In his first speech inside the Company, Ivester quoted McDonald’s founder Ray Kroc. “What do you do when your competitor is drowning? Get a live hose and stick it in his mouth.” He pulled a garden hose from beneath his podium. “I’ve got the hose. I think you know what to do with it.” Goizueta observed admiringly, “Doug has the nerve of a night prowler.”
True to his word, Ivester instituted a take-no-prisoners marketing blitz that did not rely solely on advertising to drive the business. Coke introduced new packaging for most of its products to complement the return of the contour bottle. Going back to its roots, the Company initiated sampling campaigns in markets worldwide, giving away drinks to get consumers hooked. It also took advantage of its high-profile sponsorships of sporting events as never before. To combat the private-label threat, Coke salesmen offered a detailed analysis of a store’s profitability on each beverage and its returns on shelf-space allocation, demonstrating that Coke products added more to their bottom line. The Company concomitantly sponsored the Coca-Cola Foodservice Research Forum to prove its worth to fast food purveyors. Small, independent bottlers struggled to stay in business, while the largest ten bottlers, led by behemoth Coca-Cola Enterprises, accounted for 90 percent of U.S. soft drink sales.
Meanwhile, the New Age threat receded. Snapple sold out to Quaker Oats, which changed the drink’s distribution while sales floundered. Coke pounded away at private labels with a commercial showing a man trying to photocopy a Coke. “No matter how hard they try,” the announcer intoned, “it always comes out a little flat.” By the end of 1994, Coca-Cola had regained its momentum and was named Marketer of the Year by Brandweek magazine. Worldwide case volume grew an impressive 10 percent. Coke’s stock resumed its upward march, growing 15 percent and reaching $51.50 by year’s end, while the S&P 500 declined by 2 percent. In a passage in the annual report clearly directed at John Neff and other nay-sayers, Roberto Goizueta sniffed, “We will never allow ourselves to waste our time listening to those skeptics who claim we can’t maintain our historical growth rates, recycling the same cynical reasoning we’ve heard for several decades now.”
INFINITE OPPORTUNITY
The Company was on a roll and appeared unstoppable. In April 1995, Goizueta, Ivester, and Zyman felt comfortable enough to poke fun at themselves as they marked the tenth anniversary of the New Coke fiasco. Imitating television comic David Letterman’s lists, Goizueta ticked off his “Top Ten Favorite Blunders” that yielded positive results, such as buying Columbia Pictures or bringing out New Coke. He could afford the levity, pointing out, “Today, we’re in the best shape we have been in many decades.” Sergio Zyman, widely considered the fall guy for New Coke, basked in the attention. “Anybody who thinks New Coke hurt his career hasn’t seen his new house,” Doug Ivester quipped.
In the first six months of 1995, Coke captured 85 percent of the growth in the U.S. soft drink business, as the stock jumped past $60. Goizueta wanted increased volume everywhere, including neglected markets in the United States, pointing out that Southern Californians drank less Coke per capita than Hungarians. The Company pushed vending machines into nontraditional outlets such as casinos, churches, nail salons, and post offices. No longer content with mere “availability,” Goizueta now talked about “pervasive penetration,” a project spearheaded by Ivester. On a trip to Rome, Georgia, which boasted the highest Coke per capita consumption on earth, Ivester still found plenty of places without Coke—a national park, a Ford dealership, a video store, and a karate studio. The videotaped record of the trip, “The Road to Rome,” became an internal company hit.
“The ruthless push to sell Coke absolutely everywhere made Mr. Ivester a star at Coca-Cola,” noted the Wall Street Journal, and the obsession spread throughout the Coke universe. In South Africa, trademarked taxis served chilled Cokes out of coolers, while a Dutch railroad offered cold Coca-Cola from specially designed vending machines. In Moscow, the Company opened “Coca-Cola University” to indoctrinate former communists in the pursuit of stomach share. To show their support, Bill and Hillary Clinton visited the Moscow bottling plant in May 1995, posing for photographers as they chugged Coke. In Japan’s Ginza shopping district, the Company installed a ninety-three-foot-wide, forty-nine-foot-high neon sign. At U.S. theme parks, the Company implemented “Coca-Cola Cool Zones,” climate-controlled pavilions with cooling fog and rows of vending machines.
Coke had always tried to entice children without overtly advertising to them, but now the campaign to infiltrate schools intensified. “Based on the awareness that it’s easier to establish brand preference at a younger age than it is to change consumers’ habits later in life,” wrote a Coke spokesman in an internal 1995 newsletter, “The Coca-Cola Company is focusing upon the education market with revitalized efforts around the world.” With educational funding from governments in decline, Coke recognized an opportunity to offer money in return for access to young consumers. Carlton Curtis, director of the global effort to penetrate schools, said, “This is an investment channel—investing to build brand and consumption preferences for a lifetime.” In Uruguay, where forty thousand children a year trooped through the Montevideo Coke bottling plant, the Company even put out a book in Braille to explain the wonders of Coke to blind children. In the United States, Coke paid schools for the exclusive right to install vending machines and signed a licensing agreement to market back-to-school items featuring the cute Coke polar bears.
Alarmed, Vermont Senator Patrick Leahy proposed tougher nutritional requirements for federally funded school lunch programs. Coca-Cola not only lobbied against the bill in Congress but sent a mass mailing to school officials claiming that soft drinks were “USDA-approved.” A spokesman for the National Soft Drink Association protested, “Students drink water during the day and water doesn’t contain any nutritional value.” Testifying at the committee hearing, Leahy lambasted Coke for what he called its “major misinformation campaign,” complaining that company officials refused to testify before his committee. “It seems that Coca-Cola would rather work behind the scenes to try and kill my bill than confront me and the public face to face.” Eventually, a much-diluted version of the bill passed, obliging the federal government to provide state agencies with “model language” to ban soft drinks in elementary schools. It had little effect, much to the relief of many school superintendents badly in need of soft drink dollars. University administrators also raked in money, as Pepsi paid $15 million for a ten-year exclusive beverage deal at Pennsylvania State, with Coke paying even more to the University of Minnesota, soon to be followed by Rutgers, Texas A&M, and others.
Around the world, Coke pumped money into newly designated “anchor bottlers”—Coca-Cola Enterprises in the United States, Australia’s Coca-Cola Amatil, Latin America’s FEMSA and Panamco, South Africa’s SABCO, and Malaysia’s Fraser & Neave—that executed Coke strategy across geographical borders. They had little choice, since Big Coke owned a substantial chunk of all of them. Doug Ivester proved that he was indeed aggressive, pushing the remaining independent bottlers to carry only Coke products on their trucks. When Ivester visited Vietnam, managers there told him that they couldn’t keep up with consumer demand. He immediately got on the phone, found a bottling line sitting on a ship in Singapore harbor, and diverted it to Hanoi. Ivester got the reputation for being hard-nosed but fair. “He follows up on absolutely everything,” an associate observed. “He is probably the most competent beverage executive that I have ever met,” added a beverage analyst.
In a September 1995 issue, Fortune magazine named Coke the “New Champ of Wealth Creation,” according to a market value-added formula (market value of all equity and debt minus total capital investments). “The most valuable product on this planet,” the Fortune reporter concluded, “is sugar water, or at least a particular type of it known as Coca-Cola.” To help it stay that way, the Company offered $55 million in prizes during its second “Red Hot Summer” under-the-cap promotion and another $1.5 billion in p
otential retail discounts. The Discovery space shuttle took a special portable soda fountain—dubbed a “fluids generic bioprocessing apparatus”—into space for “research into fountain dispensers in weightless environments,” according to NASA. Adding to its arsenal of drinks, Coke bought Barq’s, a popular root beer with a hip, offbeat image. In a fit of hubris, Coke USA president Jack Stahl announced that the Company planned to capture 50 percent of the U.S. beverage market by the end of the year 2000—a tall order, since Company products held only 42 percent at the time.
By the end of 1995, Roberto Goizueta was euphoric. Coca-Cola stock had jumped to $74.25, an annual hike of 44 percent. Worldwide unit case volume had grown another eight percent. In the United States, per capita consumption of Company beverages reached 343 drinks—nearly one a day for every man, woman, and child. In the annual report, an infinity symbol signified “our virtually infinite opportunity for growth,” as Goizueta observed. All of this had been achieved despite economic problems in major markets such as Mexico, Japan, and Argentina. In a new Coke mantra, Goizueta observed that the human body requires at least sixty-four ounces of liquid every day. “Our beverages currently account for not even 2 of those ounces,” he lamented. His goal, of course, was to make sure that every human being on earth drank sixty-four ounces of Coca-Cola—or some other Company product.
With 80 percent of Coke’s profits coming from sales outside the United States, Goizueta officially recognized the global nature of the business by reorganizing the Company’s management structure. Previously, there had been two primary units—North America and International. Now, he simply divided the world into five groups, North America being one of those partitions. “We not only see our business as global,” he wrote, “but we manage it that way. . . . We understand that, as a practical matter, our universe is infinite, and that we, ourselves, are the key variable in just how much of it we can capture.”
THE COCA-COLA OLYMPICS
For Goizueta and Coca-Cola, 1996 was to be the year of ultimate triumph, as the world media descended on Atlanta for the centennial celebration of the modern Olympics. Back in 1987, an Atlanta real estate lawyer named Billy Payne had decided that his city deserved to host the summer Olympics and, although initially skeptical, Goizueta eventually threw his support behind the effort. To avoid the appearance of undue influence, Goizueta made sure that the money came from Coca-Cola USA and giant bottler Coca-Cola Enterprises rather than Big Coke itself, however, and the Company also gave money to Olympic Committees for Toronto and Melbourne. Still, Coke donated $350,000 to the Atlanta bid, far more than it gave any other city. It made its corporate jets available free of charge, hosted luncheons for the International Olympic Committee (IOC) members, and fielded hundreds of volunteers.
In 1990, when IOC head Juan Antonio Samaranch announced that Atlanta had won the 1996 Olympic bid, the Athens, Greece, officials cried foul. It seemed obvious that the event should have gone to Greece, where the games originated and where they were restarted in 1896. “Morally, the Games belong to us,” complained Greek bid organizer Spyros Metaxa. “The Olympics deserve Atlanta, the capital of Coca-Cola and of American crime,” observed another bitter Greek commentator, referring to the city’s high homicide rate. “In the long run, it will perhaps prove better that we did not get them.”
It is quite unlikely that Coca-Cola officials overtly bribed anyone, although it is now widely acknowledged that IOC officials have accepted all manner of special favors. Peter Ueberroth, who had presided over the first corporate-sponsored Los Angeles Olympics in 1984 and who served on Coca-Cola’s board of directors, candidly advised, “Remember there are ninety votes and those people are not all of the highest integrity.” There is no question that Coca-Cola, the largest Olympic sponsor, wielded enormous power. “The ones who decide where the Olympics shall take place,” wrote one insider in the 1980s, “are big companies like Coca-Cola, ABC-TV, Adidas.” Two IOC members, Kenya’s Charles Mukora and France’s Jean-Claude Killy, were directors of Coca-Cola companies.
In addition, Roberto Goizueta and Juan Antonio Samaranch had become personal friends since they met at the 1984 Sarajevo winter games. They shared Spanish descent, though Goizueta came from a long line of blue-blooded aristocrats, while Samaranch, the son of a textile mill owner, was designated a noble “Marques” in 1991. Apparently it did not bother Goizueta that Samaranch had served dictator Francisco Franco faithfully for many years, routinely giving him the stiff one-armed fascist salute. When Samaranch arrived in Atlanta during the bidding process, he went straight to meet Goizueta at Coke headquarters, then flew to Washington aboard the Coke jet. When Billy Payne offered Samaranch a set of mint julep glasses, he smiled and asked, “Can you drink Coca-Cola out of these?”
Regardless of how the Olympics came to Atlanta in 1996, Goizueta and his executive team were determined to milk the opportunity for all it was worth. “As a marketing property and a volume-driving opportunity, the Games in Atlanta will be like nothing this Company has ever seen,” gloated an internal publication. “Really, it’s a soft drink marketer’s dream: During one of the hottest periods of the entire year, millions of scorched, thirsty visitors from all over the entire world will be packed into a circle 3 miles in diameter [and] the Company’s products will be within an arm’s reach.”
Coke had already established sports as the ideal way to connect with consumers. Doug Ivester continually urged, “We need to activate our sponsorships,” while Sergio Zyman, a running enthusiast, wanted to paint the Coke logo on every possible sporting event. Zyman realized that mere advertising was insufficient. Experiential event marketing to “bring the brand alive”—a concept pioneered by former ski racer Mark “Dill” Driscoll in the 1980s—could touch individual consumers most effectively. Driscoll had already promoted Cherry Coke, Sprite, and Coke Classic with wildly painted vans and opportunities for consumers to play games and sample free drinks. Now, the Company called on Driscoll to choreograph the Olympic torch relay.
Although the idea of a torch relay ostensibly hearkened back to ancient Greece, it actually came from the Nazis, who invented the dramatic prelude to the Berlin Games in 1936. At the 1984 Los Angeles Olympics, AT&T sponsored an American torch run, but it made participants pony up $3,000 for the privilege. In 1996, Coke paid $12 million for the right to sponsor the torch as it crossed America on an eighty-four-day, fifteen-thousand-mile journey during which ten thousand runners—none of whom had to pay anything—would carry the flame. Over half of the participants were “Community Heroes” chosen for their good works by local United Way agencies. Coca-Cola chose another 2,500 winners of a contest called “Share the Spirit: Who Would You Choose?” in which consumers could nominate either themselves or a friend—five hundred of them coming from seventy foreign countries. The remainder of the slots were reserved for former Olympic athletes and corporate sponsors.
The event was masterfully planned and executed down to the minute. In addition to foot-power, the torch traveled by bicycle, train, horse, canoe, steamboat, sailboat, and airplane. The circuitous route brought the Olympic flame within two hours of 90 percent of the U.S. population. NBC-TV covered the event every day, while internet junkies could keep abreast of its progress on America Online and the Atlanta Committee on the Olympic Games website. Although the runners did not wear Coke logos, just about everything else did, including the “escorts” who ran alongside. “The torch relay will be one long commercial,” lamented Michael Jacobson of the Center for Science in the Public Interest, and Sergio Zyman was delighted to agree. “Three things have been constant at the Olympic since 1928—the athletes, the fans and Coca-Cola.”
Dill Driscoll hired enthusiastic, fresh-faced young promoters to stage what he called a “15,000-mile rolling street party.” Ahead of the torch runner, his crew arrived with five flatbed trucks, accompanied by motorcycles with Coke-bottle-shaped sidecars. The “Red Army” set up a mobile stage for the welcoming ceremony, with a big screen depicting stirring Olympic mom
ents intercut with stirring Coca-Cola commercials. “I wonder if Coca-Cola has anything to do with this,” one onlooker pondered sarcastically. “A few high-spirited spectators have even run with a Coke held high,” observed a contemporary reporter, “as if it were the sacred flame from Greece.” The crew sold pins, jackets, pennants, mugs, gold Coke bottles, license plates, baseball hats, and key chains with the Coke logo on them, as well as ice-cold Coke, with the proceeds going to a local charity.
“It’s almost like hosting the Olympics for one day,” Wisconsin Governor Tommy Thompson said at a ceremony en route. Thompson asked high school band members, “Did you all get a bottle of Coke? Next to milk, it’s a good drink.” They shouted back, “Better!” The feel-good Coke reps had a harder edge, however, towards any Pepsi that dared to appear during the relay. In a small town in Ohio, they refused to allow high school students to escort the torch because the school district sold Pepsi products, and they knocked a Pepsi carton off the wall when a spectator refused to trade it for Coca-Cola. In Senoia, Georgia, Coke officials suggested draping the Pepsi vending machine next to the town hall with a black cloth but eventually settled for putting a Coke machine next to it.
It was indeed a “sea-to-shining-sea Coca-Cola carnival,” as a cynical foreign journalist observed. Yet it also provided heart-warming moments. A boy with Down syndrome carried the flame while his mother ran alongside shouting to the crowd, “This is my son! This is my son!” Children with recorders played “America the Beautiful” along the roadside. War veterans from a hospital lined the roadside and waved tiny American flags from their wheelchairs. Parents took their children out of school for this onetime event. In Selma, Alabama, blacks and whites walked together over the Edmund Pettus Bridge where civil rights marchers once were beaten back. “My God, the relay is the biggest thing to happen [here] since the illegals starting coming across,” exclaimed a resident of a tiny town near the Mexican border. Even in big cities, even in the ghettos, the torch relay worked. “This is the first time I have seen New York City as a small town,” a resident said. As one reporter observed, the torch relay was “crassly commercial and touchingly open-hearted—all at the same time.”
For God, Country, and Coca-Cola Page 64