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The Making of Coca-Cola Capitalism: Excerpt from 'Citizen Coke'

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Photo of Amazon web site showing Citizen Coke: The Making of Coca-Cola Capitalism by Bartow J. Elmore, cover for kindle edition. (nm)

By    |   Sunday, 09 Nov 2014 11:59 AM

Excerpted from the book Citizen Coke: The Making of Coca-Cola Capitalism by Bartow J. Elmore

Coca-Cola was the world’s most valuable brand in 2012. That year, the company was all over the map, operating in over two hundred countries and selling more than 1.8 billion beverage servings per day (one serving for every four people on earth). It was the twenty-second-most-profitable company in the United States, with revenues topping $48 billion and net income over $9 billion, making it one of the greatest profit-generating businesses in world history. By the twenty-first century, Coke had conquered the globe, its market reach unmatched.

How did this happen? How did a patent medicine created in a small southern pharmacy in 1886 become one of the most ubiquitous branded items in human history?

The easy answer is marketing. Some have claimed that Coke was successful because it was a “want maker,” adept at conjuring up magical, eye-catching advertisements that persuaded people to buy its nonessential products. As the story goes, Coke’s genius lay in its ability to link its product to patriotic events, American family life, and even religious iconography. Coca-Cola’s advertising and promotional campaigns transubstantiated the company’s sugary beverage into “an old friend, a piece of everyday life, a talisman of America,” and it was this iconic status that helped to explain its commercial success.

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Rosy-cheeked Santa Clauses and smiling GIs in Coke’s advertisements surely helped create consumer loyalty for its beverages, but this was only the veneer of what Coke had to sell. Behind the advertisements, Coke vended a concoction of sugar, water, and caffeine, packaged in glass, plastic, or aluminum. To be successful Coke had to turn these products of the earth into a real, drinkable beverage that could be placed on retail shelves all around the world.

In short, Coca-Cola had to acquire copious quantities of natural resources in order to thrive. By the mid-twentieth century, Coke was the single largest buyer of sugar in the world, the largest global consumer of processed caffeine, the biggest commercial buyer of aluminum cans and plastic bottles in the nonalcoholic beverage industry, and a major water guzzler. Here was a company with an unmatched ecological appetite for an array of natural resources. It gorged on commodities in order to make profits.

Yet this hefty diet did not make Coke fat. Even as the company consumed more and more, it maintained a lean corporate figure, investing little in the productive industries that supported its growth. For the vast majority of its history, Coke did not own sugar plantations in the Caribbean or decaffeination plants in the United States or coca farms in Peru. It remained a third-party buyer, letting others engage in the oft-unprofitable business of mining and processing resources from the natural world.

Coke’s success, in other words, was not manufactured in-house. The company depended on infrastructure built and managed by a host of public and private sector partners. Indeed, it would not be unfair to call Coca-Cola the Forrest Gump of the twentieth-century economy, a native son of the American South that seemed to find his way into a dizzying array of global trading networks. The company became connected to numerous supply chains through corporate intermediaries counted among the biggest commercial titans of their day, including the Sugar Trust, Monsanto Chemical Company, Car-gill, General Foods, Kraft, McDonald’s, the Hershey Chocolate Company, and Stepan Chemical Company. These businesses fed Coke’s insatiable demand for cheap commodities, and by doing more—by building factories and distribution facilities, warehouses and processing plants—they enabled Coke to invest less.

Government played a large role, too. Federal agencies subsidized farmers to fuel the production of corn Coke needed to produce its sweeteners. Local governments also invested in infrastructure, such as public waterworks and municipal recycling systems, which helped reduce the price of raw materials. Throughout the twentieth century, Coke’s growth always hinged on its ability to use government scaffolding, its sleekness in part a product of expanded government power.

Ultimately, Coke’s genius, its secret formula in many ways, was staying out of the business of making stuff. The company consistently proved adept at tapping into technological systems that were built, financed, and managed by others. It maintained a slender organizational structure compared to other similarly profitable multinationals and kept off its books the costs and risks associated with natural resource extraction and ingredient production. It was the ultimate outsourcer, long before the term “outsourcing” became popular. Success lay in partnerships, and Coke proved masterful at making friends.

But Citizen Coke is not just the history of one soft drink. Coca-Cola is the main character in this book precisely because its dependence on others offers windows into much bigger worlds. To be sure, Coke figures prominently, but many supporting actors populate the stage. Some are rivals of Coke, others allies, still others something in between. Each has a discrete history to tell, but it is in their interactions that the real story unfolds.

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At its heart, this book chronicles the making of “Coca-Cola capitalism,” a shorthand term I will use to refer to an outsourcing strategy first developed by America’s mass-marketing giants at the turn of the twentieth century. I call it “Coca-Cola” capitalism because Coke deployed it so effectively, but there were other firms—Pepsi, McDonald’s, software firms, and many others—that followed similar strategies to huge profits in the twentieth century. These companies channeled natural resources through global production and distribution networks that they did not own or directly manage. Often, this meant relying on public infrastructure to extract raw materials and transport finished products. By minimizing front-end expenses and distribution costs, a company functioning in this fashion could make substantial profits as a kind of third-party distributor of wares produced by others. It was an opportunistic, in-and-out strategy for making money; with virtually no plantations and few factories to weigh it down in specific locales, the company could go in search of new sources of supply as well as new markets for distribution wherever they were to be found.

For years, Coca-Cola capitalism has been largely ignored in classic tellings of the rise of big business in America. The historical canon of corporate capitalism treats Coca-Cola and other similar consumer goods firms as masters of marketing but gives short shrift to their deftness in coordinating the transfer of natural capital through commercial channels. This book looks beyond Coke’s advertising to explore the soft drink firm’s role as a kind of commodity broker, bringing together technologies and infrastructure it did not own to create broadband channels of ecological exchange essential to the making of modern America.

Coca-Cola capitalism emerged in an era of excess, the Gilded Age of the late nineteenth century, when cheap commodities extracted from ecosystems all around the globe were available in unprecedented quantities for commercial consumption. This was the dawn of American corporate monopoly, when gigantic industrial titans—the Sugar Trust, U.S. Steel, and Standard Oil—began to build huge factories to turn nature’s bounty into cheap commodities for a nation hungry for consumer products. Government aided this expansion, offering both direct and indirect subsidies to encourage the development of large-scale agribusinesses and modern manufacturing facilities. It was on the glut of this industrial and agricultural output that Coke built its empire.

Coke’s key contribution to the economy was making abundance transportable. It did this by first condensing a surplus of mass-produced commodities into a concentrated syrup that could be easily shipped to independent distributors around the globe. This dense parcel of biota could then be unpacked, diluted with water, and resold to consumers in massive quantities. In this way, Coke became a commodity compressor that made the bounty of the modern industrial food system digestible for global consumers. It was an anticoagulant for a congested economy, allowing stockpiles of commodities to flood freely through commercial veins to retail outposts all around the world.

But as Coke’s trade arteries stretched into distant markets in the twentieth century, the company had to find new sources of abundance in order to prevent its many satellite buyers from becoming anemic. Coke simply could not afford to let supply-side scarcity slow its syrup stream to a trickle. It made money by transacting exchanges between independent producers and distributors with profitability always contingent upon increasing the flow of natural resources through its system. To survive, the company needed more nutrients to keep its expanding commercial veins filled. How Coke managed to keep company commodity channels replete with ecological lifeblood for over 128 years is the story that follows.

The ingredient label on the back of a Coca-Cola container is our road map. In each chapter, I examine one of the critical ingredients in Coca-Cola: water, sugar, coca leaves, caffeine, and high-fructose corn syrup. Glass, aluminum, and plastic, critical raw materials needed for Coke’s empire, are the subject of the penultimate chapter, since Coca-Cola would never have been able to sell its product without copious quantities of these packaging materials. I explore the private sector partnerships and supportive state policies that enabled Coke to acquire natural resources from global providers at dirt-cheap prices. The narrative arc is both a corporate chronology and a journey through a Coke’s life cycle, beginning at the point of extraction and ending in a consumer’s body. We follow Coca-Cola as it transitions from the Gilded Age into an increasingly globalized international economy, asking how it managed to bring all these raw materials to market at such low cost.

In short, this book is an environmental history of Coca-Cola capitalism, one that restores the connection between the Real Thing and the real ecologies that supported it. This is the first corporate history of Coke to offer this perspective. When scholars have discussed Coke’s natural resource demands, they have often privileged moments of crisis when the company faced dire shortages of supply. Besides these brief glimpses into the company’s environmental dependencies, Coke’s materiality has largely remained the stuff of magic. Overlooked in past narratives was this question: why were instances of scarcity indeed so rare for Coke? After all, examining the company’s ascendancy over the long term, one is struck not by the temporary checks to Coke’s growth but by the firm’s remarkable prowess at securing access to excess for such long periods of time.

Ultimately, Citizen Coke shows how Coca-Cola was a product of abundance; it took a great deal from the earth to produce profits. It was an extractive industry, even if its systems of extraction were often hidden, operated by others. To be sure, it was no U.S. Steel, a company that directly mined ore from the ground, but Coca-Cola nevertheless stimulated the growth of many industries connected to the land. Dependent on the relentless expansion of agricultural surplus, it patronized bottlers that extracted billions of gallons of water from aquifers, and it partnered with massive chemical processing plants to transform nature’s bounty into commercial goods for sale.

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Coca-Cola’s ecological appetite was insatiable—enough was never enough. Year after year, the company demanded more of its suppliers, even when it appeared the push for growth was having unhealthy consequences—both for the environment and for consumers. By the end of the twentieth century, excess began to show at the back end of the business as millions of empty beverage containers formed mountains in municipal landfills and as human stomachs stuffed with high-fructose corn syrup began to bulge over belt buckles. Coke’s commercial arteries were becoming clogged at their terminus, yet a constant flood of commodities continued to pour into the system.

Problems also emerged farther up the corporate bloodstream. Coke’s bottling franchisees in arid regions of the world found that they had to dig deeper and deeper to access water resources from overstressed groundwater sources. Farmers in America’s Midwest that supplied the corn to produce Coke’s sweeteners became utterly dependent on tremendous quantities of fertilizers and pesticides to keep their monocrop farms afloat. Much the same was true overseas, where Coca-Cola’s sugar and coffee suppliers placed heavy demands on local water resources and soil nutrients. All around the world and all along Coke’s supply chain, nature was showing signs that there was nothing natural about Coke’s perpetual growth.

It became clear by the twenty-first century that Coca-Cola demanded much of the world, and it was not at all clear that what it offered in return was worth the cost. Could this economic system of making money by scavenging on other industries’ excess—in short, Coca-Cola capitalism—be sustained, both economically and environmentally, in the future? More importantly, should it? Turning to the past offers a starting point to answer these questions. So it is that we first go back to a time long before the problems of Coca-Cola capitalism manifested themselves, to tell the story of the birth of Citizen Coke.

Excerpted from Citizen Coke: The Making of Coca-Cola Capitalism by Bartow J. Elmore. Copyright (C) 2015 by Bartow J. Elmore. With permission of the publisher, W. W. Norton & Company, Inc. All rights reserved.

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Coca-Cola was the world’s most valuable brand in 2012. That year, the company was all over the map, operating in over two hundred countries and selling more than 1.8 billion beverage servings per day (one serving for every four people on earth).
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