Coca-Cola crushed: The real thing ain't what it used to be

It used to be the global symbol of the American Dream, but now Coke's sales are plummeting, thanks to links to obesity and young consumers who prefer trendier, healthier options. Can it recover?

by Matthew Gwyther
Last Updated: 29 Mar 2016

C'mon, then. Let's all sing along like it was 1971. 'I'd like to teach the world to sing in perfect harmony/I'd like to buy the world a Coke and keep it company. Chorus: It's the re-al thing, Coke is – what the world wants today, Coca-Cola.' Doesn't sound quite as convincing in 2015 as it did back then in the groovy, carefree early 1970s, does it? In those days, Coke was the taste that refreshes. It 'added life'. Then you had a Coke with a smile not a grimace. That was then but this is now.

Now when Coke tries to market itself, less beautiful things happen. In 2015 it has perforce to try social media, which isn't so controllable. Recently, during the US Superbowl it devised a campaign called 'Make It Happy' in which it invited people to reply to negative tweets with the hashtag #makeithappy. Then an algorithm converted the tweets into pictures of happy, positive things like a cute mouse or a chicken drumstick wearing a cowboy hat.

Then some smart alec liberal killjoy at Gawker created a Twitterbot @meincoke and set it to tweet lines from Adolf Hitler's Mein Kampf, which were then linked to the #makeithappy tag. For a few hours Coke's feed was posting passages from the Fuhrer within a shot of a cat playing the drums. Coca-Cola admitted defeat and halted the campaign.

Coca-Cola has a serious problem. Health is its central issue at home, in a country where juvenile obesity rates have tripled since the 1970s. Fast food is also in the firing line but the main target is Coke. There are those in the States who have it down as public enemy number one: the First Lady takes a dim view and in 2005 ex-New York mayor Michael Bloomberg declared war on the Atlanta behemoth by banning its vending machines from schools in his city.

A recent book Citizen Coke - the making of Coca-Cola Capitalism by Bartow Elmore piled on the pressure. Elmore shows the dark side to Coke's global colonisation process. Rather than being an engine of development and philanthropy, it was a manipulator of global sugar and caffeine markets and a parasite on public health and the planet. Coke was 'the Forrest Gump of the 20th-century economy, a native son of the American South that seemed to find his way into a dizzying array of global trading networks'.

Elmore's stats are breathtaking and include the fact that – never mind the sugar – in 2012 Coke used more water than close to a quarter of the world's population. It gets through 79 billion gallons annually diluting the syrup, and no less than an additional eight trillion gallons for other aspects of production.

Sales are down. In February Coke admitted that they had fallen by 55% in the fourth quarter of 2014. (For a company that gets 75% of revenues from overseas, a strong dollar is no help.) Sugar-laden carbonated drinks are now in serious decline as the alarm set off by the developed world's twin epidemics of obesity and diabetes sounds ever louder.

But sugar and obesity are one thing. Fashion and changing drinking habits are another. Coke didn't shift with the times. If you need a caffeine hit in 2015 then espresso is the far more fashionable answer. And if you're a quick-living youth in search of a superfast, dopamine-exploding upper then you down a vile-tasting Red Bull.

Coke – which was invented in 1886 by an itinerant quack with a morphine habit – was one of the first outfits to get 'brand value'. However, after donkey's years at number one on Interbrand's annual ranking of the world's most valuable brands, Coke has recently slipped to third behind Apple and Google. But it's still a brand worth $82bn. And it has an amazing market capitalisation of $170bn, all based on a secret formula and a name. Its tangible assets are not great as it is the outsourcer par excellence, maintaining a relatively thin organisational structure and keeping all the risks and costs off its books as others extract natural resources and ingredients.

The Coca-Cola Company is the mothership, but much of the Coke that is sold around the world is put in the bottle or can by one or other of more than 250 bottling companies. As Elmore writes 'Coke's genius was staying out of the business of making stuff... its success lay in partnerships and Coke proved masterful at making friends.'

In the UK things are no easier. Coke has been here since Selfridges started stocking it in the early 1920s. When the company's sponsorship of the London Eye was announced recently the brickbats came flying. 'Rebranding the Eye in the livery of the fizzy drink maker will lead to children suffering greater ill health,' trumpeted the Guardian. Protesters handed out toothbrushes to kids waiting in the queue.

Coke's problem is an amalgam of thorny issues. It's so big and so globally omnipresent. It has 500 different products, 131,000 employees – albeit with many redundancies on the way - and we drink two billion Coca-Cola 'servings' every day. It's so all-American that it suffers the worst form of tall poppy syndrome. To have a go at America you take a pop at Coke – or in Russia you send the health inspectors in to shut down McDonald's first, and then have a go at Coke.

What has it done to deserve this? Where did it all go wrong? The problem started in the 1980s when, in a land where bigger is better, portion sizes started going up. Rather than the classic 'contour bottle' - which is 100 years old this year – great buckets of the stuff were being pushed in fast-food outlets, along with two-litre plastic bottles at retail. The same phenomenon afflicted growth-hungry fast-food giants such as McDonald's too, with similar negative consequences.

Between the mid-1970s and 1990 Americans doubled the volumes of soda they drank. By 1998 in the land of the free they were each guzzling a gut-busting 56 gallons of the stuff annually. Today 35% of Americans are defined as clinically obese and, although recent research appears to have come to Coke's rescue by suggesting that a sedentary lifestyle lolling in front of Jerry Springer is far worse than guzzling down fizzy pop, the damage is done.

Over at deadly rival Pepsi, boss Indra Nooyi has admitted: 'We actually believe that if you let this go on too long – another three or five years - the consumer will walk away from carbonated soft drinks.' (Not great news for Pepsi either, but not as bad as it would be for Coke. Coke has a quarter of the global market for carbonated drinks, Pepsi a less drinks-dependent 11%. It has its Walkers, Doritos and equally calorie-laden snack businesses to fall back on.)

It is not as if Coca-Cola has done nothing in terms of product innovation. Coke Zero, Diet Coke, and Coke Life (although Diet Coke did take a 7% nosedive in 2013, put down to the unpopularity of artificial sweetener aspartame). It has bought super-cuddly Brit smoothie-maker Innocent and is also having a go with Fuze tea, Zico coconut water and the organic Honest tea. It buys small brands worth around $10m in sales and tries to up that to $1bn, but only one in 10 purchases succeed. The intensive work Coke is also doing with calorie and sweetener innovation is critical. But things aren't moving fast enough.

In the same way that dark spirits such as rum and whisky have struggled against clear spirits such as vodka, in the carbonated drinks market, black liquids are losing out to lighter drinks such as iced tea, water, smoothies and juices.

Coke has always been a perception-led brand, as in this ad from 1954

So if it's trying to put things right, why are its labours apparently in vain? MT spoke to a very senior adman who spent a good while working on the Coke account, and who wished to remain anonymous. 'It's an entirely perception-led brand – steeped in nostalgia, memories and history. There really is a place for a positive brand like Coke as an antidote to modern-day woes. It can be made to say "the world's not so bad".'

The adman found getting his message through to Atlanta very hard. 'What they cannot understand is how to look at changes in consumption as a positive thing.

'If we'd had our way Coke would have been repositioned as the champagne of the family table. And you don't get through a litre of champagne every night. It's got to be about treats, moments, experiences in the future.

'But they just cannot educate and persuade the bottlers, or the Walmart people for whom it is still about volume. It is the retailers who drive behaviours and if they don't shift your product they force you to buy it back these days. They are still caught in chasing the quarterly numbers.'

Then there is the deep-seated conservatism. He recalls the Arctic Home campaign that Coke ran, which aimed to assist threatened polar bears in the Arctic. There were white cans. 'It was a relevant conversation about the changing environment but they wouldn't even let us use the phrase "global warming". It was just too hot politically.'

Although Coke declined to be interviewed for this piece, Jon Woods, the general manager for UK and Ireland, answered written questions. In response to the fat customers issue he said: 'There's no doubt obesity is a complex problem and the causes are multifactorial. My view is that a narrow focus on diet alone, or one type of food or drink, or even just one nutrient, like sugar, will not address the problem effectively. I often remind people that all soft drinks contribute 2% of the calories in an adult Briton's diet.'

At Coke they feel very sore that they have been unfairly and disproportionately targeted. There has been a war going on within the organisation over how to deal with all this and plan a brighter future. The company's internal politics are legendary. There have been modernisers but they do not appear to be winning at the moment, and time may be running out.

A recent highly critical New York Times article headlined 'For Coke, Challenge is staying relevant' quoted the Danish branding guru Martin Lindstrom who came up with research indicating that the average age of a Coke drinker was now 56. 'They think they are young when they drink it,' he said. Parents who in previous generations introduced their children to Coke at between six and eight now hold back. 'Having your first Coke was a milestone. It was embedded in society,' said Lindstrom. 'Those childhood memories stick for a lifetime. But the generational handoff is breaking down. Parents have become uncomfortable with it.'

This makes having your first Coke sound like taking your first drag on a cigarette. And there are parallels. A cynic might suggest that maybe the longer-term future won't be so bad for Coke if it simply reconciles itself to being part of a sin industry. Shareholders would eventually accept the situation - the squeamish would bail out, the share price would fall and others worried only about ROI could come in and fill their boots.

Such an approach would have its upside. As the FT recently pointed out: 'The wages of sin is exorbitant profit.' It was highlighting new research by the London Business School into the best equity market performers, which showed that nothing beats tobacco and alcohol stocks over the very long term.

A dollar invested in US tobacco companies way back in 1900, with all dividends soberly reinvested, would have turned into $6.28m by now. Who needs smoothies or iced tea when being a bad boy can get you that sort of return? Perhaps this is the most realistic vision of the future for the Real Thing, after all.

COKE SLOGANS THROUGH THE AGES

1886: Drink Coca-Cola
1904: Delicious and Refreshing
1905: Coca-Cola Revives and Sustains
1906: The Great National Temperance Beverage
1917: Three Million a Day
1922: Thirst Knows No Season
1923: Enjoy Thirst
1924: Refresh Yourself
1925: Six Million a Day
1926: It Had to Be Good to Get Where It Is
1927: Pure as Sunlight
1927: Around the Corner from Everywhere
1929: The Pause that Refreshes
1932: Ice Cold Sunshine
1938: The Best Friend Thirst Ever Had
1939: Thirst Asks Nothing More
1939: Whoever You Are, Whatever You Do, Wherever You May Be, When You
Think of Refreshment Think of Ice Cold Coca-Cola
1942: The Only Thing Like Coca-Cola is Coca-Cola Itself
1948: Where There's Coke There's Hospitality
1949: Along the Highway to Anywhere
1952: What You Want is a Coke
1956: Coca-Cola... Makes good things taste better
1957: Sign of Good Taste
1958: The Cold, Crisp Taste of Coke
1959: Be Really Refreshed
1963: Things Go Better with Coke
1969: It's the Real Thing
1971: I'd Like to Buy the World a Coke (part of the It's the Real Thing campaign)
1975: Look Up America
1976: Coke Adds Life
1979: Have a Coke and a Smile
1982: Coke Is It!
1985: We've Got a Taste for You (for both Coca-Cola and Coca-Cola classic)
1985: America's Real Choice (for both Coca-Cola and Coca-Cola classic)
1986: Red, White & You (for Coca-Cola classic)
1986: Catch the Wave (for Coca-Cola)
1987: When Coca-Cola is a Part of Your Life, You Can't Beat the Feeling
1988: You Can't Beat the Feeling
1989: Official Soft Drink of Summer
1990: You Can't Beat the Real Thing
1993: Always Coca-Cola
2000: Coca-Cola. Enjoy
2001: Life Tastes Good
2003: Coca-Cola... Real
2005: Make It Real
2006: The Coke Side of Life
2009: Open Happiness

WHY GENERATION VICE FELL OUT OF LOVE WITH COCA-COLA

The Vice generation just don't understand when you try to tell them that Coke isn't evil. They grew up with No Logo and Fast Food Nation, and the early-2000s anti-globalisation riots. Whatever subtle arguments you could muster about universality or consumer choice will be met by blankness. You just don't understand, do you? Coke is evil.

Mike Cameron, the Georgia schoolboy who wore a Pepsi T-shirt to his school's Coke In Education day and was suspended for it because the head thought he might've cost them a shot at 10 grand, is as real to us as the little Dutch boy who put his finger in the dyke.

Naturally, a lot of this is stereotyping. The Innocent Smoothie company (now Coke-owned) is probably far more evil – with its massive payloads of fructose posing as a health drink. And its hyper-twee marketing is responsible for a range of incidents in which I have stubbed out cigarettes on children and kicked puppies.

Yet Coke is so vast that it can't help but be undone by its own size in a time that feels as if it's always yearning to get back to the bespoke and the individual. Coke is a byword for everything that's wrong with the modern world.

And in an age het up on authenticity, on traceability of ingredients, this sticky black tar-water that is grown out of (what plant exactly?) and contains (what exactly, apart from the legendary 'eight teaspoons of sugar'?) is not winning. They've seen the YouTube videos where it eats through pennies or that show what remains after it has been boiled for 25 minutes (left). They've seen the Mentos videos too.

With Coke there is no provenance. In your mind's eye you see only silo-sized industrial stainless-steel vats with pipes transporting chemicals to where they need to be in an industrial process, then a line of 18-wheeler trucks taking the product out to a globe not exactly in need of greater homogenisation.

This is the pickiest generation ever in their eating choices and the idea that you would unthinkingly guzzle cola as in earlier times has been conditioned out of us as surely as smoking in pubs. The associations of drinking Coke are not success and universality, they are fat poor people. Its associations are Asda Rollback and JD & Coke – the official drink of the twat rocker and naive townie.

The key thing is choice. The Vice generation are often anti-capitalist in an unstructured unideological way. But they still demand options as a birthright. Once, in the big cornershop fridge you'd see only Coca-Cola and a range of British soft drinks you wouldn't actually want to put near your mouth. Tizer. Tango. Vimto. Irn-Bru if you were ethnic. In that company, Coke positively glowed with vitality. At least it tasted like the future – Tizer tasted like a Soviet approximation of what a soft drink should be.

Since then, marketers have embarked on a quest to find a soft drink that will taste good while not turning your bicuspids into a sticky brown mulch. All have nipped tiny chunks out of the mothership's market share. Because that's how the 21st-century works: we adopt the new at twice the speed we did a decade ago.

Of course, this isn't a generation given to boycotts or pickets and pragmatism means there are still plenty of times when Coke is the only answer. A nice dewy bottle on a sunny day in the shade is as great a reward as anything. And many still swear by it as a hangover cure. But for much the same reasons they swear by a fry-up or a KFC bucket. Sometimes it takes evil to fight evil.

Gavin Haynes is a freelance journalist and staff writer for Vice

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