Fizz

by Tristan Donovan

  Kendall’s support for Nixon paid off in December 1971 when the Pepsi chief was invited to go to Moscow as part of a US business delegation to discuss American and Soviet trade. During the trip he chatted with Soviet premier Alexei Kosygin and used it as an opportunity to show off a radio in the shape of a Pepsi can that he had pretuned to a Soviet radio station. Kosygin found the promotional radio amusing, and he invited Kendall to join him at his table at that evening’s dinner. Over dinner the fishing-obsessed Pepsi chief reeled in the Soviet leader, telling him: “You will never get any real trade going until we start dealing in consumer goods.” Kosygin, probably thinking it might be beneficial to help Nixon’s pal, replied by suggesting that he bring Pepsi to the Soviet Union in exchange for Russian vodka and wine to be sold in the United States. They shook hands on the deal. In November 1972, after ten months of talks between Pepsi and the Soviet trade ministry, a deal to make Pepsi the first American consumer product to go on sale in the USSR was signed. While Kendall denied that Nixon intervened directly in the talks, he conceded that his friendship with the president did help.

  On May 28, 1974, Pepsi went on sale in the port city of Novorossiysk, on the Black Sea, where the Soviet trade agency Sojuzplodoimport had opened a bottling plant to produce the cola. Crowds flocked to the store that was selling the first Pepsis to get a taste of the American soda, even though it cost significantly more than a beer. Back in America, Stolichnaya vodka went on sale courtesy of Pepsi. Coca-Cola found itself frozen out and unable to follow suit, as Pepsi’s deal gave it a ten-year monopoly on cola drinks in the Soviet Union. To save face, Coke agreed to share its expertise in water purification and in cultivating fruit with the Soviets in exchange for Lada cars, only to find that the vehicles were so poorly made that Coca-Cola had to ship them to Britain for repair before it could sell them. With Pepsi the clear victor in the race to claim the Soviet Union, Coca-Cola turned its attention to that other Communist colossus, China, and began grooming a president of its own to help pull back the bamboo curtain: a peanut farmer named Jimmy Carter.

  Coke first encountered Carter in 1970 when he was seeking the Democratic nomination for governor of Georgia. Woodruff was already supporting Carter’s Democratic rival Carl Sanders, but to hedge its bets the company’s president Paul Austin donated $2,500 to Carter’s campaign. When Carter won the nomination and the election, Austin followed Kendall’s lead and started building a close relationship with the potential presidential candidate. As well as giving Carter access to Coca-Cola’s fleet of jets, as the company did for all governors of Georgia, Austin used Coke’s international network to help Carter develop his foreign policy credentials. Carter later credited Coke’s support on the international stage with helping him become more than a provincial candidate for president: “Georgia has a particular advantage over some states in that we have our own built-in State Department in the Coca-Cola Company. They provide me ahead of time with much more penetrating analyses of what the country is, what its problems are, who its leaders are, and when I arrive there, provide me with an introduction to the leaders of that country in every realm of life.”

  When Carter announced he would run for president, Austin worked to allay the concerns of other leading businessmen about a Carter administration and persuaded many of them to back the Democratic candidate. His Republican rival, Gerald Ford, ended up with just four corporate supporters, including PepsiCo. Coke’s advertising men also helped turn Carter into presidential material, crafting his public image as a laid-back peanut farmer. As Tony Schwartz, the director who oversaw Carter’s TV ads as well as dozens of Coca-Cola commercials, explained, the goal of TV advertising wasn’t to explain a point of view but to use images and sounds that made viewers think positively about the product, whether that product was Coke or Carter.

  Carter’s triumph in the 1976 election ushered in a new Coke-friendly regime at the White House. The Pepsi vending machines installed by Nixon back in 1969 were removed, replaced by Coca-Cola’s. Charles Duncan, a former Coca-Cola board member and the second-largest shareholder in the company after Woodruff, became deputy secretary of defense before being promoted to energy secretary in 1979. Carter’s administration also made Austin a board member of the National Council for US-China Trade, the perfect battering ram for getting Coke into China.

  Since 1973 Coca-Cola had been building ties with the Chinese, as relations between the United States and the Middle Kingdom thawed in the wake of outreach efforts by President Nixon. So in late 1978, as the two nations moved closer to a mutual understanding, Coke struck a deal to make its famous drink the first American consumer product to enter the world’s most populous nation since Mao took power. The deal, signed in Beijing on December 13, 1978, handed Coke the exclusive right to sell non-Chinese-made cola in China, starting with imported bottles and cans but to be followed by the construction of bottling plants across the country. The agreement was nominally only to let tourists visiting major cities buy Coca-Cola, but by 1981 the drink was on sale to Chinese citizens in parts of Beijing.

  Two days after the Coke deal, the US government and China agreed to normalize diplomatic relations by opening embassies in each other’s country. Coca-Cola kept quiet about its own deal for a week, so as not to steal the State Department’s thunder. In early 1979 Coke made its triumphant return to China with the delivery of almost half a million bottles and cans transported into the country via a train from Hong Kong. The drink Mao had called a symbol of “degenerate capitalism” had taken its first step toward quenching the thirst of a billion Chinese. Ian Wilson, the executive in charge of Coca-Cola’s Pacific operations, told reporters, “This agreement is more than just a sales contract. I look on it as a symbol of both Chinese pragmatism and the ubiquity of Coca-Cola.”

  As Coke and Pepsi pushed into China and the Soviet bloc, the Communists’ own colas— such as Happiness Cola, the first product to be advertised on Chinese TV, and Kofola, a cola created by Communist Czechoslovakia in 1960 to satisfy its population’s interest in American pop—found themselves competing with the genuine articles. But while Coca-Cola and Pepsi looked like large American corporations steamrolling their way around the world, the soda bottling system made it hard to distinguish the boundary between local and foreign. The brands were unquestionably American, but when the organization handling the bottling, marketing, and distribution was a local business or the state, the result was a product that was both global and local at the same time. Was Coca-Cola in China a product of the Communist government or a symbol of America? The truth lay messily in between. It was a setup that helped Pepsi and Coke overcome trade barriers across the world, convincing wary governments that ultimately the soda business they would create would belong to their nation. It also helped the American soda giants distance themselves from criticism about the employment practices of some of their bottlers, by pointing out that these were independent companies and their contracts gave the US corporations no right to intervene in employment disputes. Coca-Cola would use this defense when some of its bottling plant franchisees in Colombia and Guatemala were accused of hiring death squads to murder unionized workers.

  Sometimes the challenge came in the places where Coca-Cola and Pepsi didn’t have bottling operations. Coke and Pepsi might have spread far and wide by the mid-1960s, but neither company had ventured into Israel. So in December 1964 the Tel Aviv-based soft drink company Tempo hit on the idea of applying for the right to bottle the world’s favorite soda, only for Coke to say no. Tempo’s president Moshe Bornstein asked again. Once again Atlanta said no, arguing that Israel’s economy wasn’t big enough to enter. Bornstein was suspicious. After all, Coca-Cola was on sale in Ireland and El Salvador, countries with a similar-sized population to Israel. He figured that the real reason Coca-Cola rejected his request for a bottling franchise had nothing to do with economics and everything to do with politics.

  After the formation of Israel, the Arab world had united to do whatever it could to strangle the young Jew
ish nation and support the Palestinians. In 1948, as part of this campaign against Israel, the Arab League organized the Arab Boycott, a concerted effort to cripple the Israeli economy by getting the Muslim world to boycott companies that operated in Israel. Essentially, businesses were told that if they traded in Israel their access to the millions of people living in the Islamic nations of the Middle East would be cut off. Bornstein believed Coca-Cola wouldn’t work with him for fear of falling afoul of the Arab Boycott, so he decided to bring Coke’s reluctance to enter Israel to the attention of the world. On April 1, 1966, he held a press conference in which he accused Coca-Cola of turning its back on Israel for fear of upsetting the Arab nations.

  Jewish groups in America quickly picked up on Bornstein’s accusation. Six days after the Israeli businessman’s press conference, the Anti-Defamation League of B’nai B’rith Society called on American Jews to respond by boycotting Coca-Cola. Nathan’s Famous, a New York chain of hot dog stands, signed up to the boycott and announced that it would stop serving Coke unless the company changed its policy. The Jewish War Veterans association also announced it was toying with the idea of calling on its members to boycott the beverage. On the afternoon of April 11, 1966, the Jewish-run Mount Sinai Hospital in New York City announced it was no longer going to sell Coca-Cola—although its boycott only lasted until the evening, when hospital director Dr. Martin Steinberg stepped in and blamed the decision on a wayward purchasing official. “We’re here to cure people, not to fool around with Coca-Cola,” he explained.

  But while Mount Sinai Hospital only flirted briefly with backing a Jewish boycott of the drink, the pressure was mounting. Coca-Cola found itself caught between an Arab world determined to punish those that worked with Israel and Jewish groups in America who saw Coke’s lack of activity in Israel as a cave-in to Arab aggression. To defuse the problem, Coca-Cola explained that it wouldn’t work with Tempo in any case since it had sued the firm for infringing its trademark back in 1963, but it would consider giving the franchise for Israel to another company. Coke found an alternative bottler in Abraham Feinberg, a Jewish New York businessman, and signed a letter of intent as the first step on the road to entering Israel. The move quelled the talk of a Jewish Coke boycott. Morris Abram, president of the American Jewish Committee, said the agreement was “evidence of the company’s independence of Arab or other boycott threats.”

  Yet while the move stopped the Jewish campaign, the Arab League responded by announcing it would discuss Coca-Cola’s plan to enter Israel at its next conference in the Syrian capital of Damascus. Coca-Cola now found itself embroiled in the bitter politics of the Middle East and facing a battle to save its lucrative operations in the Arab world. It was a situation that would demonstrate how Coca-Cola’s global expansion had become as much about spreading American influence in the world as selling soda.

  Together with the US State Department, the company launched an urgent charm offensive to save its Middle Eastern business, only to find the Arab nations were in no mood for talking. Kuwait and Libya made it clear that they couldn’t care less about Coca-Cola’s fate. While Lebanon’s government was sympathetic, it signaled that it wouldn’t do anything that its Muslim opponents could use to claim it was being soft on Israel.

  Even the Coca-Cola bottlers in the Middle East proved unwilling to help. Saudi Arabian Coca-Cola bottler Sadaqa Kaki told the US government representatives that he saw Coke’s Israeli deal as an act of “bad faith” that had let down loyal Arab bottlers. When asked if he might try to persuade the Saudi government to support Coca-Cola, he replied that it was Coca-Cola not his country’s leaders that needed to change their minds. The State Department reported back to Coke that Kaki’s lack of willingness to help and the fact that the chief of King Faisal’s executive office owned the Pepsi plant in Jeddah meant it was likely that Saudi Arabia would support the boycott.

  Coca-Cola sent in its corporate diplomat Alexander Makinsky to see if he could negotiate away the boycott, but his reports proved even less reassuring than those from the State Department. Syria, he wrote, was unlikely to be swayed because “the American ambassador is particularly persona non grata, partly because he is a Negro, which the Syrians consider as a deliberate insult, and partly because he is not either tactful or diplomatic.” Egypt’s government wanted the boycott too. “Coca-Cola is non-essential to Egypt, where it can be easily replaced,” Makinsky reported back to Atlanta. “It is irreplaceable, however, to the USA, since it is a powerful instrument of US propaganda, on par with Hollywood films and the Voice of America…. If [Egypt has] tolerated us for so many years it is merely because they were afraid the banning of Coca-Cola might be construed as an anti-American move.”

  The Israeli bottler dispute gave the Egyptians the perfect excuse to kick out Coca-Cola, but Makinsky still regarded Egypt as the company’s only hope, as other Arab states tended to follow Egypt’s lead. With time running out, Coca-Cola turned its charm offensive on Egypt. Makinsky tried to get Spain, the sole European country that Egypt had warm relations with, to speak out on Coca-Cola’s behalf, hoping that his own position as president of Coca-Cola’s Spanish subsidiary would be enough to get General Francisco Franco’s dictatorship to help. Coca-Cola also offered to build a concentrate plant in Egypt, a move that would bring currency into the country by reducing imports and increasing exports since the facility would also service neighboring nations.

  By August 1966 it wasn’t just Coke that was facing the heat. Coca-Cola executive Ben Oehlert alerted the State Department that many of the Arab government officials the company had spoken to believed that it was the US government, rather than pressure from the American Jewish groups, that was behind the Israel bottling deal. “I feel sure that the administration would be as anxious as we are to make sure that the Arab nations do not connect our government with the decisions we have made,” he wrote. The Arab League had also begun to see their fight with Coca-Cola and Ford, which was also facing a boycott for backing the creation of a car assembly plant in Israel, as a major moment in the Arab clash with the Jewish nation. Rashad Mourad, the Arab League representative in the United States, wrote to Arab governments to let them know that American companies regarded what was happening to Coke and Ford as a test case and that if the two were not blacklisted “it would be the end of the boycott itself.”

  Coke’s efforts in Egypt failed. The country’s finance minister told the US embassy in Cairo that the concentrate plant bribe simply wasn’t big enough, and when the Arab League met in Kuwait in September 1966 to decide the company’s fate it was hardly a surprise when both Coke and Ford were added to the list of boycotted companies. The boycott took two years to come into force, but on August 1, 1968, Coca-Cola was shut out of the Arab market. Pepsi, which had managed to keep well away from the dispute despite having no Israeli bottler, was able to mop up the Middle East cola market, free from its most fearsome rival. Coca-Cola wouldn’t make it back into the Arab League states until after the Camp David accords were signed in 1978.

  India also proved to be a challenge for Coca-Cola. Coke entered the country in 1950, the same year that India gained independence from Britain, and by the start of the 1970s Coke dominated India’s small but potentially enormous soda market, selling more than 700 million bottles of Coca-Cola a year. Pepsi had yet to enter the Indian market; Coke’s only competition of note was an orange soda called Gold Spot, produced by a company called Parle Bisleri. The New Delhi soda company started out making cookies for the British military in India during World War II before moving into the fizzy drink business in 1949. Its first drink, Gluco Cola, named after its range of cookies, flopped, so in 1952 it came out with Gold Spot, which gained a sizeable following in New Delhi before starting to expand across the country in 1967.

  But as the 1970s progressed, India was gripped by anti-Western sentiment, partly due to longstanding resentment about the injustices of British rule and partly because of America’s willingness to supply weapons to Pakistan at a time
of conflict in Kashmir and Pakistani suppression of rebels seeking independence for East Pakistan (now Bangladesh). In response to rising nationalism, Indira Gandhi’s government introduced a law in 1973 requiring foreign businesses in India to be majority owned by Indian companies or citizens. The law was poorly enforced, but in 1977 the rival Janata Party won a landslide election victory against Gandhi’s Indian National Congress. The new government believed that enforcement of the 1973 law should be ramped up, and new industry minister Georges Fernandes soon took Coca-Cola to task. Fernandes, who once questioned Gandhi’s government over the widespread availability of Coca-Cola in Indian cities where there was no clean drinking water, saw the soda company’s success against domestic businesses as a prime example of why the “Indianization” of foreign-owned companies was necessary.

  The trade unionist turned industry minister told Coca-Cola to comply with the law by ensuring that Indians owned a 60 percent stake in all its operations in the country, and Coca-Cola agreed. But then Fernandes insisted the company must also hand over the secret formula, claiming that without the recipe India’s Coca-Cola businesses would be no more than local sales offices. Coca-Cola said never. Fernandes replied that the secret formula was the price for staying in India. That price is too high, the Atlanta firm responded, and pulled out of the country. Coca-Cola wasn’t alone in its flight from India. The government’s Indianization policy caused thirty-eight other foreign multinational corporations, including IBM, to withdraw. As far as Fernandes was concerned, though, the exit of Coke and other foreign companies was a victory for his campaign to protect India’s homegrown industries. To celebrate—and find work for the thousands of now unemployed Coca-Cola workers in India—the government launched a cola of its own, which it named 77 in honor of the year that Gandhi and Coke were defeated. But while 77 launched in a blaze of publicity and to long queues of curious Indians waiting to try it out, the government cola soon floundered.