Fizz, Movies and Whoop-De-Do

By George Russell

The centennial birthday party is billed as a "family affair," but it promises to be the biggest corporate shindig that Atlanta, and probably all of the U.S., has ever seen. Some 14,000 Coca-Cola employees from around the world are flying into the Georgia capital with their families this week, all expenses paid, to join about 10,000 local colleagues in the fun. During four days of festivities, they will toast one another at a mammoth black-tie dinner, join coworkers on six continents in singing Happy Birthday via satellite and enjoy the hoopla of a two-hour parade through downtown Atlanta. Mayor Andrew Young plans to set the tone for the monster bash by belting out, with the help of a 60-piece orchestra and a 1,000-voice choir, one of the biggest hit tunes of the 1970s. The title? I'd Like to Buy the World a Coke, of course.

The scale of whoop-de-do, which will cost somewhere between $10 million and $20 million, is fitting for the Coca-Cola Co. (1985 sales: $7.9 billion) as it turns 100. A century ago, according to corporate lore, John Styth Pemberton, 55, a surgeon and analytical chemist, whomped up the first batch of Coke's magic elixir in his Atlanta backyard, using a three-legged brass kettle and an oar. Now, almost exactly a year after the seemingly disastrous flip- flop decision to change the formula of the world's best-selling soft drink, Coca-Cola has emerged bigger, wealthier and vastly more diversified than ever before. Reflecting that fact, Coca-Cola stock closed last week at 111 1/8, nearly 70% higher than a year ago. Exults Crawford Johnson, a Birmingham Coca- Cola bottler: "We're in the best competitive position I can remember."

Despite the disappointing performance of new Coke, sales of the many other Coca-Cola drinks have been so strong that the company's share of the $26 billion-a-year U.S. soft-drink market has grown this year to 39%, vs. rival Pepsico's 29%, according to Beverage Digest. A year ago Coke's lead was 29% to 23%. A move to license the Coca-Cola name on designer clothing, which began badly last year, now seems to be humming along nicely. Most important, Coca- Cola is reaping benefits from its biggest image change of all, a controversial $1.4 billion leap into movies and television. As the love feast begins this week in Atlanta, the company is planning a vigorous expansion of the overseas operations that have long made Coke's red-and-white logo a worldwide emblem of U.S. consumer culture.

No one is more pleased with the company's progress than Chairman Roberto Goizueta, 54. Says he: "My job is not to be right. It is to produce results." The Cuban-born executive, trained as a chemist, has generated criticism aplenty since he took the helm in 1980. Some of that controversy began well before he tampered with Merchandise 7X, the secret Coke formula that has been kept under corporate lock and key ever since the soft drink's invention.

Among other things, Goizueta unleashed the blizzard of mega-brand marketing that produced Diet Coke, Cherry Coke and (still being tested) Diet Cherry Coke, not to mention new Coke and the hurried reincarnation of old Coke as Coca-Cola Classic. He shook up the company's mostly franchised bottling operations, causing about 100 of the outlets, supplying roughly 70% of the U.S. market, to change hands. Goizueta's most radical step has been to overturn the cash-heavy financial management championed by longtime Coca-Cola Chairman Robert Woodruff. During Goizueta's reign, Coca-Cola has borrowed $1.3 billion, mostly to finance his string of entertainment acquisitions.

Goizueta took his first big stride away from soft drinks in 1982 with the $700 million purchase of Columbia Pictures. At a stroke, that gave Coca-Cola control over the last major independent film producer in Hollywood, a substantial movie inventory and a television division that produces such popular shows as T.J. Hooker and Days of Our Lives. At first Columbia churned out movie after movie, as if trying to muscle its way to a bigger market share. That approach led to one smash hit, Ghostbusters, and a string of expensive clinkers, including The Slugger's Wife, Perfect and Crossroads. But at the same time, Columbia forged a deal with Home Box Office and CBS to create Tri-Star Pictures as a jointly financed vehicle for movie production, an arrangement that now earns millions for Coca-Cola.

Goizueta's second major Hollywood raid came last August with the $485 million buy-out of Embassy Communications and Tandem Productions. Embassy currently has five shows on the air, including Diff'rent Strokes, Silver Spoons and ABC television's surprise hit, Who's the Boss? More important, Embassy, which was formerly owned by Producers Norman Lear and Jerrold Perenchio, holds syndication rights to such shows as Maude, Sanford & Son, One Day at a Time and The Jeffersons. Mike Mellon, a vice president of research for Walt Disney Productions, estimates the value of Embassy's rights at $500 million.

Early last month Goizueta pounced again as Coca-Cola bought Merv Griffin Enterprises for an undisclosed sum, which some television analysts estimated at $200 million to $250 million. The new acquisition is expected to have earnings of $170 million this year, largely from the Merv Griffin Show and the popular game shows Wheel of Fortune and Jeopardy! Coca-Cola also has shares in a number of joint ventures, including a 50% stake in a home video operation with RCA.

Income from Coca-Cola's entertainment sector reached $161 million last year, a 33% increase over 1984 and equal to about 10% of the company's overall $ 1985 operating income of $1.045 billion. Considering that promising start, no one believes that Coke's Hollywood shopping spree is over. Says Frank Biondi, executive vice president of the company's entertainment division: "We remain, in the vernacular, on the make." Says Disney's Mellon: "Coke wants to take over everybody. The only number they'll be satisfied with is No. 1."

Goizueta is more modest about his company's ambitions and accomplishments. Says he: "We've been very selective, but also very lucky." At the moment, he is eager to talk about the future of the soft-drink business, a topic on which he is extremely bullish. Most of that future, as Goizueta sees it, is overseas. The average American now consumes 50 gal.--the equivalent of 533.3 12-oz. bottles--of soft drink per year, but consumption abroad averages only 15% of that. Says Goizueta: "We have tremendous room for growth." As the company prepares to toast its triumphs with more kinds of Coke than John Styth Pemberton could ever have imagined, industry experts fully expect Goizueta to do whatever it takes to keep his firm in a partying mood well into its second century.

With reporting by B. Russell Leavitt and Don Winbush/Atlanta