How They Started (35 page)

In all, 64 bottling plants opened during the war, and more than five billion bottles of Coca-Cola were consumed by service people. Mobile service stations were also taken to the battlefields, and people throughout Europe and the Pacific had their first taste of the drink. These wartime bottling plants were later converted and run by local civilians, who continued to produce and sell the drink even after the Americans had left.

Postwar America was the perfect place for Coca-Cola to expand: people were embracing a carefree lifestyle, and Coca-Cola’s advertising mirrored this desire, with images of loving couples at the drive-in and happy families driving around in shiny cars. Coca-Cola continued to be served at soda fountains and was now added to the menu in ice cream parlors.

The company still had just one product, albeit an extraordinarily successful one, and it began experimenting with new flavors. In the 1950s the company introduced Fanta (which was originally concocted in wartime Germany), followed by Sprite in 1961, Tab in 1963 and Fresca in 1966. Coca-Cola acquired the Minute Maid Company in 1960, branching out into juices. New lines of Coca-Cola were also introduced in 1960, along with bigger bottles and metal cans.

The 1950s and 1960s saw bottling plants built in more countries, expanding into new markets in Cambodia, Montserrat, Paraguay, Macao and Turkey. During the 1970s and 1980s, many of Coca-Cola’s small and medium-sized bottlers joined forces to better serve their growing international customer base. By 1969, for the first time, Coca-Cola sales in international markets exceeded those in the US.

In 1971, Coca-Cola created a particularly special television advertisement, which featured young people from all over the world gathered on a hilltop in Italy to sing, “I’d Like to Buy the World a Coke.” Coca-Cola had made its mark on the international market, and for a time it was seen as an icon of unity in an era that had not yet grasped the consequences of globalization. Significantly, in 1978, the People’s Republic of China declared The Coca-Cola Company as the only company allowed to sell packaged cold drinks in China.

In 1981, Roberto C. Goizueta became chairman of the board of directors and CEO of The Coca-Cola Company. Goizueta’s mantra was to take the company forward with a strategy he called “intelligent risk-taking.” This began with the introduction of Diet Coke on Independence Day 1982, the very first extension of the Coca-Cola trademark. Coca-Cola’s archrival, Pepsi, had released its diet version of the drink in 1963 with great success. Despite its comparatively late entry, within two years Diet Coke had become the top low-calorie drink in the world. Coca-Cola might have been slow on the uptake, but it quickly followed Diet Coke’s inception with a range of alternatives, including Caffeine-Free and Cherry Coke.

Goizueta’s riskiest initiative began in 1985, when he released what was deemed “New Coke,” which marked the first change in recipe in 99 years. Why fix something that isn’t broken? The data suggested there were cracks at the seams. Coca-Cola’s share of the soft drinks market decreased from 60 percent at the end of World War II to less than 24 percent in 1983, in large part due to its new rival, Pepsi. Coca-Cola’s share price had also decreased by 2.5 percent in the preceding four years (that might sound like a small percentage, but it represented a drop in market capitalization of $500 million). Pepsi had directly challenged Coca-Cola’s success in the marketplace by conducting blind taste testing on the streets of America, with many people opting for the sweeter Pepsi. This marketing campaign helped Pepsi overtake Coca-Cola in supermarket sales.

New Coke passed taste testers’ approval in extensive testing before launch, as most preferred it to Pepsi; however, it didn’t succeed in the marketplace. In an unprecedented expression of brand loyalty, people demanded their old Coke back. Coca-Cola received over 40,000 letters from customers pleading for the old recipe, and the company’s phone lines were continually overloaded. After the reintroduction of Coca-Cola Classic, the market share of New Coke in the Cola beverage segment (which continued to be sold alongside Coca-Cola Classic), ultimately fell from 15 percent to 1.4 percent. Pepsi declared itself the victor of the so-called “cola wars.” The company listened, and after 87 days of New Coke, the company started supplying the original Coca-Cola again under the banner of “Coca-Cola Classic.”

Its return was momentous: ABC News anchor Peter Jennings interrupted regular programming to share the news with viewers, and speaking in the US Senate, Senator David Pryor called the reintroduction “a meaningful moment in US history.” More importantly, Coke’s sales leapt up, reclaiming the top spot, which it has never lost since. New Coke was eventually discontinued, and the original recipe is still used today.

The company listened, and after 87 days of New Coke, the company started supplying the original Coca-Cola again under the banner of “Coca Cola Classic.”

In an effort to help manage the now-substantial network of bottlers, the company set up Coca-Cola Enterprises Inc. in 1986. This new public company was intended to organize the bottling partners and ensure that they could meet the international demand for Coca-Cola. The company follows the same approach today: Coca-Cola works with local bottlers, some of which are public companies while others are independent and family-owned. Significantly, the majority of them are not owned by Coca-Cola. The bottling plants (of which there are now nearly 300) package, distribute and market the product.

Coca-Cola Classic was brought back due to public demand.

In 1985, Coca-Cola became the first independent operator in the Soviet Union, and throughout the early 1990s it invested heavily in building bottling plants in eastern Europe.

During the 1990s, Coca-Cola made its presence known in the sporting world, sponsoring the Olympic Games, the NBA, FIFA World Cup and Rugby World Cup. In 1993, the company launched its catchy “Always Coca-Cola” advertising campaign, and by 1997 it was selling a billion servings of its products every day.

The 1990s also marked the return of Coca-Cola to India, following a liberalization of trade laws. The company pulled out of the market in 1977, when Indian law forbade companies to trade if they withheld trade-secret information, something Coca-Cola insisted upon to protect its formula. In 1991, India changed its laws regarding trademarks, and Coca-Cola went on sale again in 1993. A populous and hot country, India seemed fertile ground for the international giant, but surprisingly it struggled to capture the market. Its slow growth was aided by the acquisition of Indian brands Limca, Maaza and Thums Up. The company followed this pattern of growth by acquisition in other countries, too, including Barq’s Root Beer in the US, and Inca Kola in Peru.

In 1999, The Coca-Cola Company purchased the soft drinks brands of Cadbury Schweppes PLC in various countries, including the UK. This expanded the existing product range of Coca-Cola, Diet Coke, Cherry Coke, Fanta, Sprite, Lilt and Five Alive to include the Schweppes range, Dr Pepper, Oasis, Kia-Ora and Malvern water.

Unlike most business stories,
the founding of IBM is not simply a tale of one man with an idea. Rather, it is a story of several men, three in particular, whom history brought together and who laid the building blocks of a vast technological business. It is the story of Herman Hollerith, a brilliant inventor and flawed genius, who would envisage and develop the tabulating machines that IBM would later sell across the world. And it is the story of Charles Flint, a maverick investor and adventurous businessman, who would buy several companies, including Herman’s, which would be forged together to form the International Business Machines Corporation. Thirdly, and most crucially, it is the story of Thomas Watson Sr., a brilliant leader and salesman, who would bring order to Charles’s messy acquisitions and create a strong and vibrant culture that resonates at IBM to this day.

For many, Thomas was IBM. He was its leader from 1914 to 1956, setting its course, and he was the man who gave the company its name. But Thomas was no engineer or inventor—he barely understood how his company’s machines worked, beyond the information he needed to tell his customers. His path to the helm of IBM is an intriguing one, but to appreciate his journey it’s necessary to return to the beginning and look at how the company came into being, formed from the sparks of genius decades before.

In 1879, Herman, a 19-year-old college graduate, took a job at the US Census Bureau, compiling statistics. The census was taken every 10 years, and it was a tiresome and cumbersome affair for all involved. The data, recorded by hand, took years to process, and Herman became determined to find a more efficient method. He conceived of a machine that would process data automatically, and he spent the next few years of his life inventing it.

Inspired by the way ticket conductors punched holes in train tickets to record information such as destination and age, Herman predicted that the same process could be used to collect the census data. He saw that the position of a hole on a line of paper could represent answers to census questions, such as male or female, or whether a person lived in the US or was from abroad. He imagined a machine that automatically fed the paper through its processors, and a board with buttons that would electrically punch the holes in the paper. As the paper was fed through the machine, it would pass over a drum, completing an electrical circuit for each hole. The data would then come rolling out automatically, without the need for human intervention. The “tabulating machine” would, in time, revolutionize data processing, and on September 23, 1884, Herman submitted his first patent application.

But an invention alone does not a business make, no matter how great it is. Herman still needed to prove his machine worked in an office environment; he needed to manufacture it and to sell it to the world, and this required investment. Herman worked out that he would need around $2,500 ($60,000 in today’s money) to develop his invention, and a family friend agreed to put up the cash. Herman then visited the census offices and asked if they would consider using his machine to work on some past census data—in effect asking the government to fund the invention by providing the manpower (in the form of government clerks) to test it—to which census officials agreed.