The Coke Machine - Michael Blanding [53]
Lost in the debate was the support of 70 percent of the public, according to one poll, along with the American Academy of Pediatrics, the state PTA, and other public-interest groups. Once again, the bill passed, but not without a provision allowing sales in high schools. The biggest shock, however, came when Connecticut governor Jodi Rell vetoed the bill, accusing it of “undermin[ing] the control and responsibility of parents with school-aged children.” The justification was ironic, to say the least, given the lack of control parents and teachers had over the exclusive beverage contracts.
Even while, for the time being, it held the line against the onslaught of anti-soda legislation, Coke was reeling from the suddenness of the backlash against soft drinks—not only in the United States but in Europe as well. The United Kingdom’s Food Standards Agency was already making noises about binding regulations against soft drinks; and in France, lawmakers voted to ban all vending machines from elementary and middle schools in the summer of 2004, forcing companies to remove them entirely by the end of the school year. Back in the United States, CCE’s John Downs admitted to The Atlanta Journal-Constitution that the company was blindsided by the attack. “Clearly we are playing catch up,” he said.
By late 2004, however, industry began to formulate a line of defense, not just in the back rooms of state legislatures, but in its public image as well. For starters, the National Soft Drink Association changed its name to the American Beverage Association “to better reflect the expanded range of nonalcoholic beverages the industry produces.” Shortly afterward, the group’s president of fifteen years resigned, putting in charge a new director, Susan Neely.
Most recently a PR exec in the Department of Homeland Security, Neely had previously created the “Harry and Louise” ads that torpedoed the proposed health-care legislation during the early years of the Clinton administration. Now she took the helm specifically to deal with the obesity crisis. She laid out an immediate new strategy: simultaneously denying soda’s role in causing obesity and presenting industry as part of the solution. “The industry thinks [obesity] is a real concern and something we as a country need to address,” she said. “What we are concerned about is when state legislators or anyone else tries to leap to quick solutions to a complex problem.”
At the same time, a new white knight rode in to rescue Coke itself. Since Goizueta died and Ivester was pushed out, the company had drifted aimlessly under the leadership of CEO Douglas Daft. Buffeted by the obesity crisis, he turned the company away from sugary soft drinks, emphasizing other brands such as Powerade and the new diet drink Coke Zero. In March 2004, Coke created the Beverage Institute for Health and Wellness, a new organization with an Orwellian name, whose mission was to promote “global health and nutrition.” The new institute sponsored a conference in Mexico City that fall to explore the ways in which sugar might be nutritionally beneficial. But that did little to restore investor confidence. While PepsiCo’s stock rose 74 percent, Coke’s fell 28 percent during Daft’s stewardship. Morgan Stanley’s Bill Pecoriello, the dean of beverage analysts, predicted stagnation in the U.S. soft drink market for the next five years, writing that “the glory days of the big mass-marketed soft drink brands are probably over.”
Coke’s board had had enough. By the middle of 2004, it had quietly pushed Daft out. Amid intense speculation, the man who emerged to take his place was Neville Isdell, a thirty-five-year veteran