Coca-Cola (NYSE: KO) has been the ultimate repeat-purchase business for more than 100 years. But, after the death of CEO Robert Goizueta in 1997, the company hit a bad patch. It put an accountant in charge and forgot how to market itself. Douglas Ivester meant well, but what he was good at was not what Coke needed.

Coke is a marketing company, the last of the snake-oil salesmen. People pay outrageous prices for fizzy brown liquid -- and are happy to do so, because it is Coca-Cola. Even when they can't identify it in blind taste tests, when they spend their money, what they want to spend it on is Coke. An accountant cannot sustain that kind of thing, only a marketer can.

Ivester retired last year. Rumor has it that super-investor Warren Buffett privately convinced him that he was not the best man for the job. Coke has been under the leadership of Douglas Daft ever since.

Daft started out at Coke by selling the stuff. While Ivester was chief financial officer under Goizueta, Daft was a marketer and salesman overseeing operations in the Middle East and Asia. While Ivester admired a temperature-sensitive vending machine that was able to increase prices in hot weather automatically, Daft's first move as CEO was to increase local autonomy so regional flavors and marketing campaigns could more accurately match local customer preferences around the world.

Here's an excellent article about the transition between the two men, and the differences in their styles. I wouldn't be surprised if Buffett was also subtly behind the return of Donald Keough, one of Goizueta's marketing advisors lured out of retirement to help steer Coke back from the abyss of "Coke Stuff" to once again become "the pause that refreshes."

Coke's main rival, PepsiCo (NYSE: PEP), has not stood still for this. As Coke lost its way, Pepsi realized what Coke had been doing right all along. Pepsi spun off its restaurants into Tricon Global Restaurants (NYSE: YUM) and its bottling operations into a mostly owned subsidiary similar to Coke's Coca-Cola Enterprises (NYSE: CCE). It also started an advertising campaign along the lines of Coke's classics, showing (not just telling) people that the product was good stuff rather than imperiously ordering them to go buy some.

Coke has recovered its direction and has rebuilt some of its momentum, but it still has to make up for lost time. It has fallen far behind where it once was, and has a lot of distance to cover to establish the kind of clear and convincing lead it once had over all rivals. Luckily, it seems to have a steady hand on the helm once again -- marketing leadership that knows not just the mechanics of steering but, more importantly, which way to go.

JDS Uniphase to Report
Moving on to another Rule Maker Portfolio holding, optical networking components company JDS Uniphase (Nasdaq: JDSU) went over the falls with the rest of the fiber optics market yesterday after Nortel (NYSE: NT) disappointed investors with lower-than-expected sales. Folks are worried demand for products may be weakening. JDS shares fell 25% to $71 and fell another 8% in early trading today. The company reports fiscal first-quarter numbers after the bell tonight. Phil Weiss will take an in-depth look at its performance in his Wednesday column. In the meantime, LightReading took a look at the big skid yesterday in this story.

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