Focus: Can they still sell the world a Coke?
Forget about Belgium. Coca-Cola is in trouble right across the globe
Sunday 20 June 1999
The company handed out thousands of bottles to East Germans crossing to the West, and within months was buying up the old state-owned bottling plants. Coca-Cola even helped pay for the unification ceremony in 1990 in its pursuit of the new market. For this had been Pepsi territory, unconquered land that, with the end of communism, became open to the red and white machine from Atlanta.
Coca-Cola is not an ordinary company: it is a brand, a marketing idea that combines a crusade, a credo and a machine for printing money. It is essentially an organisation that sells brown sugared water. But if you think about it that way you will never understand how it came to be the world's single best-known product, how it was woven into global history after the Second World War, or how it came to grief when a few dozen Belgian and French children suffered bad stomachs after drinking a can each last week.
Those few dodgy tummies are a minuscule proportion of the global market for Coke, perhaps 200 cans out of nearly 400 billion sold every year. It is not even certain that Coke was responsible for their illness. The company has said it may have been the result of a problem with a chemical sprayed on a pallet.
But the problem for Coke is much bigger. It is probably the world's most global corporation, the symbol of the vast explosion of transnational capitalism in the 1980s and 1990s, and it is sick to the stomach.
The European hitch is only one of many problems that the company faces. Its hyper-rapid expansion into new markets in the last decade has hit trouble as economic crisis has struck Asia, Russia and Latin America, halting sales growth there and raising questions about its massive capital investments. Its attempts to buy the overseas drinks business of Cadbury Schweppes has been diverted by several competition authorities, including that of the EU. It has been hit by a racial discrimination case at home. And it faces growing competition from the old enemy, the organisation referred to in Atlanta HQ only as the "P-Company" - Pepsi.
Coca-Cola was only one of many such sodas sold in America 100 years ago. But the marketing genius of Robert Woodruff, who presided over the company from 1923 until 1955, took it around the world. The US army shipped the bottles and the bottling plants abroad during the war, cementing its image as the all-American drink. The bottles, the posters, the music that accompanies the ads, the graphics and the colours created a classic. It was a central part of the creation of the New South, generating huge prosperity for Atlanta and helping to turn the city into a modern megalopolis from the sleepy southern city of a century ago.
Coke is no stranger to the perils of the global market place. It has been criticised and boycotted for ruining the environment, for allegedly turning a blind eye to the killing of union activists in Guatemala, for trading with Israel (it has been banned in much of the Arab world, and you will never find it on the table at the Iranian embassy), and for spreading the supposed evils of American imperialism. Its famous 1971 ad featuring the New Seekers ("I'd like to buy the World a Coke") and hordes of young people joining hands was in part a response to the Vietnam War: it had become risky being the all-American drink when America was itself dropping napalm on children.
Coke has stumbled in the market place before. Its most famous detour on the road to globalism came in 1985, when - weeks after Mr Woodruff had died - the company chose to alter the secret formula. It had been tampered with before, but this was a revolution, inspired - though no one would dare mention this at the time - by the Pepsi Challenge. Coke was slipping behind and it saw the answer in a new blend. "The best," announced its then chief executive officer, "has been made even better!" But the announcement triggered a furore. Within days it was re-thinking the re-think. At an emotional ceremony on 11 July 1985, it reintroduced the old formula as "Classic Coke". Television networks broke into their programming to announce it; 18,000 calls flooded the company's telephone hotline. Within months, old Coke had overtaken Pepsi again and the event served as a classic example of how to pull victory from the jaws of defeat.
It will not be so easy this time. The company has been slow to react, and seemed insensitive. The first interview given by Doug Ivester, the chief executive, on the subject was, significantly, to the Wall Street Journal, not in Belgium. This sent the signal that the company was more concerned about its shareholders than consumers, and did not help the company's case.
Coke is hardly on the ropes. It is still, by far, the number one soft drinks company in the world, selling 16 billion cases last year, or 64 cans to every man, woman and child in the world. Coca-Cola is the top brand. But its profits were down 14 per cent last year, and its stock price languishes at about 64, down from 88 last July, when the rest of the market has been exploding.
The context for global companies has been changed out of recognition in the last few years. The criticism comes faster and harder, and hits home more accurately. Bigger markets mean bigger risks. Organisations become unmanageable. Not for nothing are issues of food safety, corporate ethics, equity in the workplace and cultural sensitivity high on the agenda around the world: global capitalism has expanded at a furious rate for two decades, and the results are starting to be felt.
And Coca-Cola, more than anyone else, should know what this is all about. "It's a bit disturbing, that a big firm with worldwide fame ... did not take far-reaching measures more spontaneously and more promptly," said Belgian health minister, Luc Van den Bossche. Coca-Cola stands for more than just a soft drink, something that it reminds the rest of the world every day, but which it may have forgotten in its race for market share.
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