For God, Country, and Coca-Cola

by Mark Pendergrast

  During his two-week stay in the penthouse Woodruff Suite in the hospital—where Robert Woodruff spent his last days—Goizueta frequently checked Coke’s stock price, which had declined from its June high, while reviewing financial plans and global strategy with his top executives. Two fax machines in an adjoining room brought reports from around the world.

  By the time they detected the cancer, however, it was too late for anything but desperate measures. Doctors administered massive radiation doses in combination with chemotherapy and sent the Coke chief home, where he got a get-well card signed by two thousand employees. “Please let my talented doctors and my terrific family worry about me,” he dictated in reply. “You, my Coca-Cola family, just worry about the Company.” With characteristic determination, Goizueta faced death calmly. When doctors or nurses asked how he was feeling, he said, “Fantastic.”

  Goizueta’s wife of forty-four years, Olguita, kept vigil by his side, and his three living children visited frequently. Olga lived in Atlanta, but Roberto (“Robby”), a theology professor at Loyola, arrived from Chicago, while Javier, a Procter & Gamble employee, flew from Brazil. Goizueta’s attention to detail never wavered. Reading aloud a letter to him, Olguita tried to skip over the pleasantries at the end. “Don’t et cetera me,” her husband said sternly. “Now start over, from the top.”

  On October 7, Goizueta returned to the hospital, suffering from a throat infection and fever, probably due to damage to his immune system caused by the aggressive radiation and chemotherapy. On October 16, the board of directors met without Goizueta for the first time in seventeen years. The next night, Goizueta asked to take a final communion with Olguita. Just after midnight, on Saturday, October 18, 1997, Roberto Goizueta died, his head cradled in his wife’s arms. He was sixty-five years old, one month shy of his birthday.

  At the funeral ceremony, attended by over a thousand mourners—including Jimmy and Rosalyn Carter, Warren Buffett, and other luminaries—former Atlanta mayor and United Nations ambassador Andrew Young delivered the eulogy. “For him,” Young said, “business was not a job, it was a mission ordained by God.” The black leader praised Coca-Cola as the fourth largest employer in South Africa, asserting, “This is certainly a better community, and indeed this is a better world, because of the love, the dedication and the devotion that he shared through business as his calling.” Goizueta was marketing not just a product, Young said, but “a way of life.” Eldest son Roberto S. Goizueta also spoke at the funeral. “He died as he had lived,” he said, “fully engaged in the Company’s affairs.” As the service ended, the organ began a solemn recessional. As mourners filed out of the church, they recognized the tune and began to hum along as it swelled and quickened, hearing the familiar words in their heads: “I’d like to teach the world to sing in perfect harmony.” Goizueta would have loved it.

  The outpouring of tributes and grief was remarkable, similar in many respects to the death of a head of state. Coke offices around the globe closed for the day of his funeral. Flags flew at half-mast not only at Coca-Cola plants around the world, but at twenty-two thousand McDonald’s restaurants. The Atlanta Journal-Constitution devoted page after page to Goizueta testimonials, including a huge pen-and-ink cartoon of a polar bear gripping a Coke in its paw, a giant tear falling from its eye. “He Was the Real Thing,” read a typical headline.

  Roberto Goizueta left an astonishing legacy. When he became CEO in 1981, The Coca-Cola Company was a stumbling giant, diversified into a hodgepodge of businesses, many of which weren’t terribly profitable. Many of the bottlers were bitter at the Company for forcing them to give up their birthright to cheap syrup. Paul Austin, the former leader, had Alzheimer’s. The stock was languishing, and Pepsi was gaining. Under Goizueta’s long reign, Coke got rid of ancillary businesses but diversified into the world of entertainment by buying Columbia Pictures, then sold it a few years later for a huge profit. During the 1990s, he had narrowed his vision to only soft drinks. “He was the most focused human being I ever met,” Don Keough recalled after his death. Goizueta applied his laser-beam intelligence to the marketing of Coca-Cola. “He didn’t play golf or tennis,” Keough continued. “All of his hobbies were linked to The Coca-Cola Company. It was his passion.” Goizueta made a few blunders—notably New Coke—but no one could argue with the results. Under his direction, the Company’s market value exploded from $4.3 billion to $145 billion, and Coke increased its U.S. market share by nearly ten points, up to nearly 44 percent. Worldwide, Coke’s soft drink share had grown from 35 to 50 percent.

  Yet as a human being Roberto Goizueta remained an enigma. When David Greising published his biography, I’d Like the World to Buy a Coke, a few months after Goizueta’s death, it proved to be a workmanlike business narrative. “His unique gift as an executive,” Greising wrote, “was his ability to change his own formula, to quickly understand his mistakes, adapt, and ultimately triumph.” But readers learned little of the leader’s inner life. Perhaps, when you knew his devotion to his family and product, you knew Goizueta. For all his aloof grandeur, however, the business giant sometimes showed a softer side. Pictures of the CEO with children at the Varsity showed him grinning as he delighted in passing out Coca-Cola pins. He also loved the Coke polar bears, giving away ties emblazoned with them.

  Goizueta rarely spoke about his past, insisting that he preferred to look forward. But he never forgot the day he fled Castro’s Cuba in 1960 with forty dollars and one hundred shares of Coke stock. On July 4, 1995, Goizueta addressed a group of immigrants who had just taken the oath of American citizenship. “For me, looking into your eyes this morning is like looking into a mirror,” he said, then wondered aloud at his own good fortune, “that a young immigrant could come to this country, be given a chance to work hard and apply his skills, and ultimately earn the opportunity to lead not only a large corporation, but an institution that actually symbolizes the very essence of America and American ideals.” He also revealed how he got there. “You must sense the opportunity in your nostrils with every breath, and you must see it in your dreams when you are asleep.” Perhaps, as he was laid to his eternal rest, Roberto Goizueta still dreamed of Coca-Cola.

  __________________

  * One of Nelson Mandela’s oldest friends and supporters was Richard Maponya, an elder statesman of the anti-apartheid movement and one of the wealthiest black men in South Africa. Maponya owned a Coca-Cola bottling plant and other businesses. Undoubtedly, Maponya helped persuade Mandela to befriend Coca-Cola. “I think Nelson is coming to see that what is holding us back now is not apartheid but money,” Maponya observed.

  * While Pepsi could introduce a clear version of its flagship cola without any flack, Coca-Cola knew better than to mess around with a colorless Coke, which would have caused an uproar. Hence, Goizueta opted for Tab Clear, altering the lowly old diet drink.

  * Each runner received a torch, so that it was the flame that was passed rather than the torch. When it was all over, runners could purchase their torch for $275.

  * Most Olympic ads were created by ad agency Wieden+Kennedy. A few months before, Mike Ovitz had left CAA to join Disney as an executive, and Shelly Hochron had also left to form Edge Creative, a kind of independent yet in-house ad agency for Coca-Cola. Edge Creative continued to make non-Olympic Coke advertisements.

  * Eventually, Pepsi found a new bottler, and Coke had to pay a $2 million antimonopoly fine, but Venezuela belonged to Coca-Cola. The following year, Coke sold the Venezuelan bottler to the anchor bottler Panamco, getting its $50 million investment back along with a larger ownership in the anchor bottler.

  † Giant anchor bottler Coca-Cola Enterprises, whose stock had languished for years, did even better in 1996, up over 80 percent.

  Part VI

  Quenching All Thirsts

  (1997–2013)

  “Neville, please don’t do this. What do you think you’ll get out of it other than headaches? Coca-Cola is a great company, and I know that it’s been your life,
but we’ve been there, done that. We have a good life here in Barbados and a beautiful home in France. We’re finding time to relax and enjoy our lives. You’ve lost ten pounds and look great. It’s been like a second honeymoon.”

  The woman paced the tile floor as she spoke, then paused to look out at the ocean waves breaking on the pure white sand. She spun around just as her husband was about to put his arms around her.

  “You know I love you very much, and I’ll support whatever decision you make, but I want to be really clear about this. Damn it! Money is certainly not the issue. You’ve proved that you are a great leader and manager, so it can’t be an ego thing—not that they ever appreciated you. They should have made you CEO when Roberto died or when they fired Ivester. Now that the Company is going down the tubes, they want you to come back to save their bacon. Well, the hell with them!”

  Neville Isdell smiled and took her in his arms. “Pamela, I know that everything you say is true.” He knew that if he went back to the North Avenue tower in Atlanta, once again he would hardly see his wife, would spend most of his life on airplanes, in meetings, arguing with ad men. She was right. At sixty, he was enjoying his well-earned retirement. And yet . . .

  “But don’t you see that if I don’t do this, I don’t think I will be able to live with myself? This is the ultimate challenge. I truly believe that I can make a difference, that I am uniquely qualified to help save Coca-Cola. It has been my life’s calling, and I simply have to do it.”

  Pamela sighed, huddling into his chest, and fought back her tears. It’s just a stupid soft drink, she thought. Why does it always have to come first? But aloud she said, “Neville, you will be the best CEO that Coca-Cola has ever had.”

  ~ 22 ~

  Ivester Inherits a World of Trouble

  One of the virtues of a 113-year-old company is that we’ve traveled over bumpy roads before. We have seen the movie before.

  —M. Douglas Ivester, CEO, The Coca-Cola Company, 1999

  Although Goizueta had never specifically anointed Doug Ivester, his ascension to become chairman and CEO of The Coca-Cola Company was a foregone conclusion. “Now that Ivester will be calling the shots,” a reporter wrote the day after Goizueta’s death, “the only real mystery is whom he will pick as his No 2.” The top contenders were Neville Isdell, fifty-five, the Irish “Indiana Jones” who had turned around the Philippines, then led the charge into Eastern Europe and Russia, Jack Stahl, forty-five, former chief financial officer and head of domestic operations, and Sergio Zyman, fifty-two, the volatile marketing head. As the months rolled by, the mystery cleared: Ivester did not intend to appoint a second banana at all. At the age of fifty, he had reached the apex of power, and he had no intention of sharing it. The ambitious, disappointed Zyman soon departed. Neville Isdell, arguably the most competent and charismatic choice for second-in-command, was removed from Big Coke ranks, heading up the new Western European anchor bottler Coca-Cola Beverages, which had been split off from Coca-Cola Amatil.

  When an interviewer asked the new Coke CEO point-blank what it would take for him to appoint a president, Ivester coyly replied, “I’m very fortunate right now in that I’ve got six [presidents],” referring to the heads of his six operating groups. “If I put someone between them and me right now, would there be great advantage to that?” He wanted “short lines of communication.” Indeed, Ivester encouraged frequent direct calls and e-mails from his executives, and he deluged them with messages and questions in return. Ivester neither smoked nor drank and, at least on the surface, was always calm and polite, if demanding. Watching a TV show on animals and stress one night at home, he commented to his wife, Kay, “You know, I don’t feel stress.” She answered, “Of course you don’t. You’re a carrier.”

  The transition between Goizueta and Ivester was seamless, but, even as Ivester took command, there were signs of trouble. The stock was down not because of Goizueta’s death but because a stronger dollar hurt Coke, which took 80 percent of its profits overseas. In addition, analysts carped at Coke’s bottling transactions, complaining that the Company artificially boosted its earnings figures by manipulating the price and timing of sales to captive anchor bottlers. “We question the manner in which these intercompany transactions are reported,” wrote two accountants, calling them “nothing more than an exercise in self-dealing” and objecting to the one-sidedness of Big Coke’s power. “What is clear is that these affiliates are part of Coke’s business model to subsidize Coke’s earnings in every way possible.”

  Just before Ivester took over, Financial World put a smashed Coke can on its cover, with the headline, “Why Coke Could Get Crushed.” The investment magazine complained that Big Coke took profits from its bottlers and their new stock issues while loading them with debt. “How much longer will Coke be able to use the bottler as a whipping boy?” If gains from bottling sales and stock issuance were excluded, Coke’s operating earnings had improved only 11 percent annually over the past five years, nowhere near its lofty goal of 17 to 20 percent.

  Nonetheless, Ivester could look back at 1997 with some satisfaction. Just before Christmas, he made his first big move as CEO, announcing the $840 million purchase of Orangina, the fizzy French drink with real orange pulp. Since CCE now owned the Coke bottling system in France, it stood to gain substantially if regulators allowed the deal. Although the “Asian Miracle” was turning into the “Asian Flu”—with the sudden July 1997 devaluation in Thailand spreading across the continent—Ivester and chief financial officer James Chestnut reassured analysts that Coke saw the turmoil as an opportunity to buy Asian bottlers at bargain prices. Ivester compared the situation to the Mexican peso crisis of 1994, during which his company continued to invest, resulting in a 10 percent rise in its Mexican market share.

  Coke stock finished strong at $67, up 27 percent for 1997. Worldwide case unit volume grew by 9 percent, and earnings per share 19 percent, just as Coke executives had promised for the past decade. In the annual report, Ivester admitted that 1998 might present “a significant challenge” because of the stronger dollar, but “over time, we manage our currency exposures to mitigate any negative impact from currency fluctuation.” He reaffirmed the Company’s goals and stated unequivocally, “Never before has this Company been more perfectly poised for pioneering.”

  He was right, but the world’s most far-flung corporate empire was also poised for a world of trouble, rippling out from Asia. In Indonesia, the rupiah went into free fall in January 1998, unemployment soared, and Coke sales plummeted. Doug Ivester urged managers to fight back rather than “to simply hunker down and ride out the storm.” He reminded them, “We’re investing for the long term and building new capabilities to deal with any type of uncertainty.” Asian Coke managers tossed out their carefully articulated annual marketing plans and adjusted to new conditions, creating “market impact teams” to work at the street level, getting product to vendors as quickly and cheaply as possible. With more strenuous marketing efforts, promotions, and new cooler placements, sales in the first half of the year steadied. Coke stock rose to $89 a share in mid-July.

  Then the bottom dropped out as economic woes hit nearly every country outside the United States in what pundits began to call a global economic crisis. “What started out as a blip on the radar screen in Thailand,” said financial guru Paul Volcker, “has somehow turned into something of a financial contagion, particularly in Russia and Brazil.” Hedge fund king George Soros spoke darkly of “the disintegration of the global capitalist system.” Coke’s net income for the third quarter dropped 12 percent. Until then, even with currency exchange problems, Coke had been able to use its expert hedging to minimize the impact, and the volume growth had continued unabated. Now effective hedging became impossible, with most foreign currencies falling, and overall case sales grew only 3 percent for the quarter rather than the usual 7 percent. Indonesia was devastated, with the economy in ruins, riots in Jakarta, and Suharto stepping down.

  News of Russi
an instability caused Merrill Lynch to downgrade Coke stock, but, as the ruble collapsed in August, a Coke executive said, “We are advanced with our [Russian] plans and there is no turning back for us.” Indeed, the Company had spent $750 million in Russia since April 1994 to build twelve plants, some of which were running at half capacity or less. Before the devaluation, a British-owned bottler agreed to sell its Russian bottling business to Coke for $187 million, but two months later it was happy to take $87 million and run.

  As the world economy deteriorated, Coke projections kept changing. “The numbers keep getting ratcheted down and ratcheted down,” complained one analyst. “It’s like water torture.” In Latin America, Brazilian volume rose only one percent for the third quarter. Japan was flat, and in Germany, where poor weather and bottler reorganization plagued Coke, volume fell 9 percent. Coke had always been considered a safe bet because it was diversified in nearly two hundred countries, but the global malaise of 1998 descended everywhere. Ivester had reassured analysts that, even in bad times, everyone got thirsty. Yet as a Wall Street Journal reporter observed, “The economic condition in some countries is so dire that people don’t have money to buy bread, let alone sugar water.” Coke stock dropped severely then rallied briefly.

  Doug Ivester remained outwardly unflappable, just as he had once on the Amazon, when a guide accidentally flipped a crocodile into his narrow boat. Ivester now counseled despondent Coke executives around the world, advising them not to cancel Christmas parties, which would send the wrong message. “Let’s capitalize on this,” he said, urging managers to look for opportunities in the ruins of the economy. Ivester, whose posture and stride reminded one reporter of the lumbering Coke polar bears, exuded “an almost surreal confidence,” she observed. He espoused a mindset in which Coke managers set specific goals as inevitable destinations. “It’s not a matter of if we’re going to get there. It’s a matter of when.”