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Coke's Symbolism

There is much more to Coca-Cola's popularity than its taste. George Runkle has traveled around the world, and he has concluded that people view Coke as a unifying experience: By drinking Coca-Cola, people feel that they're a part of something much larger. There are some people, including a friend that George made in the Middle East, who avoid Coke apparently as a way to rebel against "globalization." Still, Coke's popularity as a unifying experience should lead to more sales.

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By George Runkle (TMF Runkle)
August 9, 2000

This week I planned to cover a response from Cisco Systems (Nasdaq: CSCO) to my column on Nortel's (NYSE: NT) Open IP Environment. However, a number of things happened last week and we didn't connect. So instead, for some time I've wanted to cover some of my philosophical thoughts on Coca-Cola (NYSE: KO) to see what you think about my take on this company. We'll do that today, starting with a true story.

About three years ago I spent a number of months in the Gulf. Here in the United States we call it the Persian Gulf, but if you go to an Arab country, it's called the Arabian Gulf. I brought that up to an Iranian friend of mine, and he got angry and said it was more correctly the Persian Gulf. So, rather than get into the argument between my Iranian and Arab friends, I'll just call it the Gulf.

The Coke Generation Gap
One extremely hot morning (all mornings in the Gulf are extremely hot), I went to visit my friend Mohammed. He and I got along famously since, in many ways, we are a lot alike. Both of us are engineers, are about the same age, our sons are on the swim teams in high school, and we even have similar personalities, according to people who know us both.

There was a bit of a difference, though. I grew up in the upper-middle-class suburb of Bethesda, Maryland. Mohammed grew up in a mud hut in Ajman. My father was an engineer, while his was a pearl diver. I drove a car at 16 in 1972, Mohammed was in his 20s when he first drove a car.

That morning, when I visited Mohammed, I was drinking a Coca-Cola. Mohammed was pretty surprised to see me drinking Coke. He told me he hated the stuff -- too sweet, he didn't like the carbonation, and of course he mentioned that water was much better in the heat. (He used some adjectives to describe the heat that I can't use here.) I was rather surprised, since I saw Coke being sold everywhere -- an unscientific observation that indicated it seemed to sell rather well in that area.

Mohammed started to complain to me about how his children loved the disgusting stuff. They wanted Coca-Cola all the time. Every time they saw a vending machine, they wanted a Coke. Every time they went shopping, they wanted a Coke. He especially hated it if they had Cokes before meals because it ruined their appetites.

Now, I certainly won't disagree about the aggravation of keeping children away from excessive sweets. However, I thought it was interesting to see the change in tastes between the generations. Mohammed's sons and daughters will probably continue to enjoy Coca-Cola as they grow up. Probably, as they approach middle age, they will switch to Diet Coke (or Coke Light, as it is called in much of the world). Someday, their children will probably like Coke, too.

I don't believe it was the taste that drew Mohammed's children, though. On the same note, I don't think it was the taste that pushed my friend away from Coke. Mohammed loves to drink tea that is almost syrup with all the sugar in it. He also likes other carbonated drinks. I think it's the cultural connotation -- much like Pokeman, Nintendo, or Harry Potter. However, Coke is a more enduring one.

"I'd like to buy the world a Coke..."
I want to ask those of you who have traveled around the world a quick question. What do you remember seeing in just about every place in the world, no matter how distant? For me, it's Coca-Cola. I've bought a Coke anywhere from a sidewalk caf� in Rome to a small store in a mountaintop village in Honduras. It's not the taste that makes it popular -- anyone can make brown carbonated sugar water. (Uh-oh, our Foolish CEO was with Coca-Cola for three decades and played a key role in creating Diet Coke. So, I mean Coke has a unique product... but... uh... well, before I dig myself a deeper hole, let me continue.)

I think that drinking a Coke connects you with the rest of the world, and most people realize this on at least a subconscious level. (It's why kids around the world like to wear Coca-Cola T-shirts, too.) For Mohammed, disliking Coke may have been his way of rebelling against the modern society that he was thrust into (and is part of as an engineer).

As we see countries like China move into the "modern world," I feel that we will see Coke's sales rise even more. Periodically we'll see problems with the company's sales growth, there will be political problems in some countries, and currency changes will affect profits from time to time. However, there is no other symbol in the world that I can think of that equals Coke for connecting us all together. Coca-Cola, more than any other product, symbolizes a commonality between all of us, and I think this fact will strongly influence Coke's ability to grow sales.

I'd like to say this idea is my own, but it isn't. I came across this line of thinking in For God, Country, and Coca-Cola by Mark Pendergrast. It's a definitive history of Coca-Cola, and I think every prospective investor in the company should read this book.

Next week, I plan to return to the Cisco and Nortel battle. Until then, go enjoy yourself a nice, cold Coke!

Your Turn:
Do you believe that Coca-Cola's position of "commonality" among all people can truly help increase long-term sales? Is soda still a great growth business to be in? Share your thoughts on the Drip Companies discussion board.

Suggested Links:

  • Coke Is Back in Black, Rule Maker Portfolio, 7/28/00
  • Where Is Coke's Marketing Magic?, Rule Maker Portfolio, 7/27/00
  • Drip Port Purchases PepsiCo, 7/28/00
  • Drip Portfolio

    8/9/2000 Closing Numbers
    Ticker Company Day Chg % Chg Price
    CPBCAMPBELL SOUP-9/16-2.14%$25.69
    INTCINTEL CORP15/163.14%$63.56
    JNJJOHNSON & JOHNSON-1 27/32-1.91%$94.81
    MELMELLON FINANCIAL CORP-1/8-0.29%$42.56
    PEPPEPSICO INC-7/16-0.98%$44.00

      Day Week Month Year
    To Date
    Since
    7/28/1997
    Annualized
    Drip .80% -.04% .29% 28.94% 67.51% 18.52%
    S&P 500 -.67% .68% 2.94% .25% 56.89% 15.99%
    S&P 500(DA) -.67% .68% 2.94% .25% 59.51% 16.63%
    S&P 500(DCA) n/a n/a n/a n/a 26.40% 8.02%
    NASDAQ .13% 1.75% 2.30% -5.30% 145.51% 34.42%

    Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
    9/8/199745.9818INTC22.835$63.56178.35%
    11/5/199834.9399MEL34.051$42.5625.00%
    11/14/199715.019JNJ78.956$94.8120.08%
    7/28/20005PEP48.000$44.00-8.33%
    4/13/19988.337CPB54.179$25.69-52.59%

    Trade Date # Shares Ticker Cost Value LT $ Val Ch
    9/8/199745.9818INTC$1,050.02$2,922.72$1,872.70
    11/5/199834.9399MEL$1,189.74$1,487.13$297.39
    11/14/199715.019JNJ$1,185.84$1,423.99$238.15
    7/28/20005PEP$240.00$220.00($20.00)
    4/13/19988.337CPB$451.69$214.16($237.53)
      Cash: $60.08  
      Total: $6,328.07  


    Key
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    Note
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