Citizen Coke: The Making of Coca-Cola Capitalism, by Bartow J. Elmore

Isabelle Szmigin on the not-so secret formula underpinning a highly profitable global model

February 12, 2015

Partway through this comprehensive history, Bartow Elmore recounts a trip he made in 2010 to the Indian city of Coimbatore in search of a Coca-Cola bottling plant shut down by local authorities after allegations that it had drained local wells and polluted the water. He and his companion, a friend of Indian parentage who had volunteered as translator, heard villagers’ troubling accounts of unethical practices and mysterious illnesses. When the pair later found themselves, hungry and thirsty, in a local restaurant, they were confronted by a refrigerator full of the familiar red-labelled soft drink bottles. His friend suggested it would be safer to drink Coke than the tap water. As Elmore puts it: “It seemed I had become trapped in the history I had come to investigate.”

 

The episode is a salient reminder of the ethical choices we face when dealing with global giants such as the Coca-Cola Company. Given that such companies’ engagement in the Third World can be difficult to trace and assess, as consumers we can never be sure if they are aiding or hindering the developing countries in which they invest. Above all, Elmore’s account speaks to the way that once “Citizen Coke” took hold, it would go on to dominate the world.

This paradox is echoed in the epilogue of Elmore’s book. Coca-Cola is a company that in the 21st century is promoting its sustainability profile, launching new lower-calorie lines and funding anti-obesity initiatives. In exchange for its offer of jobs and prosperity around the world, it manufactures its iconic soft drink product thanks in no small part to publicly held resources and infrastructure. But, the author asks, is this a bargain we should engage in? Surely, he argues, we should set an appropriate price for the resources on which such firms rely, and keep a more watchful eye over our natural capital. Make no mistake: as Elmore details, Coke is an insatiably thirsty user of natural resources, consuming more water in 2012 than would be required by 2 billion people for cooking, cleaning and drinking.

The above may suggest – wrongly – that Citizen Coke is primarily a polemic against global business in general and the Coca-Cola Company in particular. Instead, this is a carefully researched and thoughtful history of a fascinating corporation, and a lesson in how this business grew and prospered largely through getting others to take the risks. Above all, the Coca-Cola story is a brilliant case study in how to succeed through outsourcing supply: for most of its history, the company has eschewed ownership of bottling plants, water and sugar resources.

Citizen Coke’s first section covers Coke’s early years until 1950, detailing its development and growth primarily through a successful distribution system of grocers and retailers that pushed the Coca-Cola syrup to smaller businesses. In the second, Elmore takes the firm up to the present day and chronicles its gradual globalisation, including its often contentious bottling projects worldwide. In each section, there is an emphasis on the source elements of Coca-Cola itself, including sugar, water and caffeine – the commodities so artfully managed to the firm’s advantage.

Coca-Cola’s business formula, as opposed to the soft drink’s legendary “secret” formula, has consisted largely in “staying out of the business of making stuff”, as Elmore puts it. This innovative outsourcing strategy, since pursued by other globally successful businesses such as McDonald’s and Apple, is at the heart of the Citizen Coke story. As we learn, there was never anything particularly new about the drink itself. If anything it was a “me-too” product, created in the late 19th century when the company’s founder, John Pemberton, decided to imitate Vin Mariani, a successful French wine and coca-based patent medicine that he reformulated (later replacing wine with carbonated water when Southern US states became more temperance-minded).

From its earliest days, Coke’s management pioneers had an eye on its global potential. After Asa Candler bought the patent from Pemberton in 1888, he swiftly developed efficient distribution networks of franchisees to market the brand and ensure that it became respected in places far from its Atlanta, Georgia base. The rationale for outsourcing developed at both ends, supply (caffeine, sugar, water extraction, bottling and transportation) and demand (the grocers and retailers selling it). The approach was summarised by a later leader of the company, Robert Woodruff, who proclaimed: “If you can get somebody to do something better than you can do it yourself, it’s always a good idea.”

Just as Coke has its detractors today, it was not without criticism in its early days. The caffeine it contains has always been a contentious ingredient: while today it is its health risks that are under scrutiny, in the early 20th century it was concern over whether its source was pure (kola nuts) or adulterated (tea leaves). But undoubtedly Coke’s most addictive ingredient is its sugar and there is plenty of it, with each 6oz serving containing more than four teaspoons of sugar. To ensure that such a high quantity of sugar was palatable, Coca-Cola’s formula relied on a concentration of acids (today, phosphoric acid) to cut through the sweetness. And true to form, Coca-Cola has long used other firms to process the sugar in order to keep the company (if not its customers) lean.

Interestingly, although Elmore acknowledges that the Coca-Cola Company has long been adept at marketing and engaging the American public through its depiction of an idealised family life enhanced by Coke, he devotes relatively little space to the depth and range of its advertising. Today, those initiatives include a significant web presence, in which the company’s more detailed sustainability and healthy lifestyle messages have been promulgated.

However, one period in which Coke’s marketing initiatives are well documented here is the Second World War. In the wake of Washington’s restrictions on sugar usage, Benjamin Oehlert, a Coca-Cola executive and government lobbyist, successfully positioned the firm as a public-spirited company committed to the war effort, bringing much-needed energy to a battle-weary nation, while patriotically selling sugar at below market price to the US military. With the support of newspapers such as The Washington Post, Coca-Cola was cast as the ideal corporate citizen, sacrificing profit for the good of the country. Actions such as this would lead to exclusive contracts with the US military worldwide, crowding out its rival Pepsi-Cola and ensuring that Coca-Cola would claim 95 per cent of all military soft drink sales during this period. Coke had a very good war, and that success was the foundation for global expansion built on what became known as “the libation of liberation”. By the end of the 20th century, more than half its net income would come from overseas markets.

Fascinating stories of opportunism and skulduggery abound in Elmore’s account, as when a New Orleans oil refinery leaked contaminants into the local water supply in 1960 and the local Coca-Cola bottler bombarded the city with ads urging citizens to drink Coke instead. With the launch in 1999 of its bottled water brand Dasani, the Coca-Cola Company had even more reason to campaign against the safety of tap water and to suggest that it was good only for irrigation and cooking. The propaganda succeeded: by 1986 Coke could claim that Americans consumed more soft drinks than any other liquid, including tap water. The secret formula had worked.

Citizen Coke: The Making of Coca-Cola Capitalism

By Bartow J. Elmore
W. W. Norton, 416pp, £17.99
ISBN 9780393241129
Published 4 February 2015

The author

Lover of the outdoors, lifelong dreamer, Allman Brothers Band fan and assistant professor of environmental history at the University of Alabama, Bartow J. Elmore lives in Tuscaloosa with his “amazing wife, Joya, who actually puts environmental education into action, building garden programmes at local public schools and around town. For both of us, it is a to be a part of a burgeoning environmental movement here in Tuscaloosa that promises to yield big changes in the years ahead.”

Elmore grew up in “Coke country – Atlanta, Georgia, USA. I was surrounded by the Coke brand and also benefited from the company’s widespread philanthropy. I attended Woodward Academy in College Park, Georgia (blocks from Atlanta’s Hartsfield-Jackson international airport), which was in many ways funded with Coke money.

“Robert Woodruff, who ran Coca-Cola from the 1920s to the mid-20th century, attended the school in the early 1900s; it was then called Georgia Military Academy. He was a generous donor to the institution, evidenced by an imposing statue of the man that still graces the front entrance of my high school.

“In short, I was well aware of Coke’s good citizenship in my hometown, from an early age; in fact, one could say my education was in part paid for with Coke money. But in Citizen Coke, I wanted to take an unflinching look at how Coke’s charitable cash came to be. How, in other words, did Coke make its profits, and at what cost were its fortunes obtained?”

Elmore’s path to academia, he recalls, “was not exactly smooth. As a young child I suffered from a form of dyslexia that made it very difficult to read. For much of my elementary education, I attended the Atlanta Speech School, an amazing institution that offered intensive educational support for students with a variety of learning disabilities and speech impediments. Without the one-on-one support I received there, I would never have been able to do what I do today. You could say the love I received from nurturing teachers at that age inspired me to become an educator.”

In addition, he says, “I was fortunate to have a Renaissance man as a father. He introduced me to the wonders of the outdoors in so many different ways. My childhood was filled with memories of spelunking in the caverns outside Chattanooga, Tennessee, white-water kayaking through the cold mountain streams of North Carolina, and diving deep into the blue freshwater springs of northern Florida. Seeing the many natural wonders of the world that were right in my backyard certainly inspired a lifelong commitment to protecting the environment.”

But his university studies would take him away from the South, to an Ivy League institution up in New Hampshire.

“I certainly was and am a dreamer, and I think when I went to Dartmouth College in 2000, it was one of many journeys I would make to push myself outside my comfort zone. Located over 1,000 miles from my hometown in the foothills of New England’s White Mountains, Dartmouth was a special place with just enough isolation from the ‘real world’ to inspire serious contemplative thought. I hunkered down in a cold little town for four years with people that really pushed me to question my own identity and worldview. That, in my mind, was what was so great about my Dartmouth education: not the core curriculum, but the conversations and discussions outside the classroom, often in rickety mountain cabins.

His experience some years later at the University of California Berkeley, where he held a postdoctoral fellowship, “was much the same: a place where I was forced to confront who I was in the face of new ideas and new friendships. I left with no profound awakening or utopic vision of how the world should be, but I did forge rich relationships with people I now consider some of my best friends.”

Asked at what point his interest in his present field developed, Elmore replies, “To be honest, I knew almost nothing about environmental history when I went to graduate school. I had come to the University of Virginia to work with Ed Ayers, a historian of the American South. I had just finished a stint teaching at a low-income public school in Savannah, Georgia, and came to Virginia with hopes of writing about the historical roots of problems in southern education.

“These plans changed dramatically in my second year of study when I met environmental historian Ed Russell, who introduced me to the field of study I now call home. Immediately after taking Russell’s introduction to environmental history class in 2007, I met with Ayers and explained that I wanted to write a history of a product of the American South that radically changed our global ecology. At first, we thought of the usual suspects – cotton, tobacco and other agricultural products of the plantation South – but then settled on Coca-Cola, a product originating in the Jim Crow South that today has conquered the globe, with consumers downing over 1.8 billion servings a day in roughly 200 countries.”

The approaches he made to the Coca-Cola Company when conducting research for this project, he says, were rebuffed.

“From the very beginning, I always wanted to work with Coca-Cola on this book to ensure that they had a voice in the story I planned to tell. I never wanted this to be a ‘hit job’ or a project that simply smeared the company’s good name. I wanted to follow the story wherever it took me.

“For several months in the early stages of the project, I reached out to the Coca-Cola archives and company executives, but was turned down for interviews and denied access to the corporate archives. Fortunately, this did not prevent me from finding robust primary sources, as Emory University in Atlanta houses an exceptional collection of Robert Woodruff’s professional and personal papers that contained over eight decades of corporate correspondence
between executives and Coca-Cola company officials. This was the rich vein I mined to tell key portions of Coke’s history.”

Upon publication of Citizen Coke, “Coca-Cola did respond to the book, publishing a piece in the Atlanta Business Chronicle arguing that I demonstrated a ‘complete lack of understanding of business’, noting that Coke’s franchising system was not necessarily unique, and that such franchising schemes yielded economic benefits to bottlers and other suppliers down the line.”

Bartow observes: “I chose not to respond to these comments at the time because I did not feel they warranted a response, considering the fact that I did indeed detail the distributed economic rewards of Coca-Cola’s franchise system in the book, highlighting stories of Coke bottlers who became millionaires. I also noted quite explicitly in the introduction of Citizen Coke and in other online publications, that Coke’s path to profits was one followed by many other companies. But perhaps my silence on these issues opened the door for more Coke responses. A few weeks later, Coke tried to publish a virtual copy of this article in Fortune magazine, but Fortune’s editorial team refused to run it, arguing that it raised no substantive and evidence-based challenges to my work. A few weeks later, Fortune turned down an amended draft submitted by Coca-Cola.”

He adds: “I can’t say I was totally surprised by Coke’s actions, but I did find it unnecessary. I don’t attack or denigrate Coke employees in my book in the way Coca-Cola has disparaged me in its online posts. In fact, I write about how some Coke officials held sincere concerns about the environment and social justice (see, for example, the story in the book about Coke president Paul Austin, someone I believe really cared about eco-stewardship). This is not a work that tries to indict specific corporate executives, but one that asks what people outside the firm can do to make businesses like Coca-Cola more responsive to environmental problems the globe faces today. I would love nothing more than to have a candid and constructive conversation with environmentally conscious Coca-Cola officials about the future ecological sustainability of the firm. In short, I don’t see the Coca-Cola Company as being filled with bad people doing bad things, and I’d hope they’d see that I am not the adversary they describe in their online posts.”

Did he fear any negative responses from family, friends or others? “Honestly, I had hoped, perhaps naively, that some at Coke would read the book and see it as a starting point for a conversation about some of the shortcomings in their current sustainability practices. As you might imagine, growing up in the heartland of Coca-Cola, I have many friends and family who are loyal fans of the Coca-Cola brand and admirers of the business strategies the company
deploys. Many of them read drafts of the book and noted that I did not take cheap shots at the firm.

“Nevertheless, I understand Coke’s position. They have an incredibly valuable brand to protect and anything that even hints at problems in the Coca-Cola system is something that could potentially diminish that brand strength. They have certain motivations to respond to criticism, but as a scholar, I have an obligation to let my evidence lead me where it will.”

Invited to speculate on the likelihood of Coca-Cola becoming a truly “green”, socially responsible and sustainable company, Elmore replies: “Tough question. I think the firm has a long way to go before it can really own the term ‘green’ in the fullest since of the word. No doubt, they have taken major strides to increase their water-use efficiency in their bottling system and reduce the carbon footprint of their distribution fleet, but as Citizen Coke details, these efficiencies don’t necessarily address some fundamental problems with Coke’s business model.

“I think the better question might be to ask what we as citizens can do to nudge corporations towards better practices. Citizen Coke tries to show how an eco-conscious public might redesign the business landscape. For example, by placing a price tag on pollution, might citizens more effectively eliminate unwanted wastes in their communities? That’s the kind of change I’m most excited about seeing in the years ahead.”

What gives Elmore hope?

“I’m incredibly hopeful about the future because everyday I’m surrounded by undergraduates, many of them business school students, who believe that they can change the world. Their energy is contagious and inspires me to believe that we can fix the big problems we face in the years ahead. When thinking about addressing problems like global climate change or water resource scarcity, I turn my gaze to a new generation of citizens who are actively demonstrating a commitment to engage rather than shirk from big responsibilities. It is a joy to be a teacher in such a climate of optimism.”

Karen Shook

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