One Coca-Cola Plaza
As the world's largest beverage company, we refresh the world. We do this by developing superior soft drinks, both carbonated and noncarbonated, and profitable nonalcoholic beverage systems that create value for our Company, our bottling partners, our customers, our share owners and communities in which we do business. In creating value, we succeed or fail based on our ability to perform as worthy stewards of several key assets: (1) Coca-Cola, the world's most recognized trademark, and other highly valued trademarks; (2) The world's most effective and pervasive distribution system; (3) Satisfied customers, who make a good profit selling our products; (4) Our people, who are ultimately responsible for building this enterprise; (5) Our abundant resources, which must be intelligently allocated; (6) Our strong global leadership in the beverage industry in particular and in the business world in general.
The Coca-Cola Company is the world's number one maker of soft drinks, holding 51 percent of the global market. Coca-Cola's red and white trademark is probably the best-known brand symbol in the world. Headquartered since its founding in Atlanta, Coca-Cola makes two of the top three soft drinks in the world, Coca-Cola Classic at number one and Diet Coke at number three. The company also operates one of the world's most pervasive distribution systems, offering its more than 160 beverage products in nearly 200 countries worldwide. Nearly two-thirds of sales are generated outside North America, with revenues breaking down as follows: North America, 37 percent; Greater Europe (which includes parts of Eurasia, such as Russia), 26 percent; Middle and Far East, 21 percent; Latin America (including Mexico), 12 percent; Africa, three percent; and other regions, one percent. Among the company's products are a variety of carbonated beverages, sports drinks, juices, teas, coffees, and bottled water, under such brands as Fanta, Sprite, Mr. PiBB, Mello Yello, TAB, Surge, Citra, POWERaDE, Fruitopia, Saryusaisai, Aquarius, Bonaqa, and Dasani. Coca-Cola owns the Minute Maid Company, a leading North American maker of juices and other beverages, including Hi-C fruit drinks, Five Alive citrus drinks, Bright & Early breakfast beverages, and Bacardi mixers. Moreover, the company, through its Schweppes Beverages unit, also holds the rights to such brands as Schweppes, Canada Dry, Dr Pepper, and Crush in 157 countries, primarily located outside North America and Europe. Coca-Cola's development into one of the most powerful and admired firms in the world has been credited to proficiency in four basic areas: consumer marketing, infrastructure (production and distribution), product packaging, and customer (or vendor) marketing.
Creation of a Brand Legend
The inventor of Coca-Cola, Dr. John Styth Pemberton, came to Atlanta from Columbus, Georgia, in 1869. In 1885 he set up a chemical laboratory in Atlanta and went into the patent medicine business. Pemberton invented such products as Indian Queen hair dye, Gingerine, and Triplex liver pills. In 1886 he concocted a mixture of sugar, water, and extracts of the coca leaf and the kola nut. He added caffeine to the resulting syrup so that it could be marketed as a headache remedy. Through his research Pemberton arrived at the conclusion that this medication was capable of relieving indigestion and exhaustion in addition to being refreshing and exhilarating.
The pharmacist and his business partners could not decide whether to market the mixture as a medicine or to extol its flavor for its own sake, so they did both. In Coca-Cola: An Illustrated History, Pat Watters cited a Coca-Cola label from 1887 which stated that the drink, 'makes not only a delicious ... and invigorating beverage ... but a valuable Brain Tonic and a cure for all nervous affections.' The label also claimed that 'the peculiar flavor of Coca-Cola delights every palate; it is dispensed from the soda fountain in the same manner as any fruit syrup.' The first newspaper advertisement for Coca-Cola appeared exactly three weeks after the first batch of syrup was produced, and the famous trademark, white Spenserian script on a red background, made its debut at about the same time.
Coca-Cola was not, however, immediately successful. During the product's first year in existence, Pemberton and his partners spent around $74 in advertising their unique beverage and made only $50 in sales. The combined pressures of poor business and ill health led Pemberton to sell two-thirds of his business in early 1888. By 1891, a successful druggist named Asa G. Candler owned the entire enterprise. It had cost him $2,300. Dr. Pemberton, who died three years earlier, was never to know the enormous success his invention would have in the coming century.
Candler, a religious man with excellent business sense, infused the enterprise with his personality. Candler became a notable philanthropist, associating the name of Coca-Cola with social awareness in the process. He was also an integral part of Atlanta both as a citizen and as a leader. Candler endowed Emory University and its Wesley Memorial Hospital with more than $8 million. Indeed, the university could not have come into existence without his aid. In 1907 he prevented a real estate panic in Atlanta by purchasing $1 million worth of homes and reselling them to people of moderate income at affordable prices. During World War I, Candler helped to avert a cotton crisis by using his growing wealth to stabilize the market. After he stepped down as the president of Coca-Cola, he became the mayor of Atlanta and introduced such reforms as motorizing the fire department and augmenting the water system with his private funds.
1891-1919: Rapid Growth Under the Candlers
Under Candler's leadership, which spanned a 26-year period, the Coca-Cola Company grew quickly. Between 1888 and 1907, the factory and offices of the business were moved to eight different buildings in order to keep up with the company's growth and expansion. As head of the company, Candler was most concerned with the quality and promotion of his product. He was particularly concerned with production of the syrup, which was boiled in kettles over a furnace and stirred by hand with large wooden paddles. He improved Pemberton's formula with the help of a chemist, a pharmacist, and a prescriptionist. In 1901, responding to complaints about the presence of minute amounts of cocaine in the Coca-Cola syrup, Candler devised the means to remove all traces of the substance. By 1905, the syrup was completely free of cocaine.
In 1892, the newly incorporated Coca-Cola Company allocated $11,401 for advertising its drink. Advertising materials included signs, free sample tickets, and premiums such as ornate soda fountain urns, clocks, and stained-glass lampshades, all with the words 'Coca-Cola' engraved upon them. These early advertising strategies initiated the most extensive promotional campaign for one product in history. Salesmen traveled the entire country selling the company's syrup, and by 1895 Coca-Cola was being sold and consumed in every state in the nation. Soon it was available in some Canadian cities and in Honolulu, and plans were underway for its introduction into Mexico. By the time Asa Candler left the company in 1916, Coke had also been sold in Cuba, Jamaica, Germany, Bermuda, Puerto Rico, the Philippines, France, and England.
An event that had an enormous impact on the future and very nature of the company was the 1899 agreement made between Candler and two young lawyers that allowed them to bottle and sell Coca-Cola throughout the United States: the first bottling franchise had been established. Five years later, in 1904, the one-millionth gallon of Coca-Cola syrup had been sold. In 1916 the now universally recognized, uniquely contour-shaped Coke bottle was invented. The management of all company advertising was assigned to the D'Arcy Advertising Agency, and the advertising budget had ballooned to $1 million by 1911. During this time, all claims for the medicinal properties of Coca-Cola were quietly dropped from its advertisements.
World War I and the ensuing sugar rationing measures slowed the growth of the company, but the pressure of coal rations led Candler's son, Charles Howard, to invent a process whereby the sugar and water could be mixed without using heat. This process saved the cost of fuel, relieved the company of the need for a boiler, and saved a great amount of time since there was no need for the syrup to go through a cooling period. The company continued to use this method of mixing into the 1990s.
Although Candler was fond of his company, he became disillusioned with it in 1916 and retired. One of the reasons for this decision was the new tax laws which, in Candler's words, did not allow for 'the accumulation of surplus in excess of the amount necessary for profitable and safe conduct of our particular business.' (It has also been suggested that Candler refused to implement the modernization of company facilities.)
1919-55: The Woodruff Era
Robert Winship Woodruff became president of the company in 1923 at the age of 33. His father, Ernest Woodruff, along with an investor group, had purchased it from the Candler family in 1919 for $25 million, and the company went public in the same year at $40 a share. After leaving college before graduation, Woodruff held various jobs, eventually becoming the Atlanta branch manager and then the vice-president of an Atlanta motor company, before becoming the president of Coca-Cola.
Having entered the company at a time when its affairs were quite tumultuous, Woodruff worked rapidly to improve Coca-Cola's financial condition. In addition to low sales figures in 1922, he had to face the problem of animosity toward the company on the part of the bottlers as a result of an imprudent sugar purchase that management had made. This raised the price of the syrup and angered the bottlers. Woodruff was aided in particular by two men, Harrison Jones and Harold Hirsch, who were adept at maintaining good relations between the company and its bottling franchises.
Woodruff set to work improving the sales department; he emphasized quality control, and began advertising and promotional campaigns that were far more sophisticated than those of the past. He established a research department that became a pioneering market research agency. He also worked hard to provide his customers with the latest in technological developments that would facilitate their selling Coca-Cola to the public, and he labored to increase efficiency at every step of the production process so as to raise the percentage of profit from every sale of Coca-Cola syrup.
Through the 1920s and 1930s such developments as the six-pack carton of Coke, which encouraged shoppers to purchase the drink for home consumption, coin-operated vending machines in the workplace, and the cooler designed by John Stanton expanded the domestic market considerably. Also, by the end of 1930, as a result of the company's quality control efforts, Coca-Cola tasted exactly the same everywhere.
Considered slightly eccentric, Woodruff was a fair employer and an admired philanthropist. In 1937, he donated $50,000 to Emory University for a cancer diagnosis and treatment center, and over the years gave more than $100 million to the clinic. He donated $8 million for the construction of the Atlanta Memorial Arts Center. Under his leadership the Coca-Cola Company pioneered such company benefits as group life insurance and group accident and health policies, and in 1948 introduced a retirement program.
Woodruff was to see the Coca-Cola Company through an era marked by important and varied events. Even during the Great Depression the company did not suffer thanks to Woodruff's cost-cutting measures. When Prohibition was repealed, Coca-Cola continued to experience rising sales. It was World War II, however, that catapulted Coca-Cola into the world market and made it one of America's first multinational companies.
Woodruff and Archie Lee of the D'Arcy Advertising Agency worked to equate Coca-Cola with the American way of life. Advertisements had, in Candler's era, been targeted at the wealthy population. In Woodruff's time the advertising was aimed at all Americans. By early 1950, African Americans were featured in advertisements, and by the mid-1950s there was an increase in advertising targeted at other minority groups. Advertising never reflected the problems of the world, only the good and happy life. Radio advertising began in 1927, and through the years Coca-Cola sponsored many musical programs. During World War II, Woodruff announced that every man in uniform would be able to get a bottle of Coke for five cents no matter what the cost to the company. This was an extremely successful marketing maneuver and provided Coke with good publicity. In 1943, at the request of General Eisenhower, Coca-Cola plants were set up near the fighting fronts in North Africa and eventually throughout Europe in order to help increase the morale of U.S. soldiers. Thus, Coca-Cola was introduced to the world.
Coke was available in Germany prior to the war, but its survival there during the war years was due to a man named Max Keith who kept the company going even when there was little Coca-Cola syrup available. Keith developed his own soft drink, using ingredients available to him, and called his beverage Fanta. By selling this beverage he kept the enterprise intact until after the war. When the war was over the company continued to market Fanta. By 1944, the Coca-Cola company had sold one billion gallons of syrup, by 1953 two billion gallons had been sold, and by 1969 the company had sold six billion gallons.
1955-81: Diversification, New Products, and Foreign Expansion
The years from the end of World War II to the early 1980s were years of extensive and rapid change. Although Woodruff stepped down officially in 1955, he still exerted a great amount of influence on the company over the coming years. There were a series of chairmen and presidents to follow before the next major figure, J. Paul Austin, took the helm in 1970; he was followed by Roberto Goizueta in 1981. In 1956, after 50 years with the D'Arcy Advertising Agency, the Coca-Cola Company turned its accounts over to McCann-Erickson and began enormous promotional campaigns. The decade of the 1950s was a time of the greatest European expansion for the company. During this decade Coca-Cola opened approximately 15 to 20 plants a year throughout the world.
The company also began to diversify extensively, beginning in 1960, when the Minute Maid Corporation, maker of fruit juices and Hi-C fruit drinks, was acquired by Coca-Cola. Four years later the Duncan Foods Corporation also merged with the company. In 1969 Coca-Cola acquired the Belmont Springs Water Company, Inc., which produced natural spring water and processed water for commercial and home use. The following year the company purchased Aqua-Chem, Inc., producers of desalting machines and other such equipment, and in 1977 Coca-Cola acquired the Taylor Wines Company and other wineries. These last two companies were sold later under Goizueta's leadership.
In addition to its diversification program, the Coca-Cola Company also expanded its product line. Fanta became available in the United States during 1960 and was followed by the introduction of Sprite (1961), TAB (1963), and Fresca (1966), along with diet versions of these drinks. One reason that Coca-Cola began to introduce new beverages during the 1960s was competition from Pepsi Cola, sold by PepsiCo, Inc. Pepsi's success also motivated the Coca-Cola Company to promote its beverage with the slogan 'It's the Real Thing,' a subtle, comparative form of advertising that the company had never before employed.
Things did not always run smoothly for Coca-Cola. When Coke was first introduced to France, the Communist party, as well as conservative vineyard owners, did what they could to get the product removed from the country. They were unsuccessful. Swiss breweries also felt threatened, and spread rumors about the caffeine content of the drink. More consequential was the Arab boycott in 1967 which significantly hindered the company's relations with Israel. In 1970 the company was involved in a scandal in the United States when an NBC documentary reported on the bad housing and working conditions of Minute Maid farm laborers in Florida. In response, the company established a program that improved the workers' situation. In 1977 it was discovered that Coca-Cola, for various reasons, had made $1.3 million in illegal payments over a period of six years, mostly to executives and government officials in foreign countries.
During the 1970s, under the direction of Chairman J. Paul Austin and President J. Lucian Smith, Coca-Cola was introduced in Russia as well as in China. To enter the Chinese market, the company sponsored five scholarships for Chinese students at the Harvard Business School, and supported China's soccer and table-tennis teams. The beverage also became available in Egypt in 1979, after an absence there of 12 years. Austin strongly believed in free trade and opposed boycotts. He felt that business, in terms of international relations, should be used to improve national economies, and could be a strong deterrent to war. Under Austin, Coca-Cola also started technological and educational programs in the Third World countries in which it conducted business, introducing clean water technology and sponsoring sports programs in countries too poor to provide these benefits for themselves.
Austin's emphasis was on foreign expansion. Furthermore, under Austin's management the company became more specialized. Where Woodruff was aware of all facets of the company, Austin would delegate authority to various departments. For instance, he would give general approval to an advertising scheme, but would not review it personally. Smith was responsible for the everyday operations of the company, and Austin would, among other things, set policies, negotiate with foreign countries, and direct the company's relations with the U.S. government.
1981-97: The Goizueta Era
Roberto Goizueta became chairman in 1981, replacing Austin. The Cuban immigrant immediately shook up what had become a risk-averse, tradition-obsessed, barely profitable company. Less than a year after becoming chairman, he made two controversial decisions. First, he acquired Columbia Pictures for about $750 million in 1982. Goizueta thought that the entertainment field had good growth prospects, and that it would benefit from Coca-Cola's expertise in market research. Secondly, without much consumer research, Goizueta introduced Diet Coke to the public, risking the well-guarded trademark that until then had stood only for the original formula. Something had to be done about the sluggish domestic sales of Coca-Cola and the intense competition presented by Pepsi. In 1950, Coke had outsold Pepsi by more than five to one, but by 1984 Pepsi had a 22.8 percent share of the market while Coke had a 21.6 percent share. Goizueta's second 1982 gamble paid off handsomely when Diet Coke went on to become the most successful consumer product launch of the 1980s, and eventually the number three soft drink in the entire world.
In 1985 Goizueta took another chance. Based on information gathered from blind taste tests, Goizueta decided to reformulate the 99-year-old drink in the hope of combating Pepsi's growing popularity. The change to New Coke was not enthusiastically greeted by the U.S. public. Apparently Goizueta did not take into account the public's emotional attachment to the name 'Coca-Cola' and all that it stood for: stability, memories, and the idea of a 'golden America.' Within less than a year the company brought back the 'old' Coke, calling it Coca-Cola Classic. New Coke was universally considered the biggest consumer product blunder of the 1980s, but it was also viewed in a longer term perspective as a positive thing, because of the massive amount of free publicity that the Coke brand received from the debacle.
In September 1987, Coca-Cola agreed to sell its entertainment business to TriStar Pictures, 30 percent of which was owned by Coca-Cola. In return, Coca-Cola's interest in TriStar was increased to 80 percent. Coca-Cola's holding in TriStar was gradually distributed as a special dividend to Coca-Cola shareholders until the company's interest was reduced to a minority, when TriStar changed its name to Columbia Pictures Entertainment and sought its own listing on the New York Stock Exchange. Although the company's flirtation with entertainment appeared to be ill-advised, Coca-Cola ended up with $1 billion in profits from its short-term venture.
In a 1984 article in the New York Times, Goizueta stated that he saw Coca-Cola's challenge as 'continuing the growth in profits of highly successful main businesses, and [those] it may choose to enter, at a rate substantially in excess of inflation, in order to give shareholders an above average total return on their investment.' Goizueta projected that by 1990 his new strategy would nearly double the company's net income to $1 billion. His prediction came true in 1988. Two years later revenues surpassed the $10 billion mark.
In the mid-1980s, Coca-Cola reentered the bottling business, which had long been dominated by family-operated independents. Coca-Cola began repurchasing interests in bottlers worldwide with a view toward providing those bottlers with financial and managerial strength, improving operating efficiencies, and promoting expansion into emerging international markets. The trend started domestically, when the parent company formed Coca-Cola Enterprises Inc. through the acquisition and consolidation of two large bottlers in the South and West in 1986. The parent company acquired more than 30 bottlers worldwide from 1983 to 1993. By then, the market value of the company's publicly traded bottlers exceeded the company's book value by $1.5 billion.
Called 'one of the world's most sophisticated and powerful marketing organizations,' the company's schemes for the 1990s included the 1993 global launch of the 'Always Coca-Cola' advertising theme. The new campaign was formulated by Creative Artists Agency, which took over much of the brand's business in 1992 from longtime agency McCann-Erickson Worldwide. In addition to the new campaign, a 32-page catalog of about 400 licensed garments, toys, and gift items featuring Coke slogans or advertising themes was released. The 1994 introduction of a PET plastic bottle in the brand's distinctive, contour shape resulted from corporate marketing research indicating that an overwhelming 84 percent of consumers would choose the trademarked bottle over a generic straight-walled bottle. But the company's primary challenge for the last decade of the 20th century came in the diet segment, where top-ranking Diet Coke was losing share to ready-to-drink teas, bottled waters, and other 'New Age' beverages, which were perceived as healthier and more natural than traditional soft drinks. Coca-Cola fought back by introducing its own new alternative drinks, including POWERaDE (1990), the company's first sports drink, and the Fruitopia line (1994). In 1992 the company and Nestlé S.A. of Switzerland formed a 50-50 joint venture, Coca-Cola Nestlé Refreshment Company, to produce ready-to-drink tea and coffee beverages under the Nestea and Nescafé brand names. Also during this time, Coca-Cola purchased Barq's, a maker of root beer and other soft drinks.
Goizueta died of lung cancer in October 1997, having revitalized and awakened what had been a sleeping giant. Goizueta had turned the company into one of the most admired companies in the world, racking up an impressive list of accomplishments during his 16-year tenure. Coca-Cola's share of the global soft drink market was approaching 50 percent, while in the United States Coke had increased its share to 42 percent, overtaking and far surpassing Pepsi's 31 percent. Revenues increased from $4.8 billion in 1981 to $18.55 billion in 1996; net income grew from $500 million to $3.49 billion over the same period. Perhaps Goizueta's most important--and influential--contribution to the storied history of Coca-Cola was his relentless focus on the company's shareholders. The numbers clearly showed that he delivered for his company's owners: return on equity increased from 20 percent to 60 percent, while the market value of the Coca-Cola Company made a tremendous increase, from $4.3 billion to $147 billion. Perhaps most telling, a $1,000 investment in Coca-Cola in 1981 was worth, assuming that dividends were reinvested, $62,000 by the time of Goizueta's death.
Late 1990s and Beyond
Goizueta's right-hand man, Douglas Ivester, was given the unenviable task of succeeding perhaps the most admired chief executive in the United States; it turned out that the first few years of Ivester's reign would prove more than challenging. Although Coca-Cola remained steadily profitable, it was beset by one problem after another in the late 1990s. Having restructured its worldwide bottling operations under Goizueta, the firm moved into a new phase of growth based on the acquisition of other companies' brands. Its already dominant market share and a sometimes arrogant and aggressive approach to acquisition led some countries, particularly in Europe, to take a hard line toward the company. In late 1997, for example, Coca-Cola announced it would acquire the Orangina brand in France from Paris-based Pernod Ricard for about $890 million. French authorities, who had fined Coca-Cola for anti-competitive practices earlier that year, blocked the purchase. In December 1998 Coca-Cola announced that it would purchase several soft drink brands--including Schweppes, Dr Pepper, Canada Dry, and Crush--outside the United States, France, and South Africa from Cadbury Schweppes plc for $1.85 billion. After encountering regulatory resistance in Europe, Australia, Mexico, and Canada, the two companies in July 1999 received regulatory approval for a new scaled-down deal valued at about $700 million, which included 155 countries but not the United States, Norway, Switzerland, and the member states of the European Union with the exception of the United Kingdom, Ireland, and Greece. Later in 1999 separate agreements were reached that gave Coca-Cola the Schweppes brands in South Africa and New Zealand.
With nearly two-thirds of sales originating outside North America, Coca-Cola was hit particularly hard by the global economic crisis of the late 1990s, which moved from Asia to Russia to Latin America. In Russia, where the company had invested $750 million from 1991 through the end of the decade, sales fell about 60 percent from August 1998, when the value of the ruble crashed, to September 1999. Rather than retreating from the world stage, however, Ivester viewed the downturn as an opportunity to make additional foreign investments at bargain prices, essentially sacrificing the short term for potentially huge long-term gains. While the economic crisis was still wreaking havoc, Coca-Cola was faced with another crisis in June 1998 when several dozen Belgian schoolchildren became ill after drinking Coke that had been made with contaminated carbon dioxide. Soon, 14 million cases of Coca-Cola products were recalled in five European countries, and France and Belgium placed a temporary ban on the company's products. The crisis, though short-lived, was a public relations disaster because company officials appeared to wait too long to take the situation seriously, admit that there had been a manufacturing error, and apologize to its customers. Meanwhile, around this same time, four current and former employees had filed a racial discrimination suit against the firm in the United States.
Despite the seemingly endless string of challenges the company faced in the late 1990s, Coca-Cola was also moving forward with new initiatives. In February 1999 the company announced plans to launch its first bottled water brand in North America. Dasani was described as a 'purified, non-carbonated water enhanced with minerals.' In October 1999 the company announced that it would redesign the look of its Coca-Cola Classic brand in 2000 in an attempt to revitalize the flagship's stagnant sales. Labels would continue to feature the iconic contour bottle but with a cap popped off and soda fizzing out. In addition, the Coke Classic slogan 'Always,' which had been used since 1993, would be replaced with the tagline 'Enjoy,' which had been used on Coke bottles periodically for decades. The company also planned to increase the appearances of the eight-ounce contour bottle, in a particularly nostalgic move. The renewed emphasis on this classic brand icon and the resurrection of the 'Enjoy' slogan seemed to be a fitting way for a U.S.--if not global--institution to launch itself into the new millennium.
Principal Subsidiaries: The Minute Maid Company; The Coca-Cola Export Corporation; Coca-Cola Financial Corporation; Coca-Cola Interamerican Corp.; Coca-Cola G.m.b.H. (Germany); Coca-Cola Industries Ltda. (Brazil); Coca-Cola Southern Africa Ltd. (South Africa); Coca-Cola Enterprises Inc. (40%); Coca-Cola Beverages plc (U.K.; 50.5%); Thai Pure Drinks Limited (Thailand; 49%); Embotelladoras Coca-Cola Polar S.A. (Chile; 29%); Coca-Cola Nordic Beverages (Norway; 49%); Coca-Cola Amatil Limited (Australia; 43%); Panamerican Beverages, Inc. (Panama; 24%); Coca-Cola FEMSA, S.A. de C.V. (Mexico; 30%).
Principal Operating Units: Africa Group; Greater Europe Group; Latin America Group; Middle & Far East Group; North America Group.
Principal Competitors: PepsiCo, Inc.; Cadbury Schweppes plc; Dr Pepper/Seven Up, Inc.; Ferolito, Vultaggio & Sons; National Beverage Corp.; Ocean Spray Cranberries, Inc.; Philip Morris Companies Inc.; The Procter & Gamble Company; The Quaker Oats Company; Triarc Companies, Inc.; Unilever plc; Virgin Group Ltd.
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