How Coca-Cola's Ruthless Business Tactics Created a Despicable Global Powerhouse
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JR: How did Coca-Cola use World War II to establish its dominance abroad? And what impact did its role in the war have for their market at home?
Robert Woodruff, the head of Coca-Cola, declared shortly after the attack on Pearl Harbor that, "We will see that every man in uniform gets a bottle of Coca-Cola for five cents, wherever he is and whatever it costs our company." Coke was subsequently declared an essential product and Coke men called Technical Observers were sent overseas in army uniforms at government expense to establish 64 bottling plants behind the lines. As a result, Coca-Cola was put in position for global expansion in the postwar world.
American soldiers came home with an overwhelming preference for Coca-Cola. In a 1948 poll of veterans, conducted by American Legion Magazine, 63.67 percent specified Coca-Cola as their preferred soft drink, with Pepsi receiving a lame 7.78 percent of the vote. In the same year, Coke’s gross profit on sales reached a whopping $126 million, as opposed to Pepsi’s $25 million; the contrast in net after-tax income was even more telling, with Coke’s $35.6 million towering over Pepsi’s pathetic $3.2 million.
Soon after the war, when the Army quizzed 650 recruits, 21 had never drunk milk, but only one soldier had never sampled a Coke. As the company’s unpublished history stated, the wartime program “made friends and customers for home consumption of 11,000,000 GIs [and] did [a] sampling and expansion job abroad which would [otherwise] have taken 25 years and millions of dollars.” The war was over, and it appeared, at least for the moment, that Coca-Cola had won it.
JR: The impact when Coca-Cola entered new markets was increased sales for all beverages, not just Coca-Cola -- and less consumption of water and milk. Can you explain that?
Yes. As Coca-Cola and subsequently other competing soda companies increased marketing and other campaigns to out-do one another, that's what expanded the total soda market. When the market for soft drinks expanded, it helped competitors such as Pepsi, and when people are paying attention to the cola wars, they are less focused on water or milk.
JR: Coca-Cola's history practically reads like a marketing textbook. Can you tell us about its revelation of the little girl's Pooh bear? Why do Coke-drinkers love Coke so much?
Archie Lee, who was the ad man behind "The Pause That Refreshes" slogan during the Depression, noticed during a beach vacation, that his four-year-old daughter lavished such attention on her Pooh bear that other children fought over it, though other toys appeared more attractive. Lee took the incident as a parable. “It isn’t what a product is,” he wrote to Robert Woodruff, “but what it does that interests us”—and set out to plant the proper thoughts about Coca-Cola, which he wanted to make as popular and well-loved as the Pooh bear.
Coke lovers care so much about the drink for many reasons -- not least the ubiquitous, effective advertising that associates the drink with youth, energy, happiness. But many people also really do associate the drink with some of the best times in their lives.
JR: How has soda consumption changed in the U.S. from the drink's introduction over a century ago, back when a serving was 6.5 ounces? Was there ever a "turning point" when Americans switched from more modest per capita soda consumption to the amount they drink today, or has it been a gradual change over time?
MP: Amazingly, Coca-Cola was served in 6.5 ounce bottles for a nickel until 1955, when King-Size Coke was finally introduced. (“King-Size” drinks were 10 and 12 ounces, smaller than a McDonald’s small today.) Since then, the sizes grew steadily larger, and PET bottles meant they wouldn't break and weren't too heavy. Super-size me, indeed. But over the last decade, concern over the obesity epidemic has made Coca-Cola back off a bit, and now the company has introduced smaller mini-cans, along with the huge containers.