Authors: Tristan Donovan
Coca-Cola responded with a fight led by Neville Isdell, a Northern Irish Coke executive who would go on to become the company's president. Isdell treated the contest as a war. He christened his sales team the “Tiger Force” after the song “Eye of the Tiger” from the movie
Rocky
and began holding company sales meetings that involved antics more befitting of banana republic dictators than a soft drink company boss. To fire up his sales force, Isdell would smash Pepsi bottles and dress up as a Filipino generalâand on one occasion he arrived at a sales conference on a tank. The theatrics did the trick, instilling the message that this was not just about selling soda but a war against a deadly rival. Within two years Isdell's Filipino sales army had turned the tables, spreading Coca-Cola signs in every corner of the country and winning the business of thousands of tiny local stores until Coke was selling twice as much as Pepsi. The discovery that Pepsi's local bottler had been cooking the books to inflate its profits, a scandal that forced the company to write down millions, helped too.
The Philippines was no isolated case. Across the world Coca-Cola and Pepsi piled into countries to slug it out for fizzy drink dominance. No market
seemed too small or too poor. From Tristan da Cunha, the most remote inhabited archipelago in the world, to poverty-stricken Cambodia, the cola giants raced to claim cola-free nations as part of their global empire. But while the Communists of France saw such expansion as a program of Coca-colonization that would turn the world American, for many poor, small, or unstable countries the arrival of Coke or Pepsi marked the first time a major foreign consumer company had bothered to invest in them. And when the cola superpowers arrived in these virgin territories they not only changed national drinking habits but altered the economic reality for millions.
In Morocco one study estimated that in 1999 Coca-Cola's activities were directly and indirectly responsible for generating more than 65,000 jobs and 0.7 percent of the country's gross domestic product. In China an estimated 414,000 people had work due to Coca-Cola and the businesses that were part of its networks. But the cola giants didn't just bring jobs and tax revenues; they also introduced new business practices that accelerated the development of domestic businesses.
In post-Soviet Russia, Coke's legal team helped the authorities write the laws recognizing private ownership of land, paving the way not only for the Moscow bottling plant the beverage company wanted to open but also for the operations of countless other Russian businesses. When Coca-Cola entered Romania shortly after the Communist dictator Nicolae CeauÅescu was overthrown, Romanian companies quickly grasped how to become more successful by learning from Coke's advertising and quality control practices. The company's free and regular deliveries to retailersâa practice unheard-of in Communist timesâalso helped countless small stores to grow. “In Romania they set the standard,” says Douglas Woodward, an economics professor at the University of South Carolina, who studied the impact of Coca-Cola's investment in several countries around the world. “Coca-Cola is impatient. They didn't want to wait for these companies to learn about on-time deliveries and quality control, so they set out to make these companies more competitive and help them grow. Early on, they help these economies get on their feet and really have a strong demonstrative effect for how capitalism works and how it's done. You can't quantify that, but it's certainly part of their impact.”
A similar effect can be seen in Africa too, he adds: “In South Africa there are millions of little businesses and no one is more in touch with them than Coca-Cola. They are in contact with these small-scale shops every day. The company has a huge influence in terms of making these businesses more competitive. When you work with Coca-Cola if you're an African business you tend to do better.”
This was no philanthropic mission, of course. Pepsi and Coke were locked in a global war for profit where the prize was billions of dollars of revenue, but their intense rivalry meant they were often the first consumer products to enter developing countries. So intense was this desire to get nations drinking their cola rather than their rival's that Pepsi and Coca-Cola even smashed through the trade firewalls of the Communist world.
In 1959 the Cold War looked dangerously close to turning hot. Fidel Castro's revolution in Cuba had installed a Communist regime on the doorstep of the United States. The USSR had the upper hand in the space race thanks to the 1957 launch of the
Sputnik 1
satellite, and in Berlin tensions between east and west were rising over the number of East Germans fleeing to West Berlin. The idea that the Soviets, rather than the Americans, would emerge victorious from the Cold War seemed a distinct possibility. Keen to ease the tension and reach out to the Soviet people, the US government organized an exhibition in Moscow to showcase life in America. The exhibition's organizers felt Coca-Cola should be there, but when they asked the Atlanta company to get involved it refused, possibly wary of the reception it might face in Moscow given how the Kremlin had sought to demonize its product around the world.
So the organizers invited Pepsi instead. Donald Kendall, the head of Pepsi's international operations, leapt at the chance, but his cost-conscious bosses were less than keen. Handing out free Pepsi to hundreds of thousands of Muscovites would cost a fortune, and since the USSR wouldn't let Pepsi enter the country, what was the point? When the former US Navy airman insisted on going ahead, his superiors said fine, just don't expect to have a job if you come back with nothing to show for this massive waste of time and money. By the time Kendall got to Moscow, he knew he needed to pull a rabbit out of the hat if he was going to save his neck, so when he
was introduced to Vice President Richard Nixon at a US embassy reception ahead of the exhibition's July 24 opening day, he asked Nixon if he would do him a favor.
Kendall explained that he had risked his job to bring Pepsi to Moscow, and asked Nixon whether he could get Soviet leader Nikita Khrushchev to visit the Pepsi kiosk. Nixon agreed to help. The next day, as the vice president wandered the exhibition hall with Khrushchev, he steered the Soviet premier to the Pepsi-Cola stand. Kendall handed the Soviet leader two Pepsis. The first was a Pepsi made in the United States, he told the Communist leader; the second was one made in the USSR for this exhibition. Khrushchev tried both and inevitably declared the Soviet-made Pepsi to be superior before ordering a second Communist cola as they were bathed in camera flashes. Nixon and Khrushchev went on to have their famous Kitchen Debate, where they argued over the merits of the American and Soviet economic systems, but Kendall had his career-rescuing big win. The next day newspapers across the world carried photos of the Communist leader sipping Pepsi. It was the start of an alliance between Nixon and Pepsi that would take the vice president into the Oval Office and Pepsi into the USSR.
Toward the end of 1959, Coca-Cola boss Robert Woodruff invited Nixon to stay with him at his twenty-eight-thousand-acre Ichauway Plantation in Baker County, Georgia. Nixon already looked like a shoo-in for the Republican presidential nomination for the 1960 election, and the visit was the chance for the wealthy corporate leader and the potential president to forge a closer relationship. The meeting went badly. Woodruff loved hunting and was unimpressed by Nixon's lack of shooting prowess. He later confided in colleagues that he didn't like Nixon because he lacked a sense of humor. And when the vice president wrote to thank the Coke boss for his hospitality and “the generous supply of home-grown sorghum,” he received a grumpy rebuke from the cola king: “That is home-grown Georgia cane syrup, not sorghum. There is a very great difference between our syrup and sorghum, which is generally a heavy bitter-sweet substance.” Nixon went on to lose his bid for the Oval Office, and in 1962 he also lost his campaign to become governor of California. With his political career seemingly over, he returned to practicing law, and he asked Coca-Cola for a job in their legal
department. Given his unsuccessful December 1959 stay with Woodruff, he shouldn't have been too surprised when the answer was a firm no.
But while the political world and Coca-Cola had written Nixon off, Kendall hadn't. After becoming the chief executive of Pepsi in 1963, Kendall arranged for Nixon to join the law firm Mudge, Stern, Baldwin & Todd to oversee Pepsi's legal affairs around the world. The $250,000-a-year job came with few strings attached. Nixon could decide his own schedule within reason and his role as a legal ambassador for Pepsi offered plenty of scope for touring the world, meeting foreign leaders, and looking presidential. Nixon used the freedom and international globetrotting his Pepsi job gave him to rebuild his political career, and in 1968 he staged the most remarkable comeback in American political history by becoming the thirty-seventh president of the United States. Soon after Nixon entered the Oval Office, the Coca-Cola vending machines in the White House were removed and replaced with Pepsi machines. The White House pass that President Lyndon Johnson had given Woodruff was also revoked. After years of Coca-Cola-drinking presidents, Pepsi finally had its own man in office.
Kendall's support for Nixon paid off in December 1971 when the Pepsi chief was invited to go to Moscow as part of a US business delegation to discuss American and Soviet trade. During the trip he chatted with Soviet premier Alexei Kosygin and used it as an opportunity to show off a radio in the shape of a Pepsi can that he had pretuned to a Soviet radio station. Kosygin found the promotional radio amusing, and he invited Kendall to join him at his table at that evening's dinner. Over dinner the fishing-obsessed Pepsi chief reeled in the Soviet leader, telling him: “You will never get any real trade going until we start dealing in consumer goods.” Kosygin, probably thinking it might be beneficial to help Nixon's pal, replied by suggesting that he bring Pepsi to the Soviet Union in exchange for Russian vodka and wine to be sold in the United States. They shook hands on the deal. In November 1972, after ten months of talks between Pepsi and the Soviet trade ministry, a deal to make Pepsi the first American consumer product to go on sale in the USSR was signed. While Kendall denied that Nixon intervened directly in the talks, he conceded that his friendship with the president did help.
On May 28, 1974, Pepsi went on sale in the port city of Novorossiysk, on the Black Sea, where the Soviet trade agency Sojuzplodoimport had opened a bottling plant to produce the cola. Crowds flocked to the store that was selling the first Pepsis to get a taste of the American soda, even though it cost significantly more than a beer. Back in America, Stolichnaya vodka went on sale courtesy of Pepsi. Coca-Cola found itself frozen out and unable to follow suit, as Pepsi's deal gave it a ten-year monopoly on cola drinks in the Soviet Union. To save face, Coke agreed to share its expertise in water purification and in cultivating fruit with the Soviets in exchange for Lada cars, only to find that the vehicles were so poorly made that Coca-Cola had to ship them to Britain for repair before it could sell them. With Pepsi the clear victor in the race to claim the Soviet Union, Coca-Cola turned its attention to that other Communist colossus, China, and began grooming a president of its own to help pull back the bamboo curtain: a peanut farmer named Jimmy Carter.
Coke first encountered Carter in 1970 when he was seeking the Democratic nomination for governor of Georgia. Woodruff was already supporting Carter's Democratic rival Carl Sanders, but to hedge its bets the company's president Paul Austin donated $2,500 to Carter's campaign. When Carter won the nomination and the election, Austin followed Kendall's lead and started building a close relationship with the potential presidential candidate. As well as giving Carter access to Coca-Cola's fleet of jets, as the company did for all governors of Georgia, Austin used Coke's international network to help Carter develop his foreign policy credentials. Carter later credited Coke's support on the international stage with helping him become more than a provincial candidate for president: “Georgia has a particular advantage over some states in that we have our own built-in State Department in the Coca-Cola Company. They provide me ahead of time with much more penetrating analyses of what the country is, what its problems are, who its leaders are, and when I arrive there, provide me with an introduction to the leaders of that country in every realm of life.”
When Carter announced he would run for president, Austin worked to allay the concerns of other leading businessmen about a Carter administration and persuaded many of them to back the Democratic candidate. His
Republican rival, Gerald Ford, ended up with just four corporate supporters, including PepsiCo. Coke's advertising men also helped turn Carter into presidential material, crafting his public image as a laid-back peanut farmer. As Tony Schwartz, the director who oversaw Carter's TV ads as well as dozens of Coca-Cola commercials, explained, the goal of TV advertising wasn't to explain a point of view but to use images and sounds that made viewers think positively about the product, whether that product was Coke or Carter.
Carter's triumph in the 1976 election ushered in a new Coke-friendly regime at the White House. The Pepsi vending machines installed by Nixon back in 1969 were removed, replaced by Coca-Cola's. Charles Duncan, a former Coca-Cola board member and the second-largest shareholder in the company after Woodruff, became deputy secretary of defense before being promoted to energy secretary in 1979. Carter's administration also made Austin a board member of the National Council for US-China Trade, the perfect battering ram for getting Coke into China.
Since 1973 Coca-Cola had been building ties with the Chinese, as relations between the United States and the Middle Kingdom thawed in the wake of outreach efforts by President Nixon. So in late 1978, as the two nations moved closer to a mutual understanding, Coke struck a deal to make its famous drink the first American consumer product to enter the world's most populous nation since Mao took power. The deal, signed in Beijing on December 13, 1978, handed Coke the exclusive right to sell non-Chinese-made cola in China, starting with imported bottles and cans but to be followed by the construction of bottling plants across the country. The agreement was nominally only to let tourists visiting major cities buy Coca-Cola, but by 1981 the drink was on sale to Chinese citizens in parts of Beijing.