consumed around the world each day. The company's goal is to increase that number in three ways: by bringing Coca-Cola products to the few places on earth where it is not available; increasing consumption of Coca-Cola products where they are available; and developing new products. While North America still accounts for one-third of the company's business, in the mid- to late 1990s much of the company's sales growth has come from overseas.

To expand global distribution of its products, the company is aggressively developing bottling networks worldwide through new agreements and joint ventures. The Coca-Cola Company has also developed new products to challenge rivals in other beverage areas. For example, in 1994 the company introduced Fruitopia to compete with Snapple's successful "new age" beverages, and its POWERade beverage competes with Quaker's Gatorade brand.

The result of all these trends is that The Coca-Cola Company continues to expand not only in international markets, but in the United States as well. For example, in the first six months of 1996, the company accounted for 80 percent of the total soft drink industry expansion in the United States, according to an analysis by the Morgan Stanley Company. The Coca-Cola Company's goal is to account for 50 percent of the U.S. soft drink market by 2001.

PRODUCTS

Products of The Coca-Cola Company include: Coca-Cola classic, caffeine free Coca-Cola classic, diet Coke, caffeine free diet Coke, Sprite, diet Sprite, Cherry Coke, diet Cherry Coke, Barq's, Coca-Cola, Fanta, Fresca, Fruitopia, Hi-C fruit drinks, Mello Yello, Minute Maid and diet Minute Maid soft drinks, Minute Maid juices, Mr. PiBB, Powerade, Surge, and TAB.

The Coca-Cola Company was also able to breathe new life into its older products in the mid-1990s. In 1996 Sprite was the fastest-growing soft drink brand in the United States and became the fourth best selling brand, due mostly to a sarcastic ad campaign that made fun of the "hype" in other soft drink ads. Sprite's slogan was "Image is nothing. Thirst is Everything. Obey your thirst."

In early 1997 The Coca-Cola Company introduced Surge, a highly caffeinated citrus beverage designed to compete with Pepsi's Mountain Dew. As of April 1997 the company had spent $13 million to advertise the product. However, R.J. Corr Naturals Inc. was suing Coca-Cola over its advertising theme, "Feed the Rush." Corr said that the advertising infringes on one of its products, Ginseng Rush.

FAST FACTS: About The Coca-Cola Company

Ownership: The Coca-Cola Company is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: KO

Officers: M. Douglas Ivester, Chmn. & CEO, 50, $2,856,250; Charles S. Frenette, Senior VP, Chief Marketing Officer, 45; James E. Chestnut, Sr. VP & CFO, 47

Employees: 29,500 (1997)

Principal Subsidiary Companies: The Coca-Cola Company operates subsidiaries including Coca-Cola Foods and Coca-Cola Enterprises.

Chief Competitors: Because of its global approach to the beverage market, Coca-Cola competes with a variety of companies. Some primary competitors include: Chiquita Brands; Cadbury Shwepppes; Cott; Philip Morris; Ocean Spray; PepsiCo Inc.; Seagram; Procter & Gamble; Triarc; and Unilever.

Citra, a thirst-quenching citrus soft drink, was nationally launched after successful initial regional market testing, and is available in nearly 50 percent of the United States. A multi-dimensional marketing campaign featuring Citra's "No Thirst is Safe" theme was launched at the beginning of 1998.

CORPORATE CITIZENSHIP

The Coca-Cola company believes it is appropriate to give back to the communities in which they do business. This concept of mutual benefit has resulted in cultural exchanges, sports sponsorships, financial support, and technological support in developing nations.

In all of Coca-Cola's sports affiliations, its support for the International Olympic Games is most visible and historic. Coca-Cola has been supplying its products to the Olympics since 1928, and is the official soft drink supplier.

In 1984 The Coca-Cola Company created the Coca-Cola Foundation to increase its ongoing aid for educational excellence. The Coca-Cola Foundation's mission is to nurture and promote a favorable environment by globally supporting educational and related community needs. Through its scholarships and minority education, the Foundation helps students to increase their chances of getting a college education. And because Coca-Cola believes the arts add value to a total public school curriculum, the Foundation also supports education in the arts for both teachers and students. The Foundation also supports interdisciplinary educational programs that provide multilingual and multicultural experiences. Some of the global programs provided by the Coca-Cola Foundation include the Coca-Cola World Fund at Yale, the King Juan Carlos I Center for Spanish Studies at New York University, and a consortium of three universities: Clark Atlanta University, University of Nairobe in Kenya, and the University of Zimbabwe in Harare.

Concerned with the environment, the Coca-Cola Company has adopted a set of environmental policies. An environmental management system ensures implementation of the policies to protect and preserve the environment in such areas as recycling, source reduction, water and energy conservation, and wastewater quality.

Coca-Cola introduced the first two-liter plastic bottle made with 25 percent recycled plastics after winning rare FDA approval to package food in recycled packaging. Coca-Cola also uses recycled aluminum; both are important practices that reduce waste and conserve energy.

Coca-Cola was criticized in the early 1990s for its plan to construct plantations for its Minute Maid products on land that was a tropical rain forest in Belize. Immediately Coca-Cola sold some of the land and set aside the rest for environmental conservation.

CHRONOLOGY: Key Dates for The Coca-Cola Company

1886:: John Pemberton invents Coca-Cola
1891:: Asa Candler buys Coca-Cola from Pemberton
1899:: Candler sells bottling rights to Benjamin Thomas and John Whitehead
1894:: The first bottled Coca-Cola is sold
1916:: Candler retires
1919:: Company is sold to Ernest Woodruff for $25 million
1923:: Ernest's son Robert Woodruff becomes president
1928:: Coca-Cola begins supplying Coke to the Olympic Games
1940:: Coca-Cola is bottled in 45 countries
1941:: Introduces the slogan "It's the Real Thing"
1960:: Buys Minute Maid Company; introduces Fanta
1961:: Introduces Sprite
1963:: Introduced Tab
1967:: Forms the Coca-Cola Company Foods Division
1972:: Introduces Mr. PiBB
1979:: Introduces Mello Yello
1981:: Roberto Goizueta becomes president
1982:: Introduces Diet Coke; acquires Columbia Pictures
1984:: Creates the Coca-Cola Foundation
1985:: Changes the Coca-Cola recipe; introduces Cherry Coke
1990:: Introduces POWERaDE
1994:: Introduces Fruitopia
1995:: Buys Barq's root beer
1996:: Opens "The World of Coca-Cola Pavillion"
1997:: Introduces Surge; Goizueta dies and is replaced by Douglas Ivester
1998:: Company sells one billion drinks per day

GLOBAL PRESENCE

Global markets are key to The Coca-Cola Company's continued growth. The company's first venture into international markets was in the early 1900s, when Coca-Cola was introduced in Canada. In the 1920s the company made its first serious effort to expand sales of Coca-Cola around the world. Overseas sales climbed rapidly and by 1940 Coca-Cola was botled in more than 45 countries. Coca-Cola's global business was helped greatly by the company's commitment to supply U.S. servicemen with Coca-Cola during World War II. After the war, distribution systems were in place in many countries to market Coca-Cola. By the mid-1970s more than half of Coca-Cola's global sales came from outside the United States.

The Coca-Cola Company's global presence is strong and growing. Unit case sales increased 10 percent in 1993, including strong growth in China and Mexico. The company's international soft drink operating income was up 18 percent in 1994. In 1997 The Coca-Cola Company was propelled to a strong worldwide unit case volume gain of 8 percent, which amounts to over 600 million additional cases. Sprite also continued its explosive global growth with worldwide unit case sales advancing 13 percent.

In the mid-1990s Coca-Cola expanded further into Central China, forming a partnership with several private and state-owned Chinese firms to build a new bottling plant in Zhengzou. That plant opened in 1996. Coca-Cola products were available to 80 percent of China's 1.2 billion people as of 1996. In 1997 Coca-Cola's sales volume grew 30 percent.

Much of Coca-Cola's international success in the mid-1990s came at the expense of its biggest rival, PepsiCo, which in 1996 suffered large declines in its soft drink product sales. In 1996 The Coca-Cola Company scored a major gain when it convinced the Cisneros Group in Venezuela to stop bottling Pepsi products and begin bottling Coca-Cola products.

Volume growth is a primary measure of the health of Coca-Cola's global business. In Latin America, unit case volume increased 12 percent and gallon shipments grew 9 percent in 1997. In the Middle East and Far East, unit case volume increased 10 percent and gallon shipments grew 14 percent in 1997. In eastern Europe the company expanded its market share in the mid-1990s, and in 1996 it controlled 65 percent of the market in Romania, more than 50 percent in Hungary, more than 30 percent in the Ukraine, and 37 percent in Poland.

FLUID INTAKE STRATEGIES

By the mid-1990s, the average American was drinking 343 eight-ounce servings of Coke products per year. Mexico followed, with 322 Cokes per year, and Australia beat out Norway by gulping down 292 Cokes per year. At the other end of the spectrum, the average Chinese person drank only four Cokes, and the average Indian drank only two Cokes annually. It's easy to see why Coke has targeted China and India as areas where the company can expand significantly. In their 1995 annual report, Coke sketched out their corporate strategy by asking the question, "What's our most underdeveloped market?" Their answer is quite simple, "The human body." As Coke explained to its shareholders, "We're focused on expanding our share of every human being's fluid intake . . . as long as people consume approximately 64 ounces of fluid per day, our growth opportunities will be virtually unlimited."

A COKE BY ANY OTHER NAME?

Coca-Cola is a company whose products are known and sold throughout the world; in fact it is probably one of the most recognizable "symbols" of America. However, for all its marketing and distribution efforts, it has run into some problems in overseas markets. For example, when Coca-Cola was first shipped to China, the company wanted to name the product something that, when pronounced, sounded like "Coca-Cola." The only problem was that the characters they decided to use meant "bite the wax tadpole," in Chinese. The company later changed to a set of characters that translates to "happiness in the mouth." It wasn't pronounced like Coca-Cola, but at least it meant something a bit more pleasant.

EMPLOYMENT

The Coca-Cola Company maintains a long-standing commitment to equal opportunity and affirmative action. The company values the diversity of its employees and strives to create a working environment that is free from discrimination and harassment with respect to race, sex, color, national origin, religion, age, and sexual orientation. Coca-Cola also makes reasonable accomodations to qualified individuals with disabilities.

Coca-Cola fosters the growth of minority and women-owned businesses through its targeted purchasing programs. Two women and 2 people of color sit on the 14 member board of directors. Also, there are 4 women and 6 people of color among the top 38 officers at Coca-Cola.

SOURCES OF INFORMATION

Bibliography

coca-cola company 1995 annual report. atlanta, ga: the coca-cola company, 1996.

coca-cola company 1997 annual report. atlanta, ga: the coca-cola company, 1997.

coca-cola company 1998 first quarter financial statement. atlanta, ga: the coca-cola company, 1998.

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mcbride, sandra. "news from china: the world's largest population meets the world's two greatest soft drink marketers." beverage world, september 1996.

sellers, patricia. "how coke is kicking pepsi's can (competition between coca-cola and pepsico)." fortune, 28 october 1996.

prendergast, mark. "for god, country and coca-cola: the unauthorized history of the great american soft drink and the company that makes it." new york: scribners, 1993.