The Coke Machine (5 page)

 

 

 

As a business tycoon
, Ernest Woodruff was almost a caricature—a cross between Gordon Gekko and the Monopoly Man. His occupation was to make money, mostly through the takeover, restructuring, and sale of real estate and transportation companies. He had a reputation for playing dirty, not above breaking into a rival’s office late at night to steal files. And he was even more of a skinflint than Candler, once supposedly strapping $2 million in bonds to himself and his secretary on a train from Cleveland in order to save $200 in shipping costs. This was the man to whom Dobbs turned to buy the Coca-Cola Company, enlisting the company’s lawyer Harold Hirsch as go-between. By the summer of 1919, he had secured signatures from all five of Candler’s children to sell the company for $15 million in cash and $10 million in stock, the largest financial transaction ever conducted in the South at that time. Not one of the children said a word of the sale to their father.

The buyer was a syndicate of three banks—Woodruff’s Trust Company of Georgia, and two New York Banks, Chase National and Guaranty Trust. Woodruff engineered a deal that, while technically legal, relied on insider information to offer a killing to the businessman and his colleagues. Settling on 500,000 shares, they sold the first 417,000 to brokers at $35 a share—anticipating they’d turn them around to the public at $40 or more. Secretly, however, they kept back 83,000 shares for insiders to buy at the bargain price of $5 each, assuring control of the company and millions of dollars in profit for pennies on the dollar. The gambit worked, and the new Coca-Cola Company was incorporated in Delaware, a state known for its low business taxes and leniency on corporate bylaws.

One of Woodruff’s first actions was to reward Dobbs with the presidency of the new company, even while he maintained control with a three-man Voting Trust. Surveying his new domain, Ernest Woodruff liked what he saw—one of the fastest growing companies in the world, with seemingly unlimited territory to expand.

Quickly, however, he identified an enemy within the ranks: the bottlers to whom Candler had given away franchise rights for a song. The bottling system had grown from nearly 250 bottling plants nationwide in 1905, to almost 500 in 1910, to more than 1,000 by 1917. War changed many things in the world, however, not the least of which was the price of sugar, which skyrocketed from 5 cents to almost 30 cents after war’s outbreak, costing the company $20,000 a day. Meanwhile, the bottlers’ contract stipulated a set price for syrup at 92 cents per gallon, no matter how much sugar fluctuated, leaving the parent company to eat the cost. Hirsch, who had been the bottlers’ best advocate when he was going after the trademark imitators, was now made the go-to guy to lead the attack against them.

Company executives directed their particular animosity against the “parent bottlers,” umbrella companies set up by Whitehead and Thomas, who had subcontracted out territories to smaller bottlers. They were now little more than paper entities, buying syrup at 92 cents a gallon and selling it to bottlers at up to $1.20 a gallon. Thus, they pocketed a quarter a gallon without even handling the syrup, which was shipped directly from the Coca-Cola Company. Hirsch called the current presidents of the parent bottlers, Veazey Rainwater and George Hunter, into his office, and informed them their contracts were now “contracts at will.” The bottlers protested that the contracts had been signed by Asa Candler in perpetuity. Even so, not wanting to appear unreasonable, the bottlers countered with a sliding scale for syrup with a more modest profit of a dime per gallon. Woodruff saw no need to strike a deal; he simply fired the bastards—declaring that from now on, Coke would be sold directly to individual bottlers.

The bottlers sued, hauling Coke into court in April 1920 for a two-year trial that quickly became a bloodbath. Hirsch essentially called the bottlers leeches who had built a profit of $2.5 million but “who served no useful purpose.” That’s a funny thing to say, shot back Veazey Rainwater, by a syndicate that pocketed $5 million in profit in just one day during the sale of the company. Even while the bottler case hung in the balance, the company’s—and Sam Dobbs’s—fortune took a turn for the worse. In the summer of 1920, Coke chairman Howard Candler committed to buying two tons of sugar from Indonesia at 20 cents a pound, just before the worldwide price of sugar broke back to 10 cents. Despite Howard’s catastrophic error, Woodruff blamed Dobbs, with whom he’d clashed egos from the beginning. He forced Dobbs to resign, a bitter payback for the deal he had engineered to put Woodruff in charge. In his place, Woodruff reinstalled Howard Candler as president—at least for the time being.

Finally, the verdict in the bottler case came down in June 1921 in favor of Hunter and Rainwater, declaring the bottling contracts permanent. Now with the upper hand, the bottlers again offered a compromise allowing them to make a profit of 15 cents a gallon, a nickel more than they’d originally offered. Even as the rift was repaired, it was never healed. From then on, the bottlers were always suspicious of the intentions of the parent company, and the Coca-Cola Company was always looking for schemes to take back what Candler gave away. It would take another sixty-five years to again consolidate the bottlers under its influence.

 

 

 

With the lawsuit over
, however, Coke had successfully weathered several crises to come out on top. The stock price rebounded from a low of $25 a share to back above $40, and sales, too, soon rose again, to $24 million by 1923. Everybody was happy, except Candler. When he heard of the deal brokered by his children to sell the company under his nose, he was publicly enthusiastic but privately devastated. “They sold out a big share for a fancy price,” he sniffed. “I wouldn’t have done that, but they did.” More and more, the man responsible for creating the world’s most successful brand sank into self-pity. Writing to Howard, he said, “I sometimes think that once I lived in Heaven and, wandering, lost my way. . . . I was once counted with Atlanta’s builders . . . now I am companionless, not needed nor called for any service.”

As sentimental Coke historian Pat Watters puts it, “The syrup of life by now had, for him, entirely soured.” After the death of his wife, Lucy, he scandalized Atlanta society with his intention to marry, of all things, a Catholic suffragette from New Orleans. Under pressure from his brother the bishop, he called off the marriage and instead married a stenographer in his office building who was soon caught in a police raid drinking boot-leg liquor with two strange men. “Everybody is dead but me, and I ought to be dead but I just won’t die,” he sputtered during a trademark infringement case in 1924. “There are too many days between my cradle and my grave now.” It would be another five years before he was finally relieved of suffering, dying alone in a New York City hotel room in 1929.

The company he helped create, however, was prospering beyond the wildest dreams of Asa Candler or John Pemberton. After a sometimes rocky start, it hit its stride during the Jazz Age of the 1920s, with profits increasing by millions of dollars a year over the decade. More important, the product itself had begun to worm its way into the American consciousness. As the company steadily built its brand, what started out as a fizzy drink and a headache cure was taking on new life as a symbol of everything desirable about American life—even as a symbol of America itself.

T
he Gaylord Texan Hotel and Convention Center,twenty miles north of Dallas, is a triumph of illusion. Inside its eighteen-story glassed-in atrium is a full-size Spanish hacienda, an Alamo-like fort, a box canyon, and a covered wagon, all kept a comfortable seventy-two degrees in defiance of the Texan sun. It might seem a strange place to hold the thirty-fifth annual convention for the Coca-Cola Collectors Club, dedicated to the devotion of a product known as “The Real Thing.” And yet, here Coke is, the ultimate symbol in a sea of surfaces. Vintage Coke signs hang year-round at the resort’s pool area, and rusting Coke coolers decorate the café, fixtures in the resort’s vast evocation of Texan nostalgia.

That’s nothing, of course, compared with the amount of memorabilia laid out this Fourth of July weekend in the guest rooms on four floors of an entire wing of the hotel, amassed over decades from some of Coke’s biggest fans.

For Bob Bessenden, it started with commemorative Coca-Cola bottles—6½-ouncers emblazoned with insignias of different college and professional sports teams he picked up for his kids on business trips. From there, he attended a Coke memorabilia swap-meet in Minneapolis after seeing an ad in the paper, and found table after table of collectors’ items, along with a whole subculture of acolytes. “There were people from as far away as Australia,” says Bessenden, who is sixtyish with a trim white beard and glasses. “It was more like a fellowship.”

It didn’t take him long to join that society, hunting down souvenirs at flea markets and thrift stores; in one of his biggest scores, he acquired an entire room full of vintage Coke signs set to be thrown out by a distributor in Alaska. Now his hotel room at the Gaylord Texan is a veritable shrine to the drink, with signs, posters, and menu boards spread across both beds. Most sport the “fishtail” logo of the 1950s, a cherry-red oval with triangles cut out of both sides. “For a couple of years, we collected only fishtails,” says Bessenden. “Some people only collect signs that say ‘Things Go Better with Coke.’ Some people collect Santas. Some collect only Olympic items.”

For those who collect it, this accumulated flotsam comes with many more associations than just the sugary drink it advertises. “It represents an era, a much simpler time,” says Bessenden’s wife, Ann, who’s got a down-home vibe that goes with her unfussy bob. “You know, when everything was more laid-back, soda fountains and ice cream and people socializing.” Countless collectors with their own hotel rooms chock-full of Coke offer variations on the theme. “The nostalgia, the good times, when things were so much easier,” explains Pat Vaughn, the club’s western coordinator, when asked what Coke means to her. Her basement in Denver is set up as an imitation 1950s diner, complete with Coke ads on the walls, and among her prized possessions is a sandwich iron from the 1930s that could emboss the Coca-Cola logo into a grilled cheese.

Despite their earnest appeals, it’s hard to imagine collectors holding a similar convention for any of dozens of brands surviving from the same era—Campbell’s Soup, Morton’s Salt, Kleenex Tissue. Coke, however, is something more, having long ago transcended its corporeal reality to become a stand-in for baseball games and soda fountains, national pride and international harmony—symbols worthy of devotion, even obsession. In another room down the hall, two brothers from Oklahoma have stacked crate upon crate of commemorative Coke bottles; they have some 40,000 in all. On the last day, participants sit through a live auction of Coke coolers, vending machines, billboards, a bicycle. As the rapid-fire patter echoes off the ceiling of the cavernous convention hall, cardboard signs fetch $1,000 and an 1899 calendar garners a high bid of $6,500.

Despite the free-flowing Coke in the back of the convention hall, the participants invariably get shy when asked about their love of the drink itself. “I drink way too much,” says Bessenden bashfully, patting his not-particularly-large stomach. “I limit myself to one can a day at work. Then I have one when I get home—a couple of cans.” He hesitates. “Sometimes breakfast . . .” Vaughn drinks a six-pack of Diet Coke daily. “I start with decaf coffee in the morning and then switch—too much caffeine is not good for your bones,” she says.

But of course, the appeal of Coke to the collectors has little to do with the drink itself. “In its simplest form, Coca-Cola is sugar water,” says Keith Duggan, perhaps the most fanatical Coke collector of them all, having attended every one of the club’s thirty-four past annual conventions. “But they don’t sell sugar water. They sell refreshment. They sell love. They sell good times.” As he says this, he is rummaging through crates of old ads in another hotel room, looking for one he might not already have.

Sitting in a rocking chair nearby, the club’s past president Dick McChesney concurs. More than any company of its time, he says, Coke invested in new techniques of graphic design and color. “Their philosophy was that you had to create an idea in their heads to get them to drink your soft drink,” he says, leaning back in a rocking chair. “As a collector, what could be better than a whole bunch of signs that create ideas?” He motions to a poster-sized reproduction of a 1942 ad with two girls in a convertible, one tipping a bottle to her lips. “How could you not look at that and say, ‘That makes me feel good to see those two gals enjoying a Coke’?”

He’s right, of course. The Coca-Cola Company would never have succeeded without its advertising. And in the bargain, it helped change advertising itself, into something that sold customers less on products than on the ideas.