The Coke Machine - Michael Blanding [75]
When the communists and their allies tried to pass a law in the French National Assembly to effectively ban Coke in France and its colonies, Coke reacted with immediate furor. “Coca-Cola was not injurious to the health of American soldiers who liberated France from the Nazis,” fumed Coca-Cola Export head James Farley, a former political operative in the Roosevelt administration. “This is the decisive struggle for Europe,” cried Coke’s top lawyer, as if describing a military conquest. The company called in all of its troops. At its urging, the State Department warned France of “serious possible repercussions” if it pushed through a ban so “prejudicial to American interests.” One Georgia congressman forswore French dressing (in an eerie precursor to the “Freedom Fries” protest by Republican congressmen preceding the invasion of Iraq); another more seriously threatened a trade war on French wine, cheese, and Champagne.
As the combined political pressure defeated the anti-Coke alliance in the National Assembly, the company was in fact living up to the fears of those opposing it—becoming a cultural bully that imposed its will, and its products, on a country whether it liked it or not. Despite its victory in France, a 1953 poll there found that only 17 percent of respondents liked Coke “well enough” or “a lot,” while 61 percent liked it “not at all.” Company officials justified their forceful entry into Europe in the name of the free market, in contrast to the totalitarian control by communists.
“My guess is that the commies don’t dislike us so intensely just because we’re American,” mused one Coke executive. “It’s because Coke is a champion of the profit motive. . . . Everyone who has anything to do with the drink makes money.” Coke had good reason to resent communists, who had nationalized bottling plants in Cuba and China after World War II. For years, Coke steered clear of the communist world, even as Pepsi broke into the Soviet Union with the help of former Pepsi counsel Richard Nixon in the 1960s.
With the exception of its stand against “the commies,” however, the company was as flexible in its politics internationally as it had been at home. In the Middle East, it used every excuse not to open a franchise in Israel so it didn’t upset the wealthy sheiks who owned bottling franchises in Saudi Arabia, Egypt, and other Arab countries. When American Jews protested in a boycott in 1966—Mount Sinai Hospital and Nathan’s Famous Hot Dogs both suspended sales—Coke backtracked and granted a franchise in Tel Aviv within days. The Arab League predictably retaliated with its own boycott. Coke did the math, and stayed with the Jews, closing up shop in the rest of the Middle East for the next two decades. In an interview, company head Paul Austin said it would simply be against company policy to give in to a boycott, despite the fact that the company seems to have done exactly that.
As president of Coke in the 1960s and chairman in the 1970s, Austin spent more than half his time flying around the world to cultivate new countries for Coke. By 1976, the overseas market accounted for 40 percent of consumption and 55 percent of profits. By this time, the concept of the “multinational corporation” had become the established way of doing business around the world. All across the business world, companies spawned international subsidiaries to exploit local markets, while profits invariably flowed back to New York, London, Paris, or Stockholm. Coke was virtually unique, however, in spinning off not only control but also ownership to its franchises.