India drinks: Fizzing up

November 21st 2011

FROM THE ECONOMIST INTELLIGENCE UNIT Coca-Cola is ramping up its Indian operations to take advantage of the market's growth potential. But PepsiCo is still snapping at its heels. Things seem to be coming full circle for Coca-Cola in India. In mid-November 2011, the worlds largest beverage company said that over 2012-2016, it and its partners would invest US$2bn to ramp up its Indian operations. The move, which will double the company's investment in India to date, hints at the importance Coca-Cola is attaching to the Indian market along with China and Russia - as the operating environment gets easier. A look at Coca-Cola's history in India shows the extent of the turnaround there. Back in 1977 the company was forced to make a high-profile exit from the country, when a government ruling required it to share its secret formula with its Indian partners and dilute its stake in its Indian unit. The company only re-entered India in 1993, when foreign investment rules were liberalised. Since then, Coca-Cola has invested over US$2bn in India and is now Indias leading beverage company, employing over 25,000 people directly. It acquired several local brands that are now best-sellers, including mango-based Maaza, Indias biggest-selling juice and Thums Up, which, along with Coca-Cola's own brand Sprite, remain Indias top two fizzy-drink brands. Over the past five years Coca-Colas India business has grown particularly strongly, registering double-digit volume growth in 15 of the past 21 quarters. Now the company is preparing for an even bigger India presence. Its latest plan represents one of its biggest single-phase investments in one country, after the US and China. The investment, which will come from the company and its bottlers, will be used to set up a new company-owned manufacturing plant. The company already has 50 production facilities, 13 franchise bottlers and one company owned-bottling operation. The investment will also be used to expand the companys supply chain and infrastructure, and to double its already-vast retail network of 1.5m outlets, as well as contributing to its marketing spend. Three prongs According to Coca-Cola, India is already the largest market in its Eurasia and Africa Group in volume terms, and ranks among its top ten globally. By the end of this decade, it could become one of the top five. Growth will be driven by the country's strong population growth, by urban migration, and by the growth of the middle class. Even ignoring the demographics, the potential is huge: the annual per capita consumption of Coca-Cola beverages in India is currently only one-third of that in China. That growth potential is crucial for Coca-Cola, as for other consumer goods companies facing stagnating growth in the cash-strapped and increasing health-conscious US and European markets. Countries like India, on the other hand, are now spending more on beverages and processed foods as their economies prosper. In the third quarter of 2011,

Coca-Cola reported strong operating earnings of US$1.03 per share worldwide, a 12% rise from the year-ago quarter, on the back of its strong growth in emerging markets. This growth will be the key to Coca-Cola achieving its 2020 vision, which entails doubling its servings and system revenues globally. To that end, Coca-Cola and its bottling partners plan to invest nearly US$30bn worldwide over the next five years. The focus is on China, where Coca-Colas sales topped 1bn unit cases in the first six months of 2011, double their level five years ago. In August 2011, Coca-Cola announced that it would invest US$4bn in China over the next two years, taking its total investment in China since 2009 to US$7bn. A month later, the company also said that it and its Russian bottler would invest US$3bn in Russia in 2012-2016. The India investment is thus the third big announcement of this kind in just three months. The great race In the race to capture share in emerging markets, Coca-Colas main rival is PepsiCo, another US icon. Since 2006, PepsiCo has increased its focus on healthier products, aiming to more than double sales from such items to US$30bn by 2020. However, its core soft drink business has stumbled, particularly in North America, and Coca-Cola still leads Pepsi in many important markets including China and India. In 1988, while Coca-Cola was absent from India, PepsiCo gained entry by creating a joint venture with Indian companies and has since invested over US$1bn in the country. PepsiCo India is now one of the companys top five global operations outside the US. In line with PepsiCo's global strategy of focusing on high priority emerging markets, its India business in 2008 was elevated to "region" status. At the time, PepsiCo decided to invest US$500m in its India operations over the following three years, aiming to triple revenues in five years. Despite all that, by April 2011, Coca-Cola India claimed a 58.4% share of the Indian carbonated soft drink market, while PepsiCos share was under 40%. But PepsiCo is determined to catch up: it increased its sales at double Coca-Colas pace in the first half of 2011. Coca-Cola attributes its slower growth to the fact that it raised prices by 9-15% in the period to cope with higher commodity prices, against PepsiCos increases of only 5-6%. But price is not the only factor. PepsiCo attributes its sales growth to the fact that it expanded its sales force by 25%, distributed more coolers to increase its reach by 20%, raised capacities, and backed that with aggressive marketing and a sharper focus on rural markets. PepsiCo now plans to set up two to three manufacturing facilities in each Indian state. This will keep manufacturing close to consumption, cut transportation costs and keep prices low. PepsiCo also plans to bring healthier variants of its products to India. Apart from their competition, both companies face other hurdles in India. Volume growth has slowed in Indias Rs110bn soft drinks market, on the back of rising commodity prices, high inflation, higher taxes and higher product prices, driving category growth rates down to 13-14%, from 20-30% two years ago. Both companies have also come under fire in the past for depleting ground water and on concerns about pesticides in their beverages. India is indeed a high-potential market, but as Coca-Cola is aware, it will take more than just big investments to maintain a long-term advantage.

4/19/2012 @ 12:42PM |2,631 views

Coca-Cola Delivers Despite 'Dead' Soft Drink Market Growth

Trefis Team, Contributor + Comment now

coca cola (Photo credit: twicepix)

Coca-Cola Co delivered strong results helped by impressive volume growth in developing countries and strong pricing in the North American region.This should put to rest concerns about the soft drink market being dead. Revenues for Q1 stood at $11.1 billion, up 6% from the same quarter in the previous year. Operating income grew 10% to $2.5 billion whereas the net income rose 8% to $2.06 billion. The company currently competes with companies like PepsiCo andDr Pepper Snapple Group and other local players.

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See our full analysis forCoca-Cola Emerging Markets Continue to Deliver Worldwide volume for Coca-Cola grew 5% helped by a 20% growth in India, 24% in Thailand, 9% in China and 10% in South Africa. Coca-Cola continues to invest heavily in China with plans to invest $3 billion in the country in the next three

years. Recently, the company also opened its 42nd bottling plant in the country. Coca-Cola also acquired a 50% stake in Aujan industries in 2011 for $980 million which will see the company having a greater presence in the Middle East and North African markets. The move is already beginning to reap benefits as the volume grew 14% in the region. We expect the namesake beverage Coca-Cola to gradually increase its market share in the international soft drink markets as the company continues to go deeper into the developing regions. Investments in developing markets focus mostly on setting up new plants to increase capacity, marketing investments and expanding distribution networks. Just to emphasize that point, the company added more than 1.2 million new pieces of cold drink equipment in 2011. Strong Pricing in North America Net revenues rose 5% in the North American region whereas the volume grew only 2%. Most beverage companies are struggling to generate volume growth in the U.S. and hence increase their prices periodically to maintain profitability. Compared to same quarter previous year, soft drink volume grew 1% whereas the still beverage volume grew by an impressive 6%, with Powerade leading the pack with 13% volume growth. The focus is clearly on still beverages (or non-CSDs) as consumers switch from traditional soft drinks to healthier alternatives such as juices, sports drinks, water mixers, Ready-to-Drink teas, among others. While the soft drinks will continue to generate profits due to their strong pricing, volume growth for Coca-Cola will come from non-CSDs. We have a revised $74 price estimate for Coca-Cola, which is in line with the market price.
http://www.forbes.com/sites/greatspeculations/2012/04/19/coca-cola-delivers-despite-dead-softdrink-market-growth/ http://www.trefis.com/company?hm=KO.trefis&from=widget%3Aforecast&ovd_urlid=1243718#

PepsiCo sales growing twice as fast as Coca-Cola

Ratna Bhushan, ET Bureau Aug 8, 2011, 02.24am IST

Tags: Thums up| soft drinks market| PepsiCo sales| PepsiCo| Coca-Cola

NEW DELHI: Taste the Thunder may be Coca-Cola's tagline for Thums Up, but global rival PepsiCo seems to be stealing the thunder in India, having increased its sales at double the pace of the soft drinks market leader in the first half of the year.

In the Rs 11,000-crore soft drinks market, where volume growth is significantly lower than two years back in any case, PepsiCo reported 17% volume growth during April-June while Coca-Cola grew 8%. This is the biggest gap in growth between the two cola rivals in the past three-four years when they were growing neck-to-neck.
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"Our growths have been driven by our focus on fewer, bigger and better priorities this year," PepsiCo India CEO (Beverages) Praveen Someshwar says. PepsiCo expanded its sales force by 25% and distributed more coolers to increase its reach by 20%, raised capacities to strengthen the back-end, and backed it with aggressive marketing that included the successful 'Change the game' campaign during the Cricket World Cup in February. PepsiCo-maker of Pepsi cola, lemon drink Mountain Dew and mango-based Slice-posted growth across brands, helped by increase in home penetration with the launch of 1 litre packs and a sharper focus on rural markets, Someshwar says. Coca-Cola, which leads PepsiCo in several countries including India, has attributed its slower growth mainly to higher consumer prices. "Any significant price increase leads to lag in volumes," a Coca-Cola India spokesman said. "In line with our 2020 vision of gaining both volume and value share, we took significant price increases in most markets on most of our packs... on the back of a steep rise in commodity prices," he said in an email response to ET. Increase in value-added tax on carbonated drinks in some states also led to price escalations. Last year, for example, Delhi increased VAT on soft drinks to 20% from 12.5%. While PepsiCo says it increased portfolio pricing by 5-6%, Coca-Cola says its prices have gone up 9-15% in the past sixseven months. CocaCola's Thums Up and Sprite remain the top two fizzy-drink brands in the country, according to market researcher Nielsen's data. And Coca-Cola says it is taking steps to revive volume growth. "We are strengthening our occasion, brand, price, pack, channel architecture and shopper marketing programme, investing on brand activation in the festive season and expanding our presence," the company spokesman said. Both the firms are growing considerably slower than two years back when their growth rate was 20-30%. PepsiCo's Someshwar says growth would have been healthier if not for a host of negative factors. "It has been a challenging first half, given the inflation, inclement weather and change in tax rates resulting in increase in prices, therefore, limiting overall category growth to 13-14%." With sales barely moving in the US and Europe, growth in India is critical to the beverage firms. PepsiCo India ranks at fifth place globally for the New York-based $60-billion beverages and snacks maker. Coca-Cola India is expected to become one of the Atlanta-based firm's top five markets in five years. Its India unit contributes 13% of its Eurasia and Africa Group volume.

http://articles.economictimes.indiatimes.com/2011-08-08/news/29864298_1_coca-cola-indiasprite-soft-drinks-market

http://www.marketingweek.co.uk/brands/coca-cola/
Cola War continue: Coke and Pepsi in the Twenty First Century
1. Why is the soft drink industry so profitable? An industry analysis through Porters Five Forces reveals that market forces are favorable for profitability. Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution.Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many

promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly between Coke and Pepsi, resulting in positive economic profits. To be sure, there was tough competition between Coke and Pepsi for market share, and this occasionally hampered profitability. For example, price wars resulted in weak brand loyalty and eroded margins for both companies in the 1980s. The Pepsi Challenge, meanwhile, affected market share without hampering per case profitability, as Pepsi was able to compete on attributes other than price. Substitutes: Through the early 1960s, soft drinks were synonymous with colas in the mind of consumers. Over time, however, other beverages, from bottled water to teas, became more popular, especially in the 1980s and 1990s. Coke and Pepsi responded by expanding their offerings, through alliances (e.g. Coke and Nestea),acquisitions (e.g. Coke and Minute Maid), and internal product innovation (e.g. Pepsi creating Orange Slice),capturing the value of increasingly popular substitutes internally. Proliferation in the number of brands did threaten the profitability of bottlers through 1986, as they more frequent line set-ups, increased capital investment, and development of special management skills for more complex manufacturing operations and distribution. Bottlers were able to overcome these operational challenges through consolidation to achieve economies of scale. Overall, because of the CPs efforts in diversification, however, substitutes became less of a threat. Power of Suppliers: The inputs for Coke and Pepsis products were primarily sugar and packaging. Sugar could be purchased from many sources on the open market, and if sugar became too expensive, the firms could easily switch to corn syrup, as they did in the early 1980s. So suppliers of nutritive sweeteners did not have much bargaining power against Coke, Pepsi, or their bottlers. NutraSweet, meanwhile, had recently come off patent in 1992, and the soft drink industry gained another supplier, Holland Sweetener, which reduced Searles bargaining power and lowering the price of aspartame. With an abundant supply of inexpensive aluminum in the early 1990s and several can companies competing for contracts with bottlers, can suppliers had very little supplier power. Furthermore, Coke and Pepsi effectively further reduced the supplier of can makers by negotiating on behalf of their bottlers, thereby reducing the number of major contracts available to two. With more than two companies vying for these contracts, Coke and Pepsi were able to negotiate extremely favorable agreements. In the plastic bottle business, again there were more suppliers than major contracts, so direct negotiation by the CPs was again effective at reducing supplier power. Power of buyers: The soft drink industry sold to consumers through five principal channels: food stores, convenience and gas, fountain, vending, and mass merchandisers (primary part of Other in Cola Wars case).Supermarkets, the principal customer for soft drink makers, were a highly fragmented industry. The stores counted on soft drinks to generate consumer traffic, so they needed Coke and Pepsi products. But due to their tremendous degree of fragmentation (the biggest chain made up 6% of food retail sales, and the largest chains controlled up to 25% of a region), these stores did not have much bargaining power. Their only power was control over premium shelf space, which could be allocated to Coke or Pepsi products. This power did give them some control over soft drink profitability. Furthermore, consumers expected to pay less through this channel, so prices were lower, resulting in somewhat lower profitability. National mass merchandising chains such as Wal-Mart, on the other hand, had much more bargaining power. While these stores did carry both Coke and Pepsi products, they could negotiate more effectively due to their scale and the magnitude of their contracts. For this reason, the mass merchandiser channel was relatively less profitable for soft drink makers. The least profitable channel for soft drinks, however,

was fountain sales. Profitability at these locations was so abysmal for Coke and Pepsi that they considered this channel paid sampling. This was because buyers at major fast food chains only needed to stock the products of one manufacturer, so they could negotiate for optimal pricing. Coke and Pepsi found these channels important, however, as an avenue to build brand recognition and loyalty, so they invested in the fountain equipment and cups that were used to serve their products at these outlets. As a result, while Coke and Pepsi gained only 5% margins, fast food chains made 75% gross margin on fountain drinks. Vending, meanwhile, was the most profitable channel for the soft drink industry. Essentially there were no buyers to bargain with at these locations, where Coke and Pepsi bottlers could sell directly to consumers through machines owned by bottlers. Property owners were paid a sales commission on Coke and Pepsi products sold through machines on their property, so their incentives were properly aligned with those of the soft drink makers, and prices remained high. The customer in this case was the consumer, who was generally limited on thirst quenching alternatives. The final channel to consider is convenience stores and gas stations. If Mobil or Seven-Eleven were to negotiate on behalf of its stations, it would be able to exert significant buyer power in transactions with Coke and Pepsi. Apparently, though, this was not the nature of the relationship between soft drink producers and this channel, where bottlers profits were relatively high, at $0.40 per case, in 1993. With this high profitability, it seems likely that Coke and Pepsi bottlers negotiated directly with convenience store and gas station owners. So the only buyers with dominant power were fast food outlets. Although these outlets captured most of the soft drink profitability in their channel, they accounted for less than 20% of total soft drink sales. Through other markets, however, the industry enjoyed substantial profitability because of limited buyer power. Barriers to Entry: It would be nearly impossible for either a new CP or a new bottler to enter the industry. New CPs would need to overcome the tremendous marketing muscle and market presence of Coke, Pepsi, and a few others, who had established brand names that were as much as a century old. Through their DSD practices, these companies had intimate relationships with their retail channels and would be able to defend their positions effectively through discounting or other tactics. So, although the CP industry is not very capital intensive, other barriers would prevent entry. Entering bottling, meanwhile, would require substantial capital investment, which would deter entry. Further complicating entry into this market, existing bottlers had exclusive territories in which to distribute their products. Regulatory approval of intrabrand exclusive territories, via the Soft Drink Interbrand Competition Act of 1980, ratified this strategy, making it impossible for new bottlers to get started in any region where an existing bottler operated, which included every significant market in the US. In conclusion, an industry analysis by Porters Five Forces reveals that the soft drink industry in 1994 was favorable for positive economic profitability, as evidenced in companies financial outcomes. 2. Compare the economics of the concentrate business to the bottling business. Why is the profitability so different? In some ways, the economics of the concentrate business and the bottling business should be inextricably linked. The CPs negotiate on behalf of their suppliers, and they are ultimately dependent on the same customers. Even in the case of materials, such as aspartame, that are incorporated directly into concentrates, CPs pass along any negotiated savings directly to their bottlers. Yet the industries are quite different in terms of profitability. In some ways, the economics of the concentrate business and the bottling business should be inextricably linked. The CPs negotiate on behalf of their suppliers, and they are ultimately dependent on the same customers. Even in the case of materials, such as aspartame, that are incorporated directly into concentrates, CPs pass along any negotiated savings directly to their bottlers. Yet the industries are quite different in terms of profitability.

The fundamental difference between CPs and bottlers is added value. The biggest source of added value for CPs is their proprietary, branded products. Coke has protected its recipe for over a hundred years as a trade secret, and has gone to great lengths to prevent others from learning its cola formula. The

company even left a billion-person market (India) to avoid revealing this information. As a result of extended histories and successful advertising efforts, Coke and Pepsi are respected household names, giving their products an aura of value that cannot be easily replicated. Also hard to replicate are Coke and Pepsis sophisticated strategic and operational management practices, another source of added value. Bottlers have significantly less added value. Unlike their CP counterparts, they do not have branded products or unique formulas. Their added value stems from their relationships with CPs and with their customers. They have repeatedly negotiated contracts with their customers, with whom they work on an ongoing basis, and whose idiosyncratic needs are familiar to them. Through long-term, in depth relationships with their customers, they are able to serve customers effectively. Through DSD programs, they lower their customers costs, making it possible for their customers to purchase and sell more product. In this way, bottlers are able to grow the pie of the soft drink market. Their other source of profitability is their contract relationships with CPs, which grant them exclusive territories and share some cost savings. Exclusive territories prevent intrabrand competition, creating oligopolies at the bottler level, which reduce rivalry and allow profits. To further build glass houses, as described by Nalebuff and Brandenberger (Coopetition, p. 88), for their bottlers, CPs pass along some of their negotiated supply savings to their bottlers. Coke gives 2/3 of negotiated aspartame savings to its bottlers by contract, and Pepsi does this in practice. This practice keeps bottlers comfortable enough, so that they are unlikely to challenge their contracts. Bottlers principal ability is to use their capital resources effectively. Such operational effectiveness is not a driver of added value, however, as operational effectiveness is easily replicated. Between 1986 and 1993, the differences in added value between CPs and bottlers resulted in a major shift in profitability within the industry. Exhibit 1 demonstrates these dramatic changes. While industry profitability increased by 11%, CP profits rose by 130% on a per case basis, from $0.10 to $0.23. During this period, bottler profits actually dropped on a per case basis by 23%, from $0.35 to 0.27. One possibility is that product line expansion in defense against new age beverages helped CPs but hurt bottlers. This would be expected if bottlers per case costs increased due to the operational challenges and capital costs of producing and distributing broader product lines. This, however, was not the case; cost of sales per case decreased for both CPs and bottlers by 27% during this period, mostly due to economies of scale developed through consolidation. The real difference between the fortunes of CPs and bottlers through this period, then, is in top line revenues. While CPs were able to charge more for their products, bottlers faced price pressure, resulting in lower revenues per case. These per case revenue changes occurred during a period of slowing growth in the industry, as shown in Exhibit 2. Growth in per capita consumption of soft drinks slowed to a 1.2% CAGR in the period 1989 to 1993, while case volume growth tapered to 2.3%. In an struggle to secure limited shelf space with more products and slower overall growth, bottlers were probably forced to give up more margin on their products. CPs, meanwhile, could continue increasing the prices for their concentrates with the consumer price index.Coke had negotiated this flexibility into its Master Bottling Contact in 1986, and Pepsi had worked price increases based on the CPI into its bottling contracts. So, while the bottlers faced increasing price pressure in a slowing market, CPs could continue raising their prices. Despite improvements in per case costs, bottlers could not improve their profitability as a percent of total sales. As a result, through the period of 1986 to 1993, bottlers did not gain any of the profitability gains enjoyed by CPs.

3. Why have contracts between CPs and bottlers taken the form they have in the soft drink industry? Contracts between CPs and bottlers were strategically constructed by the CPs. Although beneficial to bottlers on the surface, the contracts favored the CPs long-term strategies in important ways. First, territorial exclusivity is beneficial to bottlers, as it prevents intrabrand competition, ensures bargaining power over buyers and establishes barriers to entry. But it is also beneficial to CPs, who are also not subject to price wars within their own brand. The contracts also excluded bottlers from producing the flagship products of competitors. This created monopoly status for the CPs, from the bottler

perspective. Each bottler could only negotiate with one supplier for its premium product. Violation of this stipulation would result in termination of the contract, which would leave the bottler in a difficult position. Historically, contracts were designed hold syrup prices constant into perpetuity, only influenced by rising prices of sugar. This changed in 1978 and 1986, as contracts were renegotiated, first to accommodate for rises in the CPI, and then to give general flexibility to the CP (Coke) in setting prices. Coke could negotiate this more flexible pricing because its bottlers were dependent on it for business. It further ensured that its bottlers would be captive to its monopoly status by buying major bottlers and then selling them into the CCE holding company, which would only produce Coke products. Coke would capture 49% of the dividends from CCE, without the complications of vertical integration.

http://industrialeducation.blogspot.in/2008/12/cola-war-continue-coke-and-pepsi-in.html

The Story Of Coca Cola

The Coca-Cola company started 110 years ago as a small, insignificant one man business. Since then, it has grown into one of the largest companies in the world. The first chairman of the company was Dr. John Pemberton and the current chairman is Roberto Goizueta. The demand for this product has made this company into a 50 billion dollar business. Coca-Cola was invented by Dr. John Pemberton, an Atlanta pharmacist. He concocted the formula in a three legged brass kettle in his backyard on May 8, 1886 by mixing lime, cinnamon, coca leaves, and the seeds of a Brazilian shrub. (Things Go Better With Coke 14). Coca-Cola, as he called the beverage, made its debut in Atlanta's largest pharmacy, Jacob's Pharmacy, as a five cent noncarbonated drink. Later on, the carbonated water was added to the syrup to make the beverage that we know today. Coca-Cola was originally used as a nerve and brain tonic and a medical elixir. Coca-Cola was named by Frank Robinson, one of Pemberton's close friends, he also penned the famous Coca-Cola logo in unique script. Dr. John Pemberton sold a portion of the Coca-Cola company to Asa Candler. He was forced to sell because he was in a state of poor health and was in debt. He had paid $76.96 for advertising, but he only made $50.00 in profits. In time, Candler acquired the whole company for $2,300 (Coca-Cola Multiple Pages). Candler achieved a lot during his time as owner of the company. On January 31, 1893, the famous Coca-Cola formula was patented. He also opened the first syrup manufacturing plant in 1884. His great achievement was large scale bottling of Coca-Cola in 1899. In 1915, The Root Glass Company made the contour bottle for the Coca-Cola company. Candler aggressively advertised Coca-Cola in newspapers and on billboards. In the newspapers, he would give away coupons for a free Coke at any fountain. CocaCola was sold after the Prohibition Era to Ernest Woodruff for 25 million dollars.

He gave Coca-Cola to his son, Robert Woodruff, who would be president for six decades(Facts, Figures, and Features Multiple pages). Robert Woodruff was an influential man in Atlanta because of his contributions to area colleges, universities, businesses and organizations. When he made a contribution, he would never leave his name and became to be known as "Mr. Anonymous." Woodruff introduced the six bottle carton in 1923. He also made Coca-Cola available through vending machine in 1929. That same year, the CocaCola bell glass was made available. He started advertising on the radio in the 1930s and on television in 1950. Currently Coca-Cola is advertised on over five hundred TV channels around the world. In 1931, he introduced the Coke Santa as a Christmas promotion and it caught on. Candler also introduced the twelve ounce Coke can in 1960. The CocaCola contour bottle was patented in 1977. The two liter bottle was introduced in 1978, the same year that the company introduced plastic bottles (Coca-Cola Multiple Pages). Woodruff did have one dubious distinction, he raised the syrup prices for distributors. But he improved efficiency at every step of the manufacturing process. Woodruff also increased productivity by improving the sales department, emphasizing quality control, and beginning large-scale advertising and promotional campaigns. Woodruff made Coke available in every state of the Union through the soda fountain. For all of these achievements he earned the name, "The Boss" (Facts, Figures, and Features Multiple Pages). In 1985, the Coca-Cola Company made what has been known as one of the biggest marketing blunders. The company developed a new formula in efforts to produce a diet Coke. They invested 4 million dollars into research to come up with the new formula. The decision to change their formula and pull the old Coke off the market came about because taste tests showed a distinct preference for the new formula. The new formula was a sweeter variation with less tang, it was also slightly smoother (Demott 54). Robert Woodruff's death was a large contributor to the change because during his lifetime he had insisted on keeping the same formula. After he died, Coke's market shares fell 2.5 percent within the next four years. Each percentage point lost or gained meant 200 million dollars. A financial analyst said, "Coke's market share fell from 24.3 percent in 1980 to 21.8 percent in 1984" (Things Go Better With Coke 14). In hopes of boosting their earnings, the company decided to introduce the new flavor. This was the first change since the conception of the Coca- Cola company. The change was announced April 23, 1985 at the Vivian Beaumont Theater at the Lincoln Center. Some two hundred TV and newspaper reporters attended this very glitzy affair. It included a question and answer session, a history of Coca-Cola, and many other events (Oliver 131). The debut was accompanied by an advertising

campaign that revived the Coca-Cola theme song of the early 1970s, "I'd Like to Buy The World A Coke" (Say It Ain't So, Coke 24). The following was the jingle: "I'd like to teach the world to sing In perfect harmony. I'd like to buy the world a Coke And keep it company." The change to the world's best selling soft drink was heard by 81 percent of the United States population within twenty-four hours of the announcement. Within a week of the change, one thousand calls a day were flooding the company's eight hundred number (1-800-GET-COKE). Most of the callers were shocked and/or outraged, and many said that they were considering switching to Pepsi. Within six weeks, the eight hundred number was being jammed by six thousand calls a day. The company also received over forty thousand letters, which were all answered and each person got a coupon for the new Coke. A retired Air Force officer, explained in a letter to the Coca-Cola company that he wanted to be cremated and interned in a Coke can, but now that this change had come about he was reconsidering (Pendergrast Multiple Pages). Sharlotte Donneally, a thirty-six year old anthropologist said, "I hate the new stuff" (Demott 60). Wendy Koskela, a thirty-five year old vice president of an insurance company said, "It's too sweet. It tastes like Pepsi." She also stated, "Real Coke had punch. This tastes almost like it's flat" (Demott 60). Many American consumers of CocaCola asked if they could have the final say. When Pepsi heard that the Coca-Cola company was changing its secret formula they said that Pepsi tastes better and decided to take advantage of the situation. Roger Enrico, the president and CEO of Pepsi-Cola wrote a letter to every every employee within the company as well as to every major newspaper in the U.S. to declare the victory. The letter stated the following: "It gives me great pleasure to announce that after eighty-seven years of going at it eyeball to eyeball, the other guy just blinked. Coca-Cola is withdrawing its product from the marketplace, and is reformulating the blend to make Coke taste more like Pepsi...There is no question the long-term market success of Pepsi has forced this move...Maybe they finally realized what most of us have known for years, Pepsi tastes better than Coke. Well, people in trouble tend to do desperate things...and we'll have to keep our eye on them. But for now, I say, victory is sweet, and we have earned a celebration. We're going to declare a holiday on Friday. Enjoy! Best Regards, Roger Enrico President, CEO Pepsi-Cola USA (Oliver 128). Coca-Cola officials said, "The new formula will boost Coke's share by 1 percent. That is worth 200 million dollars a year." Coca-Cola management had to decide:

Do nothing or "buy the world a new Coke" (Things Go Better With Coke 14). They decided to develop the new formula. Roberto Goizueta, the president of the Coca-Cola Company stated, "The old Coke formula, with its secret flavoring ingredient, called Merchandise 7X, will stay locked in the bank vault of the Trust Company of Georgia in Atlanta, never to be used again" (Demott et. al 55). Many Coke officials were very optimistic about this change and said, "This is the most significant soft drink development in the company's history" (Demott et. al 54). The change back to the old Coke was known as the Second Coming. Roberto Goizueta said, "Today, we have two messages to deliver to the American consumer, first, to those of you who are drinking Coca-Cola with its great new taste, our thanks...But there is a second group of consumers to whom we want to speak to today and our message to this group is simple: We have heard you" (Oliver 178). On July 10, 1985, eighty-seven days after the new Coke was introduced, the old Coke was brought back in addition to the new one. This was greatly due to dropping market share and consumer protest. The market share fell from a high of 15 percent to a low of 1.4 percent (Miller 38). Roberto Goizueta and Donald Keough took full blame for this failed product launch. Don Keough, Coca-Cola president, said in response to the comeback, "The truth is, we are not dumb and we are not that smart" (New bottle 18). Roberto Goizueta's response was, "We have heard you"(Moore 8). This was said to be a classic marketing retreat. Coca-Cola executives admitted that they had "goofed" by taking the old Coke off the market. One old Coke loyalist said, "The company had spoiled the taste of its ninety nine year old soft drink and betrayed a national trust" (Moore 8). Ike Herbert, a Coke marketer said, "You would have thought we had invented a cure for cancer" (Pendergrast 366). The Coca- Cola company's eight hundred number received eighteen thousand calls of gratitude. One caller said they felt as if a lost friend had returned home. The comeback of old Coke drove stock prices to the highest level in twelve years. This was said to be the only way to regain the lead on the cola wars (Classic Comeback Of An Old Champ 12). In 1979, fifteen hundred employees moved to the new corporate headquarters in Atlanta located on North Avenue. The new corporate headquarters came to be known as "The Tower." During the time when the research for the new formula was taking place, it was known as "The Bunker"(Oliver 53). The known ingredients in present day Coca-Cola are water, caffeine, phosphoric acid, vanilla, various oils and essences and extracts of the coca leaf and the kola nut. The one in four hundred part of cocaine was removed from Coca-Cola in 1903 (Demott 54). Five years after the infamous Coke fiasco, the Coca-Cola company tried to bring back the reformulated Coke. The effort to phase in Coke II into the soda market was quite unsuccessful (Miller 38). During the Woodruff era, Mr. Woodruff made

a promise to the armed forces of the United States to supply Coca-Cola to every service person. He said that costs and location did not matter and he supplied 5 billion bottles to the service. In the mid-1970's, more than half of Coca-Cola sold was outside of the U.S. Coca-Cola products outsell closest competitors by more than two to one. One in every two colas and one in every three soft drinks is a Coca-Cola product (Facts, Figures, and Features 16). The best known trademark in the world is sold in about one hundred and forty countries to 5.8 billion people in eighty different languages. This is why Coca-Cola is the largest soft drink company in the world. Coca-Cola is worth more than 58 billion dollars on the stock market (Coca-Cola, The Coca-Cola Company 232). For more than 65 years, Coca-Cola has been a sponsor of the Olympics. The 1996 Summer Olympics will be held in Atlanta, Georgia, the home of Coca-Cola. One great earmark that the Coca-Cola company has is helping the people of Atlanta. They accomplish this through scholarships, hotlines, donations and contributions, etc. Another large accomplishment that the Coca-Cola has, is being the first company to make and use recycled plastic bottles. One way to see all of the achievements of the Coca- Cola company is to visit the World of Coke in Atlanta. It houses a collection of memorabilia, samples of the products, exhibits, and many other exciting items (Facts, Figures, and Features Multiple Pages).
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