The Real Thing - Truth and Power at the Coca-Cola Company

Abstract: In the book The Real Thing, Constance L. Hays describes the growth of Coca-Cola, its establishment as a national (and international) icon, and the many ups and downs the company faced in its growth, both within the US and overseas. The story of how a company that makes what is essentially sweetened, carbonated water, came to represent the face of American business for common people all over the world is a fascinating one.

 

About the Author: Constance L Hays has worked as a reporter for The News and Observer in Raleigh, North Carolina, and, since 1986, for The New York Times, where she covered the food and beverage industry for three years. She lives in New York City with her husband, John A Hays, and their children.

<< Previous

Woodruff was perhaps the most influential figure at Coca-Cola during the 20th century. He joined the company as President in 1923, and controlled the company for the next 62 years. Although he retired as Chairman in 1955, he remained a director and was also chairman of the finance committee, which meant that all major decisions required his approval. Woodruff remained "The Boss in performance and spirit", until his death in 1985. He was also instrumental in the appointment of Roberto Goizueta as the Chairman and CEO of the company 1981. Much of the book is devoted to Coke's relationship with its bottlers. In the initial years, the bottlers had made the investments that were required to make the company grow - investments in bottling plants, delivery systems and marketing. The company merely supplied the syrup. In its agreements with its first bottlers, Coke had made a mistake that was to later prove costly - the company had contracted to supply the syrup at the price of one dollar a gallon, in perpetuity. At various times in its history, the company tried to get around this limitation. At one point, the price was allowed to be increased, based on the increase in the prices of sugar. The bottlers played a critical role in the company's growth even in the subsequent years.

In the process they also grew rich. They were usually pillars of the communities in which they lived, often occupying high political positions. They contributed to strengthening the image of Coca-Cola as a wholesome, clean, American product. However, the bottlers were also independent minded; the company often had trouble getting them to do what it wanted, and relations between them were usually strained. Moreover, the bottling operations were also very profitable. Most of the bottlers also resisted moves by the company to raise syrup prices. Little wonder then, that Coca-Cola would try all means possible to bring them under the company's control.

Coca-Cola's initial moves in this direction were unsuccessful. However, over a period of years, the company acquired some of the bottlers who wanted to exit the business. As the company's approval was required for the transfer of bottling franchises, Coca-Cola was also able to negotiate new contracts, with terms far more favorable to the company, with the entities that purchased the franchises from the old-time bottlers.

The decisive turning point in the company's relations with the bottlers came during the term of Goizueta. Douglas Ivestor, who would eventually succeed Goizueta as the Chairman and CEO, was responsible for the real breakthrough in the company's attempts to control the bottling operations. He devised the plan to set up Coca Cola Enterprises Limited, which bought out many of the independent bottlers. The new company (which was partly owned by Coca-Cola), also took on its balance sheet the huge debts incurred in the acquisitions. One happy result of this move was that, over the next few years, by making suitable adjustments to the price charged for syrup and money given to the bottling company for marketing and promotion, the reported earnings of Coca-Cola could be managed to meet financial analysts' expectations.

While Coca-Cola was the darling of Wall Street during the Goizueta days, Ivestor's term as Chairman and CEO was marked by several crises and a sharp decline in the company's share price. Eventually, this led to Ivestor's removal and the installation of Doug Daft as CEO. Daft was an unexpected choice to replace.

Next >>