* Califano recalled that “it was the most hostile hearing room I’ve ever walked into, jammed with interns and angry students.” A young, dark-haired woman with glasses came up to him and said, “You shit, you’ve sold out.” It was Hillary Clinton.
* The famed “Hilltop” commercial was nearly a disaster. During the first take, 1,200 Italian orphans waited in steaming buses in the rain for their appearance. Eventually, they rioted, threw Coke bottles at the director, and began to rock a Coke truck, trying to overturn it. As Bill Backer recalled, it demonstrated the exact opposite of what was intended—“lack of harmony and understanding between diverse peoples.”
* At Coca-Cola, power was where you found it. Robert Woodruff, “retired” since 1955, continued to rule from his perch on the Finance Committee. When Paul Austin was appointed president of the company, he maintained real control, although Lee Talley chaired the board. Austin retained his authority when he became chairman.
* The Company’s residual sexism wasn’t hard to find. A 1972 Refresher article on Company women received the headline “Girls Girls Girls”—including an older woman who had joined Coke in 1963 after fifteen years with a trucking firm.
* In the 1940s, when Roberto Goizueta attended Colegio de Belen as a teenager, he must have known Fidel Castro, four years ahead of him. Castro was an exceptional athlete and a brilliant, if erratic, scholar, in contrast to Goizueta, a studious, quiet boy. The two Cubans were destined to find their place in history as virtual monarchs of their respective realms. Goizueta’s kingdom, the worldwide Coke empire, was the more impressive. Yet in a way, he owed it all to Castro for nationalizing American companies.
* The normal cassia importation process was legal, but Broadwater knew that individuals were forbidden to bring plant material into the United States. He could picture the scene: “Oh, so you’re a Coca-Cola official, and this is part of the secret formula?”
* In 1977 the nationalistic Indian government demanded that all of the soft drink must be manufactured inside India, which meant turning over the secret formula. Coke balked, and the Company reluctantly withdrew, abandoning twenty-two bottling plants.
* In the meantime, Pepsi had become much more diversified than Coke, with its Frito-Lay division performing well. In 1978, Pepsi purchased Pizza Hut and Taco Bell, which guaranteed exclusive national soft drink outlets. Coke men consoled themselves: PepsiCo had become more of a conglomerate than a soft drink company, with over half of its sales coming from nonbeverage enterprises after 1975.
* Greene threw up after the sixth Coke, but he manfully continued to chug drink after drink—all for nothing, since the directors eventually used the first take. One bootleg clip became a famous TV blooper in which Greene was supposed to say “Hey, kid! Catch!” Instead, he said “Hey, kid!” and emitted a gigantic belch.
Part V
The Go-Go Goizueta Era
(1980–1997)
If any father had a right to feel proud of his son, it was Crispulo Goizueta. When Roberto graduated from Yale, his father had wanted him to settle down in the family’s Cuban sugar empire. After a year, however, the young man became restless, eager to strike out on his own. In 1954, thirty-one years ago, Roberto answered a blind ad and went to work as a chemical engineer for Coca-Cola.
So much had happened since then, Crispulo reflected. Castro had stolen his land, his heritage, and most of his wealth, and now he lived in Mexico City as an expatriate. In the meantime, Roberto had risen within the Company, achieving more than he or his father could ever have dreamed. As CEO, he had galvanized the staid old soft drink company in just a few years, transforming it into an aggressive dynamo.
Yet Crispulo’s pride was tempered with anxiety. Mexicans were saying that his son had committed a grave error: he had changed the formula of Coca-Cola, and the entire world seemed in tumult over it. The change hadn’t even come to Mexico yet, but it seemed that people spoke of little else. The troubled former plantation owner looked at Roberto now and saw a handsome man in his mid-fifties, a slight bulge beginning around the belt. Roberto, attending his own son’s marriage on this hot May day in Florida, appeared typically unruffled and in command, yet Crispulo sensed a hesitancy he had never noticed before.
When the two men were alone, they spoke in Spanish, making polite conversation about the weather, the joyful occasion, and other small talk. Finally, Crispulo could bear it no longer. He had to know why his son had alienated so many people. “Roberto,” he burst out, “this is awful, terrible! People are calling you names. What have you done?”
~ 18 ~
Roberto Goizueta’s Bottom Line
Two vultures [are] sitting on a branch of a dead tree in the middle of the desert where, frustrated, they have been waiting for days on end for something to eat. One vulture finally turns to the other and says, “Patience, hell. Let’s go kill something!”
—Roberto Goizueta
Her jaw clinched, Dianne Smith stormed back to her office. The blonde secretary had worked at The Coca-Cola Company for ten years and, like most employees, she was fiercely loyal, proud to work for Atlanta’s best company. In 1972, she had won the Miss Refreshing contest. On this particular May morning in 1980, however, with the dog-wood in bloom, something inside the secretary snapped. The Company used to feel like one big gracious Southern family, but, in the last two years, ridiculous corporate strictures had descended from on high. And today, when Smith walked across North Avenue to the little park for her lunch, security guards informed her that no one was allowed to eat there anymore. Mrs. Austin didn’t want anyone to attract pigeons and their droppings, which would sully the manicured grounds. The frustrated secretary defied the guards and grimly, determinedly ate her sandwich on a bench anyway.
Back in her office, Smith rolled a fresh sheet into her typewriter, banging the keys with a letter of complaint to Paul Austin. “I am speaking for ‘the little people,’” she wrote, “who do not have releases from the daily pressures, and the park affords us the opportunity of a wonderful outlet.” It had always been “a major source of pride for me to say that I am employed with this fine company,” she typed, “but as of late, I have reason to doubt my source of pride.” Smith wrote that she had never seen morale lower. With a flourish, she ended the letter with her full name, Constance Dianne Smith. “That ought to get some attention,” she said to herself. Just to make sure, though, she sent a blind copy to Robert Woodruff. After all, the pigeon-plagued park was named after him.
The secretary’s letter galvanized the Boss. Just the week before, Woodruff’s chauffeur had returned empty-handed from an errand to North Avenue, when a security guard told him he couldn’t park in front of the building—sorry, no exceptions, orders of Mrs. Austin. Shortly afterward, Grumman Aircraft had called Woodruff’s office to iron out some details on the new jet that Mrs. Austin had just ordered to facilitate her search for works of art. Then came the crowning blow. On May 28, the Company announced a $100 million debt offering to pay for the new tower. Woodruff, who prided himself on steering the Company out of debt in the twenties, was livid. The ninety-year-old patriarch now summoned Paul Austin to his office and demanded his resignation, effective the following year, and he insisted that Austin appoint his successor immediately as the Company president. * A shaken, confused Austin drafted a letter nominating his friend Ian Wilson, who was traveling in Asia on a month-long business trip. When word of the recommendation spread through the North Avenue Tower, concerned executives—none ever willing to admit their role—convinced the Old Man that Ian Wilson, an autocratic Austin acolyte, would simply be more of the same. The Company needed a new direction. Besides, the appointment of a white South African would be foolhardy and might alienate black consumers.
THE RISE OF ROBERTO
At a special meeting of the board on May 30, 1980, Roberto Goizueta was appointed president of The Coca-Cola Company. Virtually everyone was surprised, since Don Keough seemed the obvious choice after Wilson. A skillful politician, tough
marketer, and the best speaker and motivator since Harrison Jones, Keough could “read from the phone book and make you cry,” as one admirer put it. Goizueta, on the other hand, a technical man with no operating experience, spoke in a halting accent, a curious amalgam of Cuba and Dixie. It seemed strange that a Latin chemical engineer should run the Company that produced the most American of products. Insiders like Joe Jones weren’t so surprised, however. Only forty-eight, Goizueta, the consummate corporate politician, had risen quickly within the Company since his arrival in Atlanta in 1964. Most important, he had grown very close to Woodruff in the last year, joining him every day in his private dining room for lunch. Goizueta flattered Woodruff’s vanity, seeking his opinion, deferring to his wisdom. The Boss in turn called Goizueta his “partner,” perceiving something in the Cuban that reminded him of himself when he first took over the Company.
Like Woodruff, Goizueta, the son of a very wealthy man, had established his own career outside the family business. Raised in his grandfather’s baronial mansion paid for by sugarcane, he grew up in a culture that valued tradition and older people. Goizueta enjoyed the attention of his grandfather, and his conversation was still sprinkled with the Cuban proverbs he learned from him. In Woodruff, Goizueta found another wise old man. While his devotion to the Boss was politically expedient, it was also probably genuine. Woodruff’s simplistic aphorisms reminded him of his grandfather’s, and Southern culture resonated with the same social graces Goizueta had acquired in Cuba.
As journalists dug into Goizueta’s past, trying to assess the dark-horse winner, they discovered a remarkably intelligent man. In 1948, when eighteen-year-old Roberto Goizueta attended the prestigious Cheshire Academy in Connecticut for his senior year, he knew little English. He learned the new language by going to the same movies over and over again, absorbing American values along with the lingo. His discipline, combined with a photographic memory, helped him to excel. “My professor said that my sentence structure was textbook-perfect,” Goizueta recalled. “It should have been; it came right out of the textbook! The only way I could accurately convey a thought was to memorize, word by word, entire passages.” Incredibly, by the end of the year he delivered the valedictory address. Later, he graduated tenth in his class at Yale.
Coca-Cola associates knew Goizueta as a dedicated, impeccably dressed employee who left a bare desk every night. Never a brilliant researcher, he was an able administrator, a notorious perfectionist with an eye for detail. “He knew where every grain of sand was in the office,” a fellow worker recalled. Goizueta’s courtly, affable manner and Latin good looks hid what some called ruthlessness, but he rewarded results, and he never assumed an absolute position, quoting one of his grandfather’s proverbs: “The quality of one’s compromises is much more important than the correctness of one’s position.” Intensely pragmatic and somewhat cynical, he once observed, “It’s a pretty good bet that human beings will act in their own self-interest most of the time.” Although Goizueta kept his emotions under a steely, logical control—“his mind is like a piece of crystal,” an associate said—the surface tranquility was belied by his chain-smoking and slight hand tremor. Outside of work and family, he had few interests aside from swimming laps and reading everything in sight. Somewhat incongruously, the Cuban blue blood also developed a fondness for country music.
Asked what he would do if he weren’t the head of Coca-Cola, Goizueta gave a wholly unexpected answer: “I’d probably be a good teacher in a business school.” What would he assign? Not In Search of Excellence or other popular management tomes but The Brothers Karamazov and the Gospel of St. Luke. His answer revealed not only his eclectic reading but deep philosophical and religious concerns. Nonetheless, the Coca-Cola executive’s brand of religion did not call for turning the other cheek. When asked for his best characteristic, Goizueta did not speak of his devotion to God, incisive mind, intuitive grasp, or managerial expertise. “I’m very persistent.” His greatest fault, he said, was impatience. These two traits together produced a man who, like the vultures in his parable, favored well-planned aggression over passivity.
SETTING THE SLEEPY GIANT IN MOTION
Before assuming the chairmanship from Paul Austin in March of 1981, Goizueta spent an uneasy year as a president without full powers. He used the time well, making alliances with key executives and solidifying his power base. Recognizing that Don Keough’s interpersonal skills would complement his more private analytical bent, Goizueta told the Iowan that he wanted him as his chief operating officer. Goizueta and Keough began to appear everywhere together. In their speeches, each talked about what Don or Roberto had said about this or that.
In the meantime, Goizueta made certain that Ian Wilson’s star did not rise again within the Company. “There was never any doubt that it was Keough or me,” he informed journalists. “I do not think Wilson had a chance.” He noted that Wilson’s territory of Canada and the Far East contributed only 15 percent of the Company’s sales and hadn’t maintained a high profit margin. And when Wilson’s name came up in a scandal, Goizueta did nothing to clear it. The South African couldn’t secure his U.S. citizenship, since a black Atlanta immigration official took pleasure in blocking his application. Anxious to obtain his green card before his anointment as CEO, Wilson had contacted Washington “fixer” Irving Davidson. Now, when word leaked of Davidson’s imminent indictment in conjunction with an alleged Mafia don, Wilson splashed onto the papers and national TV for his involvement with the shady character, and the official Coke spokesman left the South African twisting in the wind with a “no comment” response.
Similarly, Wilson suddenly found himself implicated within the Company for illegal shipments of concentrate to Rhodesia in the late sixties, in violation of U.S. sanctions. Although in charge of the southern African territory at the time, Wilson denied any knowledge of the shipments, claiming he was framed. One anonymous source hypothesized that for Goizueta, “the stakes were enormous. What would you do if you were a displaced Cuban whose only recognized expertise was engineering and quality control for soft drinks, and you were confronted with someone who might do you in? On one side, there was the power and glory; on the other, the absolute abyss.” Symbolically, after Wilson’s departure, Goizueta appropriated his locker at the Peachtree Golf Club, where Woodruff had long controlled the sought-after membership.
At the same time, Goizueta worked on a major strategy statement that would, he hoped, revolutionize the way the Company did business. Grasping that an eighties’ CEO would have to become a financial wizard, the new president determinedly taught himself about accounting, currency fluctuation, and economics, applying the same persistent curiosity and sponge-like memory to the task as he had to acquiring English. “He used to come into my office fifteen or twenty times a day,” remembered Sam Ayoub, who was then the assistant financial officer. “He didn’t know a word about accounting or finance, but he just asked questions and questions and questions.”
The more Goizueta learned, the more uneasy he felt about management decisions within the Company. The fountain business, for instance, which Coke had always dominated, was considered the financial backbone of the Company, since the syrup price was flexible, unlike the bottler contract, which hamstrung the Company. Goizueta noted, however, that capital expenditures on fountain had gone up substantially since the introduction of the five-gallon (known as figal) aluminum fountain dispenser in the late sixties. The figures showed that while the fountain business returned 12.5 percent, the cost of capital was 16 percent. In theory, at least, the business was liquidating itself. Goizueta’s technical men quickly solved the problem for their old boss by inventing inexpensive disposable bag-in-a-box containers.
Similarly, Goizueta concluded that the corporate obsession with market-share figures meant neglect of the bottom line. The Pepsi paranoia had blinded everyone to the ultimate goal of a good return on investment. Goizueta had, in fact, already demonstrated his ability to merge his technical background
with concern for a cost-effective business when, in January of 1980, he persuaded Robert Woodruff to let him use high-fructose corn syrup (HFCS) in Coca-Cola in lieu of cane sugar.*
CORN SYRUP AND ANGRY NON-AMENDERS
Luke Smith and Paul Austin had insisted that corn syrup lent an “off-taste” to Coca-Cola, but now a taste panel found no discernible difference. Although cane sugar would have been cheaper in a free market, HFCS offered a 20 percent savings over prices imposed by the traditional U.S. protective tariffs on sugar. At first, Goizueta had a difficult time convincing Woodruff to substitute HFCS, because it would, after all, change the sacred formula. Before the Finance Committee, the Cuban chemist elaborately explained the technical aspects, muddling Woodruff. John Sibley, even older than Woodruff but just as sharp, intervened, giving Goizueta his cue. “Remember when we approved of beet sugar back in the thirties, Bob? Well, this is just another kind of sugar, that’s all.” Once the decision was couched in such fundamental, simple terms, Woodruff quickly agreed.
In his war against Pepsi, Coca-Cola USA head Brian Dyson locked up almost the entire fructose supply with long-term contracts, then boosted the Company’s share of advertising. While holding out such carrots to most bottlers, though, Dyson used HFCS as a stick to beat the non-amended renegades. The 1978 amendment specified that any savings in the cost of sweetener would flow through to the amended bottlers. But for the minority who had refused to sign, the Company held firmly to the old syrup price.
Bill Schmidt, already angry at Big Coke’s cavalier attitude, became apoplectic at this financial blackmail. Didn’t his perpetual contract call for 5.32 pounds of cane sugar per gallon of Coca-Cola syrup? They couldn’t just foist off this corn syrup without permission. Schmidt ventured forth from tiny Elizabethtown, Kentucky, in search of an Atlanta lawyer to pursue his case, though he had little hope of finding anyone willing to risk collision with the monolithic Coke/King & Spalding business establishment.
For God, Country, and Coca-Cola Page 51