The Coca-Cola Company

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The Coca-Cola Company

310 North Avenue, NW
Atlanta, Georgia 30313
U.S.A.
(404) 676-2121
Fax: (404) 676-6792

Public Company
Incorporated: 1892
Employees: 31,300
Sales: $13.96 billion
Stock Exchanges: New York Boston Cincinnati Midwest Pacific Philadelphia Frankfurt Zurich Geneva Bern Basel Lausanne
SICs: 2087 Flavoring Extracts and Syrups, Nee; 2037 Frozen Fruits and Vegetables; 2033 Canned Fruits and Vegetables

The Coca-Cola Company has consistently ranked among Fortune magazine’s five most admired companies and, with a market value of $58 billion, stood as the fourth-largest company in America and the largest consumer goods company in 1993. That year, after over a century in business, the firm topped $2 billion in annual net income for the first time in its history. Coca-Cola’s red and white trademark is probably the best-known brand symbol on earth; the firm’s flagship product holds 57 percent of the worldwide cola segment. The company’s family of brands held an overwhelming 44 percent of the global soft drink market and were advertised in over 80 different languages by the last decade of the twentieth century. Coca-Cola also operated the world’s most pervasive distribution system, offering the Coca-Cola brand in over 195 countries worldwide. The company’s success has been credited to proficiency in four basic areas: consumer marketing, infrastructure (production and distribution), product packaging, and customer (or vendor) marketing.

The inventor of Coca-Cola, Dr. John Styth Pemberton, came to Atlanta from Columbus, Georgia, in 1869. Since 1885, when he set up a chemical laboratory and went into the patent medicine business, Atlanta has been the headquarters of the Coca-Cola Company. 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 doctor 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 Walters 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 its first year in existence, Pemberton and his partners spent $73.96 advertising their unique beverage, but made only $50.00 from 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.

Asa Candler, a religious man with excellent business sense, infused the enterprise with his personality. Candler became a notable philanthropist, incidentally associating the name of Coca-Cola with social awareness. 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.

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 America. 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, Coke had also been sold in Cuba, Jamaica, Germany, Bermuda, Puerto Rico, the Philippines, France, and England.

An event which had an enormous impact on the future and very nature of the company was the 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. Three years later, in 1904, the one-millionth gallon of Coca-Cola syrup had been sold. In 1916, the now universally recognized, uniquely-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.)

Robert Winship Woodruff became president of the company in 1923 at the age of 33. His father 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 work place, and the cooler designed by John Stanton expanded the domestic market considerably. And, 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 Depression the company did not suffer thanks to Woodruffs cost cutting measures. When Prohibition was repealed, Coca-Cola continued to experience rising sales. However, it was World War II 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 Woodruffs time the advertising was aimed at all Americans. By early 1950, blacks 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 American soldiers. Thus, Coca-Cola was introduced into the world market.

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.

The years from the end of World War II to 1980 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 was 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-Ericson 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 fifteen to twenty plants a year throughout the world.

The company also began to diversify extensively, beginning in 1960, when the Minute Maid Corporation merged with 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, Tab, and Fresca, 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. 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 have 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.

Roberto Goizueta became chairman in 1981, replacing Austin. Less than a year later 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 also 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.

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 move was not enthusiastically greeted by the American 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.

In September of 1987, Coca-Cola agreed to sell its entertainment business to Tri-Star Pictures, 30 percent of which was owned by Coca-Cola. In return, Coca-Cola’s interest in Tri-Star was increased to 80 percent. Coca-Cola’s holding in Tri-Star was gradually distributed as a special dividend to Coca-Cola shareholders until the company’s interest was reduced to a minority, when Tri-Star changed its name to Columbia Pictures Entertainment and sought its own listing on the New York Stock Exchange.

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.

In the mid-1980s, Coca-Cola entered the bottling business, which had long been dominated by family-operated independents. Coke 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 over thirty 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 twentieth 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.

In 1993, CEO Goizueta articulated Coca-Cola’s three priorities: the creation of stockholder value, maintenance and building of trademark strength, and emphasis on the long-term. Although the company already had a substantial global presence, great potential for geographic development remained. Coca-Cola’s 1993 annual report noted that the company’s top 16 markets accounted for 80 percent of its volume, but that those markets comprised only 20 percent of the world’s population. Goizueta emphasized that “every single one of the world’s 5.6 billion people [will] get thirsty” every day, and that Coca-Cola planned to do everything in its power to make its branded soft drinks “pleasantly inescapable.”

Principal Subsidiaries:

Bottling Investments Corp.; Carolina Coca-Cola Holding Co.; CRI Holdings, Inc.; Coca-Cola Financial Corp.; Coca-Cola Interamerican Corp.; Coca-Cola Overseas Parent Ltd.; CTI Holdings, Inc.; Coca-Cola Export Corp.; Refreshment Product Services, Inc.; Beverage Products Ltd.; S.A. Coca-Cola Beverages (1991) N.V.; Coca-Cola S.A. Industrial, Comercial Y Financiera; Coca-Cola Industries Ltda.; Recofarma Industria Quimica E Farmaceutica, Ldta.; Coca-Cola Ltd.; Atlantic Industries Ltd.; Conco Ltd.; Coca-Cola de Colombia, S.A.; Coca-Cola GmbH; International Beverages ltd.; Coca-Cola (Japan) Company, Ltd.; Coca-Cola Korea Company, Ltd.; Coca-Cola Nigeria Ltd.; Coca-Cola Poland, Ltd.; Minute Maid S.A.