The Coke Machine: The Dirty Truth Behind the World's Favorite Soft Drink

by Michael Blanding

  Perhaps the person most responsible for the growth in pouring-rights contracts nationwide, however, was a former college athletic director from Colorado named Dan DeRose, who reinvented himself as DD Marketing, a consulting company to guide schools on striking the hardest bargain with soda companies. Between 1995 and 1999, DeRose inked $300 million in contracts (the consultant pocketing a healthy 25 to 35 percent of the total).4 “My basic philosophy,” he told The Denver Post in 1999: “Schools have it; they’re offering it. If we can assist them in maximizing their revenue then I think we’re doing a great, great service.” He even used his own daughter Anna to underscore the value of soda contracts, boasting to school administrators when his daughter was in first grade: “From now until she’s graduated, all she’ll drink is Coke. . . . She doesn’t even know how to spell Pepsi.”

  As the contracts got more and more lucrative, however, some parents and activists began expressing misgivings about the amount of advertising by soda companies in schools. “There should never be a situation on public property where commercial advertising is permitted,” says Ross Getman, a self-described “obsessive-compulsive” from Syracuse, New York, who launched a website to track the contracts nationwide, starting with the one signed by Cicero-North Syracuse High School in 1998. That one included up-front payments from Coke of $900,000 to construct a new football stadium—in which the Coke logo would be prominently displayed on a six-foot-high scoreboard provided by the company, with athletes on the field required to drink out of red Coke cups.

  The deal was inked with the help of the president of the state assembly, Michael Bragman, who had a home filled with antique Coca-Cola memorabilia that would set the collectors at the Gaylord Texan to drooling, including two fully stocked Coke machines in the basement. Over the years, Bragman had been a good friend to Coke, helping to repeal a 2-cent-per-container soda tax imposed back in the 1990s. In exchange, Coca-Cola had consistently been one of the biggest contributors to Bragman’s reelection campaigns.

  Now, standing next to Bragman at the announcement, Coca-Cola Enterprises CEO Bob Lanz gave a heartfelt speech, saying that Coke “wanted to give something back to the community.” Neither of them mentioned that the majority of the money for the stadium—some $4.6 million—would come from state funds.

  The floodgates had now been opened—the school stadium success was written up in Coke’s hometown newspaper The Atlanta Journal-Constitution , and once administrators began hearing about the cash payments, school districts from Portland, Oregon, to Edison, New Jersey, got religion in a big way. By 2000, according to the Centers for Disease Control and Prevention, 92 percent of high schools had long-term soda contracts, along with 74 percent of middle schools and 43 percent of elementary schools. And at almost all of them, the number of vending machines increased, jumping from a lonely Coke machine by the locker room to dozens of machines scattered around the cafeteria, the auditorium, or even in the halls outside classrooms.

  While the additional revenue for the company added only slightly to its massive balance sheet, the schools gave Coke access to customers at an early—and vulnerable—age. “If a high school student drinks a Coke while he’s at school, the likelihood that he’ll turn to Coke again when he’s outside school and actually has a choice becomes much greater,” says former brand manager Cardello. “Thus in the end, the goal is not just about getting kids to spend money, it’s about getting kids to choose the right brand.”

  Getting inside the school building with the active support of administrators also gave Coke a back door around its long-standing strictures against advertising to children. For years, after all, Coke had directly targeted kids with special come-ons, from nature cards with the Coke logo in the 1920s to “Know Your Airplanes” decks of cards during World War II. Even back then, however, the company fretted about appearing to advertise a sugary drink to young children. The D’Arcy Agency’s ad rules included a proscription against showing “children under 6 or 7 years old,” which by the 1950s, McCann extended to children under twelve—a policy Coke supposedly continues to the present day.

  Despite its restraint, however, Coke has been remarkably successful in penetrating even the youngest minds. Research has shown that babies recognize brands at anywhere from six to eighteen months, specifically requesting them by age three. Of those brands they know best, Coke is in the top five, along with Cheerios, Disney, McDonald’s, and Barbie. In a society where Coke is within an arm’s reach of desire—or part of a 360-degree landscape—even children can’t escape the ubiquitous Coke logo. But familiarity and brand loyalty, of course, are very different things. As another former Coke marketing chief once said, “With soft drink consumption, early preferences translate into later life preferences. It’s a lot easier than getting consumers to switch their brand preferences later on.”

  And so, Coke has constantly found ways to do that. For decades, for instance, it has blithely produced “collectors’ items,” including Barbie dolls, playing cars, board games, delivery trucks, and other toys supposedly targeted to adults. Then there are all of those Santa ads, which subtly package the meaning of Christmas in the delivery of a bottle of Coke, imprinting the two concepts together in minds that aren’t cognitively well developed enough to distinguish the difference. Those cute polar bears serve a similar purpose. “You take any character that is cute and cuddly and fun and have them drinking down a Coca-Cola and smiling,” says Daniel Acuff, an industry ad consultant for years who created the M&M’s characters and worked on campaigns for Cap’n Crunch cereal. “That is very clearly playing on the soft spot in people in general and the cognitive un-awareness of children under twelve in particular.”

  Coke has found other ways to get around its policies as well, especially on television, where it defines kids’ shows as those in which 50 percent of the audience is under twelve. At least since the last decade, however, the programs children watch most are those originally intended for teens or adults. In 2000, Coke helped foment the concept of “product placement” with a $6 million deal for primary sponsorship of the WB show Young Americans, in which characters were seen drinking Coca-Cola in ways one television critic called “ludicrously conspicuous.” But Coke found absolute product placement gold with its sponsorship of the runaway television hit American Idol, which happens to be the second most popular show among children under twelve (second only to SpongeBob SquarePants).

  In addition to commercials during the program, Coke puts Coke cups into the hands of judges and brands a backstage “red room” with Coke pictures on the walls, Coke coolers, and a “red couch,” where performers are interviewed among Coke logos. “You couldn’t ask for better TV,” enthused one Coke VP in USA Today. “If you look at ratings, it’s got universal appeal—everything from kids to 35- to 64-[year-olds].”

  Television shows aren’t the only realm where Coke has used product placement to appeal to kids. In 2001, Creative Artists Agency brokered a $150 million deal for Coke to be the exclusive sponsor for the Harry Potter movies—based on the wildly popular book about a child wizard that spurred a generation of tweens to start reading. In the deal worked out with Warner Bros., Coke wouldn’t appear in the movie, nor would any of the characters be seen drinking it (after all, the film’s young star, Daniel Radcliffe, was only eleven years old at the time). However, characters and symbols from the film were plastered on packages for Coke, Minute Maid juices, and Hi-C, leaving no doubt who the company was pitching to. “Kids love Harry Potter, and we are confident the affiliation will be very good for us,” said a spokesman for Minute Maid, even as a Coke spokeswoman insisted, “The target is really families and not just kids.”

  The movie earned nearly $1 billion worldwide—the second-highest-grossing film at the time behind Titanic—and Coca-Cola Enterprises spokesperson John Downs called Potter the most successful campaign of the year. It was enough to spur a push to product placement in movies. Coke appeared in eighty-five of them between 2001 and 2009, third behind Apple and For
d in frequency. While many were marketed to adults, several were even more conspicuously aimed at kids, including the 2005 Dream Works film Madagascar, featuring animated zoo animals escaping from New York, as well as such preteen fare as Elf, Are We There Yet?, Scooby-Doo, and the Disney live-action princess fantasy Enchanted.

  Finally, in 2002, Coke made the leap to online advertising with Coke Studios, an online world where users could create avatars called “V-Egos” and put together their own music mixes with different virtual instruments. In 2007, the company followed it up with an entire branded world, CC Metro—which must look much like what Doug Ivester imagined when he envisioned the concept of a “360-degree landscape” of Coke. In this world, avatars move around an entire three-dimensional city, buying cool clothes, riding on hovercraft and skateboards, and talking with fellow fans of Coke. And while they are doing all these cool things, they are surrounded by Coke’s advertising images—with logos on billboards, blimps, and park benches, fountains and statues in the shape of Coke’s hobbleskirt bottle, and various stores and restaurants where you can spend real money to buy virtual glasses and bottles of Coke products. (Strangely, there are very few ads for anything but Coke Classic.) Soon after it opened, it was getting more than 100,000 visitors a month—no doubt many of them children, given the video game interface and the range of activities available.

  With that kind of success reaching young audiences, schools must have seemed to Coke just another avenue to “getting them young.” But in doing so, it failed to see how cynical it seemed to sell to children who had no other choice but to spend eight hours a day in the glow of the Coke machine.

  Almost immediately after forming the new Public Health Advocacy Club, Jackie Domac and her students took action, attempting to persuade the school to cancel its contract with Coke and implement healthier choices in the vending machines. They knew it would be difficult to convince their fellow students that the soft drinks they enjoyed were actually bad for them. Liquid Candy had only just been published, and studies were only beginning to link soda to obesity and other health problems. Even so, the students worked to raise awareness, creating whimsical T-shirts and holding taste tests for organic soy milk in the cafeteria.

  Momentum grew after Domac and her students met directly with a representative from Coke’s bottler, who reluctantly agreed to stock half of the slots with juice and other more healthful beverages (but only if the school accepted a 15 percent commission on those items, compared to 36 percent on soft drinks). When Domac triumphantly took a French film crew to show them the vending machines a few weeks later, she found the company had changed virtually nothing. “I had asked them to meet us halfway, and now I just embarrassed myself,” she remembers. “That was it, they were out.” She adopted more confrontational tactics, running for and winning a spot on the parents’ advisory council and bringing students in to raise the issue during meetings.

  It was money, however, that eventually did the talking. Domac and her students applied for a state health grant in 2002 to serve as a model school for nutrition. When they received a windfall of $250,000, the administration agreed to cancel the deal with Coke on a trial basis to see if the new strategy could work. “You can scream all you want about how healthy beverages prevent obesity and diabetes, but unless you can show a school that it has enough money to run its programs, that’s going to fall on deaf ears,” Domac says. With the new money, the students worked to get an array of juices and soy beverages into the vending machines at last, along with baked chips and trail mixes. While vending machine sales initially dipped, they eventually rose higher than before—$6,163 in 2002 versus $7,358 in 2003, according to Domac, who still keeps the figures.

  Flush with their sense of victory, the student health club took the issue to a higher authority even before those numbers came in—arguing for a ban on soda in the entire Los Angeles Unified School District, the second largest school district in the country, with more than 700,000 students. Again, they used creativity to make their point, storming meetings dressed in necklaces of plastic fruits while performing a foot-stomping chant, “Take Back the Snack.” “Facts are great, but they are also quite boring,” says Domac. “Having kids being vivacious and happy with a positive message went a long way.” The students made impassioned speeches about the new health craze at their school, at the same time marshaling data from a new UCLA study showing that 40 percent of students in the Los Angeles district were already obese.

  Coke waged a creative campaign of its own, threatening to pull its sponsorship of the district’s Academic Decathlon events at the school in a blunt attempt to silence opposition. But in the end, the grassroots strategy worked: In August 2002, the Los Angeles Unified school board unanimously voted to cut their contract with Coke. Starting with the 2004 school year, the district would sell no soda at all, stocking its vending machines with only milk, water, and drinks with at least 50 percent juice and no added sweeteners.

  After three years of struggle, the students had won—an empowering and humbling experience. “I’ve never been part of anything like that where people so young can have so much sway,” says Faisal Saleh, one of the student leaders, who is now majoring in theater arts at Santa Monica State College. “That’s something I take pride in.” The success in Los Angeles, however, was hardly the end of the battle against Coke in schools—in fact, it was only the beginning. Even while Coke was losing ground in California, the company soon roared back, determined not to lose out on a hard-won new market for its products at a critical time.

  By the time L.A. passed its resolution, word had already spread to other school districts, spawning similar resolutions in San Francisco, Sacramento, Madison, and Oakland. It wasn’t just Coke that stood to lose from the backlash—but Pepsi as well. The two companies, bitter rivals in the press, closed ranks to defend themselves through their trade organization, the National Soft Drink Association. As with the initial criticism of CSPI’s report, the group painted Domac and her students as misguided. “This is like using a squirt gun to put out a forest fire,” said NSDA spokesman Sean McBride. “The LAUSD missed an important opportunity to stem rising obesity rates by having more physical education in their schools and better nutrition education.”

  That notion that “it’s the couch, not the can,” became a rallying cry for Big Soda. Coke quickly launched a pilot program in Houston, Philadelphia, and Atlanta called “Step with It!”—distributing Coke-red pedometers to kids to encourage them to exercise more by taking 10,000 steps a day. The program won praise from Health and Human Services secretary Tommy Thompson, and expanded to 250 schools around the country by 2003. Even as Coke was playing nice in the media, however, it was funding studies to cast doubt on the connection between soft drinks and obesity.

  Along with Tyson Chicken and Wendy’s, Coke reportedly “donated” $200,000 to a new group called the Center for Consumer Freedom (CCF), which took the lead in ridiculing the fight against soda and other unhealthy food, all without revealing its funding. (Pepsi publicly disavowed the group.) “There is a rush to blame soda companies that far outstrips any scientific evidence,” said CCF senior analyst Dan Mindus. He pointed to competing studies, one showing that soda had no effect on weight gain, another contending that it was lack of exercise that caused weight increases. What CCF doesn’t advertise, of course, is who is paying for those studies. A recent review by David Ludwig—the author of the previously mentioned study on kids and soft drinks—found that beverage studies paid for by industry sources were four to eight times more likely to deny the connection between soda and weight gain than those funded by government or private sources. He makes the connection between soda and the tobacco industry, which funded studies attacking the connection between smoking and lung cancer for forty years. “Is that happening today with the soft drink industry?” Ludwig asks. “Only time will tell, but there certainly is a precedent.” As its name implies, CCF argues that consumers should be free to eat what they want—without the “food police
” looking over their shoulder at the dinner table. “Their ultimate goal is to restrict our access to certain food,” says Mindus. “If they don’t believe that we are to be trusted with the decision of choosing the food we eat, how can Americans be trusted with anything?” The argument has resonance. Shouldn’t Americans be free to choose what they eat and drink? And if it makes them fat, isn’t that their own fault? The argument hits deep in the American psyche, evoking images of founding fathers dumping tea and the Marlboro Man bestriding the Western plains. It also evokes the spirit of free-market capitalism, which enshrines free choice as its highest value.

  Ultimately, however, the argument is a cynical one—since the very success of Coke and its fellow companies has given the company the ability to narrow kids’ choices. In 2009 alone, Coke spent $2.8 billion in advertising to push its products to the general public. And in schools, the deck is even more stacked against students, since they can choose only from a preselected array of beverages, all the while subjected to the advertisements of the exclusive brand. “Certainly students should be taught to make healthful choices and take individual responsibility,” says Lori Dorfman, of the Berkeley Media Studies Group, who has analyzed the way that the soda/obesity issue has played out in the media. “But students do not determine what is made available to them in the vending machines. It’s the adults who are responsible for ensuring that schools are doing right by children in their care.”

  Even so, the Coca-Cola Company appealed to “choice” in 2001 when it staged a strategic retreat with a new school beverage policy. Coke would continue to allow its products in schools but prohibit exclusive school contracts or up-front payments to school districts. “We just don’t think that schools are an appropriate venue for marketing,” said Coca-Cola America president Jeffrey Dunn during a luncheon announcement in Washington. Coke received a rush of positive publicity, but there was only one problem—nobody bothered to tell the bottlers. Whether by design or benevolent neglect, Coca-Cola Enterprises was caught flat-footed by the announcement. A spokesperson for CCE promised that the bottlers would comply if schools stopped putting out requests for proposals. That promise lasted for all of a week—until Portland, Oregon, put out a request and Coca-Cola Enterprises ponied up a bid.