20 August 2007

Constance L Hays - Pop

This is a short history of Coke, subtitled Truth and Power at the Coca-Cola Company, from its origins in the 1880s as a restorative served in pharmacies, to the glory expansion years of the 80s under Roberto Goizueta, and to the troubled 1990s.

It's a fascinating story of how a simple soft drink came to represent America throughout the world - cunning marketing in World War 2, where Coke bottling plants were set up alongside troop bases, identified Coke alongside the valiant liberators of Europe and Asia.

The legendary Goizueta was an exiled Cuban, who was a school contemporary of Castro, and whose family lost everything in the revolution. He was already working for Coke at the time, and found a substitute job in Florida, progressing through the 70s to become President, then Chairman and Chief Executive. Modern corporate governance rules advise against the combination of both roles, but in the 80s big autocratic personalities were in, and there were few bigger than Goizueta. His stated aim was for Coke to become the liquid of choice by the majority of people in the world - his market place was not just the cola market, or the soft drink market, but all beverages, including water, tea and milk. He used this argument to counter anti-monopoly suits in Europe, some of which were proposed by Pepsi, and many of which curtailed Coke's attempts to control the entire sales chain.

Hays describes well the central relationship between Coke and its bottlers, a legacy of the initial franchising decisions in the 19th century. The bottlers were the local distributors of Coke - they bought Coca Cola syrup at a fixed price, bottled it and sold it to outlets within a geographical franchise. The local Coke bottler became a significant social figure in America, wealthy, well connected, symbolic of enterprise, community, healthy living, and America. But for Coke, they restricted the potential for growth. Many of the contracts were perpetual, so that the relationship between the Coke company and the bottler couldn't be broken, and the price was tied to the price of sugar. This last was broken by Coke switching from sugar as its principal ingredient to high-fructose corn syrup, a change which has had significant health impacts in the Us not touched upon by Hays.

The former problem was solved by buying up bottlers, and allowing some to consolidate, so that there were fewer, bigger, bottlers. This helped Coke's ability to control marketing and pricing, and Coca Cola Enterprises (CCE) was created as the largest bottler. This was the basis for the growth in the 80s, but also of many of the problems faced by Coke in the 90s.

Hays spends half of the book on the period from 1981 to the present, allowing only one half for the history of almost a century before. This is partly because the recent period has been the most dynamic in Coke's history, but also because her undoubted in-depth research focused on interviews with key personnel from this period. She is good on the personalities of Goizueta and his hardworking but inadequate successor, Doug Ivester, but has a shaky grasp of finances. She says that Coke was doing better than Pepsi at one point because the share price was higher, and throughout attaches great significance to share splits, which are just rebases and have little intrinsic worth. These undermine her credibility a little - how can she be asking the most penetrating questions of ex-Coke executives if she doesn't understand these fundamentals?


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