John Pemberton was a colonel in the Confederate army in the Civil War and was wounded during his time in the war. He received morphine as part of his treatment and became addicted to it. He created a formula to help people get over an addiction to drugs like morphine. That is when he developed the formula for Coca-Cola. It was used as both a medicine and as a fountain soft drink. People in those days believed carbonated water had health benefits.
Coca-Cola has been able to raise revenues steadily for the past ten years except for the past two. Part of this could be due to international expansion efforts. But the biggest problem for the company is consumption of soda has fallen drastically in the past couple of years.
Sweetened soda accounts for a portion of the obesity problem in the United States. As an effort to reduce those obesity rates, consumers are cutting back on buying soda. This dramatically affects sales for all soda companies.
Luckily, Coca-Cola has operations in other countries as well as diverse product lines to weather the storm. It is unclear whether this trend in reduced soda consumption will continue indefinitely or if it is just a fad and people will begin consumption later. The company has the means to handle however the situation plays out.
Pemberton licensed the formula to a few vendors for a fee. One vendor continually tried to obtain more and more of the market share and eventually succeeded.
Early formulas did contain certain amounts of cocaine, although it’s not clear exactly how much.
How the Company Started
Pemberton became addicted to the morphine he was given during the war to help him heal from his wounds. He wanted to develop something that could help him get over that addiction. The coca plant held the answer for him, and he combined that with the flavor of the Kola nut.
It was sold as a medicine early on but was also introduced as a refreshing carbonated drink.
The company was funded largely through licensing, although Pemberton was a drug store owner and pharmacist. This gave him the running capital needed to continue operations.
Using cocaine (from the coca plant) became more and more controversial in American society. The company felt that it needed to retain at least some amount of cocaine in its formula as well as Kola. Otherwise, they believed it could lose the right to use the name Coca-Cola.
So they decided to use extremely small amounts to satisfy this requirement. It is believed that the amount was so small it wouldn’t even be able to give a buzz to a small bug. Interestingly, the company does not use cocaine at all in this present day and is allowed to retain the name.
Pemberton allowed different parties to sell what they called an elixir (which is the Coca-Cola formula). One interested party was Asa Candler. Candler was not allowed to sell the product as Coca-Cola and unsuccessfully tried to sell it using other names.
He wanted the rights to the Coca-Cola name. When both Pemberton and his son Charley had both had died a short duration apart, Candler paid the other sellers to obtain the rights and managed to get full rights to the name and the formula.
In 1919, an investment group purchased the company and reincorporated it with a public offering. The company has been publicly owned since that time.
Why it Works
The main reason it works is that it is largely associated with Americana. It has been a part of the growth of America all the way since just after the Civil War. It has been (and continues to be) a marketing powerhouse.
The company is brand-recognizable worldwide. It is one of the few companies that can stake claim to existing completely in the Twentieth Century. And it still here.
Coca-Cola collectible items are something you will see at flea markets, thrift stores, etc. And some of the more rare pieces can often command high prices. It goes to show just how strong the company’s presence is and has been.
It’s likely you remember slogans like, “It’s the Real Thing.” or, “Have a Coke and a Smile.” These are popular catchphrases that people continue to associate with the company.
To this day, the company focuses on its core products. Unlike PepsiCo, it did not diversify into many different channels. It played to its strengths which allowed it to continue solidifying its brand.
In 1985, the company announced it was going to do away with the original formula for Coke and opted for a new and improved formula. It named this product New Coke. It was not well received. In fact, media outlets labeled it as a disaster for the company. The company abandoned the initiative and brought back the original formula.
There are many analysts who believe, even to this day, that this was a publicity stunt by the company to gain back market shares that it lost to PepsiCo. Sales for the company did surge after bringing back the original formula. There is likely some truth to the belief.
Both Coca-Cola and its primary competitor, Pepsi, continue to run taste tests. Most people like one or the other and remain loyal to the one they like. If you were born anytime before 1970 (and probably later), you know Coke because it’s what your parents drank and what their parents drank, and so on.
Pepsi came out in 1965 and didn’t establish a hold on the market until the 1980’s. While it does appeal to a younger generation, it is tough to break through a company like Coca-Cola whose brand loyalty remains to this day. This is not to say that Pepsi hasn’t given Coca-Cola a run for its money. In fact, it’s likely these two competitors both help each other stay strong.
Lessons Learned by The Business
- Constantly work towards distinguishing yourself from others. The company, for most of its history, has been extremely successful at doing this.
- Reach out to others and form strategic partnerships whenever possible. As a recent example, the company was an integral advertiser with American Idol.
- Make your product an experience for people to enjoy. The slogans the company has come up with over the years has reinforced this strategy several times over.
- Don’t try to sell what you can make, but make what you can sell, is something the company likes to project. New Coke was an example of a product that they tried to sell (and made) but did not do well.
- Sometimes, all that is needed is to remind people that you still exist and that you are still relevant. One of the company’s most recent slogans is, “Always Coca-Cola.” This is all that is needed for people to remember they are still in the game.
How Other Businesses Can Learn from This
If there is one aspect that other companies can learn from Coca-Cola, it’s to maintain your brand loyalty as long as you can, all while looking for ways to reinvent it. This doesn’t mean you should rest on your laurels. Doing that is a recipe to become complacent, which your competition will then strike hard.
Coca-Cola is a big believer of reinvesting its profits. Other companies need only to look at Coca-Cola’s track record for over 100 years to see how effective this can be.
One last attribute of the company that can help other companies is to remain consumer focused. Make sure you understand what the consumer is looking for.