The Coke Machine - Michael Blanding [31]
THREE
Biggering and Biggering
By the end of the 1980s, it seemed like the Coca-Cola Company could do no wrong. For nearly a hundred years, it had been growing larger and larger, selling more and more of its sugary sweet pleasure. Now, after the New Coke experience, it had survived its biggest stumble ever, and somehow come out stronger for it. After decades of advertising, Coca-Cola’s brand had been cemented into the American consciousness as something good and patriotic that brought people together not only in the United States but around the world as well. And now, it represented something more: a part of every American they suddenly realized they’d be heartbroken to lose. For its hundredth-anniversary celebration in 1986, Coke pulled out all of the stops, turning Atlanta’s convention center into a huge indoor party for 14,000 people, complete with floats, marching bands, and food including 66,000 pieces of shrimp, 9,000 barbecue ribs, and a fourteen-foot-high Coke bottle popping out of a 7.5-ton cake.
When the hubbub died down, the company’s executives turned to the future—where they saw nothing but blue skies on the horizon. Growth had always been a priority at the Coca-Cola Company. Asa Candler had made expansion part of Coca-Cola’s very business model; Robert Woodruff had pushed Coke’s expansion “within an arm’s reach of desire” around the world. But growth would become an obsession for the next generation of Coke executives, spurred by an unprecedented level of wealth in the stock market.
For the first time, average Americans began putting their money into the market in significant numbers—either on their own or through the vehicles of mutual funds or pension funds. These institutional investors began to push for higher and higher returns, and companies obliged them, focusing everything on their quarterly earnings statements in a new emphasis that became known as the “shareholder value movement.” The idea dates back to an obscure 1975 book by economist Alfred Rappaport. But the philosophy was articulated most famously by Jack Welch, the CEO of General Electric, who declared in 1981 that plodding growth of “blue chip” companies was no longer good enough for him. Instead, he pushed GE’s earnings into high gear by cutting waste and inefficiency wherever he found it—including downsizing through massive layoffs. He set the tone for other companies, who rushed to please Wall Street by any means necessary—including accounting tricks, stock buybacks, and rampant acquisitions of other companies. Flush with stock options, CEOs profited handsomely, even as they sometimes hurt the long-term success of their companies through an emphasis on short-term growth.
Outside of Jack Welch, no CEO was associated with the “shareholder value movement” more than Roberto Goizueta, who became a darling of Wall Street in the 1980s. “I wrestle over how to build shareholder value from the time I get up in the morning to the time I go to bed,” he once said. “I even think about it when I am shaving.” In the days before the Internet, he had a computer screen installed in a conference room on the twenty-fifth floor of Coca-Cola headquarters with a live feed from the New York Stock Exchange that continually monitored Coca-Cola’s stock price; he put another screen at the main entrance to Coke headquarters, so it would be the first thing employees would see as they walked in the door and the last thing they’d see as they left. The company sloughed off divisions acquired by Austin to create his “halo effect” that never turned a profit—such as his desalinization plants in the Middle East