Fizz Page 24

  At the same time over in Johnson City, Tri-City Beverage had a new boss, Bill Bridgforth. Keen to save money, Bridgforth started dropping branded drinks and building a range of Tri-City sodas. One drink he ditched was Sun Drop, a fizzing mix of orange and lemon billed as a “citrus lemonade” that had been created by J.F. Manufacturing, the St. Louis business that used to supply Al Capone’s soda business with root beer extract. Bridgforth replaced Sun Drop with a citrus lemonade of his own creation, but while people loved the taste the brand failed to connect. So in 1960, feeling that Mountain Dew had a good brand but an unpopular taste, he started selling his citrus lemonade under the Mountain Dew name. By 1962 the Tip Corporation had followed his lead. Two years later the drink had captured enough of the market in the southeastern states for Pepsi to buy the rights to the greenish-yellow beverage.

  Pepsi kept the hillbilly image, hoping to tap into the popularity of hillbillies in the wake of the hit TV show The Beverly Hillbillies. To help relaunch the drink, the company hired an actor who spent a week in Philadelphia pretending to be a hillbilly from the real-life village of Turkeyscratch, Tennessee. The actor spent his time causing traffic jams as he drove around in a bright red 1929 Model A Ford weighed down with jugs of Mountain Dew and petitioning the city authorities to let him open outhouses for making moonshine on Philadelphia’s parking lots.

  For a while the hillbilly branding worked, but by the start of the 1970s it was clear it wasn’t gelling with the nation, so Pepsi dropped it for a less unusual image that was equally unsuccessful. With Mountain Dew making little progress, Pepsi cut back on its advertising of the beverage, but then something strange happened: Mountain Dew started selling. The drink was growing by word of mouth, and so fast that by 1976 its sales had tripled in just two years despite Pepsi’s limited promotional efforts.

  As Mountain Dew’s sales gathered momentum, rivals started launching their own citrus lemonades hoping to cash in. One of the first clones was Rondo from Schweppes, which had finally broken into the United States with its tonic water during the 1950s, thanks to a promotional campaign fronted by its US boss, former British Royal Air Force wing commander Edward Whitehead. With his distinctive ginger hair, long goatee, and English mustache, Whitehead became a well-known figure in America thanks to ads that showed him touring the United States and introducing people to the refined pleasure of the company’s mixers and the British cocktail gin and tonic. Thanks to that twenty-year advertising campaign and the company’s 1969 merger with the British chocolate giant Cadbury, Schweppes became a sizable force in the US beverage market. Even so, Rondo flopped. Coke did better with its enduring imitation Mello Yello, but it still couldn’t match or stop Mountain Dew’s rise.

  With Mountain Dew coming up fast, 7Up’s owners Philip Morris dropped the Uncola campaign and in March 1982 hit back by promoting the lemon-lime drink’s lack of caffeine in the hope of attracting health-conscious shoppers. The “Never had it, never will” campaign did little more than spark a rapid counterattack from 7Up’s rivals. Before the year was out, people could buy caffeine-free Coke, Pepsi, and Dr Pepper, and 7Up’s anticaffeine attack had been defused. Philip Morris never found the magic marketing formula for 7Up. In 1986 it sold 7Up’s international operations to Pepsi and two years later offloaded the US business to Dr Pepper.

  The defensive rush of Mountain Dew, Dr Pepper, and caffeine-free sodas reflected just how competitive the business had become. The average American was drinking three times as much soda in 1980 as in 1950, guzzling through the equivalent of four hundred twelve-ounce cans a year. As sales soared every sliver of market share became immensely valuable. Even a 0.1 percent slice of the market was worth millions of dollars, and with so much at stake no soda company was willing to give any ground. So when new flavors proved popular, beverage companies would rush in with their own versions to grab a slice of action or—at the very least— stop their competitors from reaping the rewards. If one company offered a cherry cola then everyone was going to have a cherry cola. This race for market share also inspired a rash of acquisitions and mergers. Coca-Cola snapped up Barq’s root beer, Thums Up, and Inca Kola. Pepsi followed up its purchase of 7Up’s global business and Mountain Dew by buying Mug root beer. Cadbury Schweppes went on a buying spree, absorbing dozens of famous brands including Hires, A&W, Canada Dry, Dr Pepper, 7Up, Vernors, Royal Crown, and Orangina. By the early 2000s, Coca-Cola, PepsiCo, and Cadbury Schweppes would control more than 90 percent of the soda market.

  Advertising became a crucial battleground as the three soda giants fought to outspend and outsell one another. In 1983 Coca-Cola paid big bucks to get the actor and comedian Bill Cosby to star in TV commercials in which he needled Pepsi by holding up a can of Coke and saying: “If you’re number two or three or seven, you know what you want to be when you grow up.” Pepsi hit back in late 1983 by hiring Michael Jackson, the world’s biggest star, to front its revival of the Pepsi Generation concept “Pepsi, The Choice of a New Generation.” To get Jackson on board the company handed over an eye-watering $5 million, making the campaign the most expensive ever made at that point in time, even before the cameras rolled. Roger Enrico, Pepsi-Cola’s boss, initially balked at the price tag but relented because, as Jackson’s promoter Don King told him, “This is Michael Jackson. He is bigger than God.”

  The deal involved two commercials, sponsorship of the Jacksons’ reunion tour, and a personal appearance by Jackson at the press conference where the deal would be announced. Enrico met Jackson for the first time at the New York City press conference. It was, he recalled in his book The Other Guy Blinked, an awkward encounter. “What do you say when you meet Michael Jackson? He’s so shy he makes you shy. So we stand next to each other and don’t say much of anything. After a bit, I make some small talk. And then Michael leans over and whispers in my ear. And what he says is: ‘Roger, I’m going to make Coke wish they were Pepsi.’”

  But when it came to filming the ads, Enrico probably wished he worked at Coke. After showing the softly spoken pop star the storyboards for the ads, Jackson said it was all fine except he didn’t like the music or the commercial. When Pepsi’s ad men asked why, the singer responded that his face was on camera too long. “I don’t want you to show me for more than a few seconds,” he replied. The Pepsi advertising team was stunned; $5 million and he won’t let us show his face for more than four seconds? But Jackson insisted. Instead, he told them, they should film his shoes, his gloves, and his silhouette before revealing his face at the very end. There was better news on the music. Why don’t you use “Billie Jean” instead, Jackson asked. He didn’t have to ask twice. Pepsi dumped their jingle and happily adopted Jackson’s mega hit. As anticipation about the Jackson ad spread, the music video channel MTV offered to broadcast it for free if it got an exclusive. Free airtime? OK, said Pepsi.

  All was going well. The world’s biggest star, free advertising on MTV, “Billie Jean,” huge public excitement. Then on January 27, 1984, as the ad was being filmed in Los Angeles, disaster struck. As Jackson danced down a staircase the magnesium flash bombs surrounding him fired early, setting his gelled hair on fire. For a few moments he danced on unaware. “I was dancing down this ramp and turning around, spinning, not knowing I was on fire,” Jackson recalled in his biography Moonwalk. “Suddenly I felt my hands reflexively going to my head in an attempt to smother the flames.” As Jackson was rushed to the hospital with third-degree burns, the Pepsi advertising team looked on in horror. “I remember the medical people putting me on a cot and the guys from Pepsi were so scared they couldn’t even bring themselves to check on me,” wrote Jackson.

  Jackson threatened to sue Pepsi but eventually settled for a payment of $1.5 million, which the star used to fund a burns center at the Los Angeles hospital that treated him. The world’s most expensive commercial had just gotten even more expensive, but the advertising deal of the decade was still on. And when the Jackson ad premiered in February 1984, more than eighty-three million people tun
ed in to watch what was, after all, just a Pepsi commercial.

  But while the high-profile commercials captured the imagination of the public and the media, the real fight for soda dominance was an invisible war taking place in the streets, the stores, and restaurants around us. These, says former Pepsi executive Bob McGarrah, were the trenches of the Cola War: “The cola wars were fought in the vending channel, the on-premises channel and the store display stands.”

  The fast-food chains were one of the biggest of these under-the-radar battlefields. Soda had already played a crucial role in the birth of fast food. Back in 1919, a real estate developer named Roy Allen visited Tucson, Arizona, on business and while he was there, tried a root beer made by a local pharmacist. Impressed, Allen bought the rights to the recipe and later that year opened a roadside restaurant in Lodi, California, that sold hamburgers and his root beer to passing drivers.

  It proved so popular that he opened a second, equally successful root beer and burger restaurant in 1920 in Stockton, a few miles south of Lodi. Thrilled with the success and aware of the growing market for roadside service, Allen teamed up with one of his employees, Frank Wright, and formed a partnership called A&W. They opened five outlets around Sacramento. While the food and soda remained the same, these stands focused on serving passing traffic rather than sit-down indoor service. The fast-food drive-in had been born. As the momentum behind the A&W stands grew, Allen bought out Wright and adopted a franchise model that foreshadowed the business models of the fast-food chains that came in its wake. The franchise model worked wonders and A&W Root Beer Drive-Ins spread across America as fast as the roads could be built. By 1941 more than 260 A&Ws had opened across the nation.

  The ideas that A&W tapped into with its pioneering fast-food stands evolved rapidly, and by the 1960s a burger joint called McDonald’s had become the leader of this culinary revolution. McDonald’s started out as a drive-in barbecue joint in San Bernardino, California with carhop service, but in 1948 the McDonald brothers decided to reinvent their popular restaurant. They wanted to serve their customers faster, and their answer was the “Speedee Service System.” The carhops were fired, replaced by self-service. Out went the crockery, in came paper cups and plates. To stop wasting time with bills and tips, they got customers to pay up front for their food, which was now churned out in seconds on a cooking assembly line modeled on Henry Ford’s car factories.

  The new McDonald’s with its instant service and standardized meals proved exceedingly popular, but the McDonald brothers barely imagined their drive-in would expand beyond San Bernardino’s city limits, let alone spread throughout America and the world. But while the brothers didn’t believe they had invented the restaurant of the future, Ray Kroc did. Kroc first got a taste for business while working as a soda jerk at his uncle’s fountain in his birthplace of Oak Park, Illinois. “That was where I learned you could influence people with a smile and enthusiasm and sell them a sundae when what they’d come for was a cup of coffee,” he recalled in his biography Grinding it Out. Kroc first noticed McDonald’s after they ordered an unusually large number of the Multimixer milkshake machines he was selling. Curious, he traveled to California to find out why and was so impressed he bought the right to sell McDonald’s franchises. Under Kroc’s leadership McDonald’s grew into the biggest fast-food chain in the world and became the trailblazer of a new generation of restaurant chains that included Burger King, KFC, Pizza Hut, and Taco Bell.

  For every fast-food chain, soda was a major source of profit. People almost always wanted a drink with their food, and soda was incredibly cheap to make. A cup of soda would cost mere cents to make but could sell for more than ten times that amount. So great was the markup on soda that fizzy drinks were the most profitable item on fast-food menus. With so much profit to be made from peddling soda, fast-food chains did everything they could to get customers to drink more of it and began increasing serving sizes so that they could make even more from selling beverages. With fast-food chains selling so much fizzy pop, soda companies clamored to win their business. But most fast-food chains wanted the number-one soda, and Coca-Cola won most of these lucrative deals, including the biggest deal of them all: McDonald’s.

  Coke’s advantage in fast food was a constant source of frustration for its rivals. Dr Pepper could infiltrate Coke’s stronghold thanks to its classification as a pepper drink, but rival colas faced an uphill struggle in trying to persuade fast-food joints to abandon the market leader. Pepsi tried undercutting Coke without success and eventually resorted to offering generous deals mainly to give the fast-food companies something to use to push down Coke’s prices. In 1976 Royal Crown decided that if it couldn’t negotiate its way into fast food, it would buy its way in and snapped up the beef sandwich chain Arby’s. PepsiCo followed suit, buying Pizza Hut, Taco Bell, and KFC and converting them to Pepsi sellers. While these acquisitions gave Pepsi a significant presence in fast-food restaurants, it also caused several chains to refuse to buy Pepsi, as they didn’t want to fund a rival.

  With Coca-Cola dominant in fast food, its rivals looked to the more open battleground of the supermarkets and convenience stores as the prime way to boost sales. In these stores they used a mixture of sweetheart deals, clever display equipment, bigger and better value bottles offering more pop per dollar, and a bit of bullying to make their drinks stand out on the shelves. To grab shoppers’ attention soda companies developed equipment that would make their products stand out, which they then handed out to the major retailers. They built reinforced displays that could withstand constant collisions with supermarket carts and constructed increasingly elaborate coolers to keep their soda temptingly cold.

  One of the most audacious was a trapezoid Pepsi cooler with three glass-fronted doors that was designed to sit at the end of supermarket checkouts, where it could offer chilled drinks within easy reach regardless of where a customer stood. “It was expensive, but we captured that end-aisle space with it,” says McGarrah, who designed the cooler. “Every marketplace wanted it. We said: ‘Fine, but if you want that machine, you have to give us that space for two years.’ So for two years we owned that end-aisle space and Coke was shut out. That was worth millions of dollars of sales. It was all driven by equipment. You bring it to the store owner and say, ‘Look! I have a better mousetrap than the other guy. It will help you sell more product and when you sell more product you make more profit, and we make some more profit too.’”

  When not using flashy equipment to gain the in-store edge, soda companies used financial incentives to get their drinks into the best in-store locations and keep the competition at bay. They offered stores discounts on their products or large one-off payments to shops that put their brands on the sought-after eye-level shelves or moved their rivals’ beverages to the bottom shelves, which would require shoppers to go to the trouble of bending down to reach them. Alternatively, the deals would require retailers to have more coolers filled with their beverages than their rivals’, or to display their drinks in the lucrative impulse-buy zone at the checkout. These deals were also a way for soda companies to get their less popular brands into shops, a tactic that played a crucial role in helping Coca-Cola get its sports drink Powerade into stores back when Quaker Oats’ Gatorade had sewn up most of that market.

  Usually these deals would merely seek to give a company’s drinks greater prominence, but in the early 1990s Pepsi and Coca-Cola started offering deals requiring stores to stop selling rival sodas altogether, carving up the retail landscape into pockets of Coke beverages and Pepsi beverages. In 1994 the Royal Crown Cola bottler in Paris, Texas, found itself on the receiving end of a spate of these deals. As its cola was shut out of stores, its sales collapsed, hurtling down to a quarter of what they had been just a few months earlier. The company sued on antitrust grounds, but while Pepsi made an out-of-court settlement, Coca-Cola refused to give way. Coke initially lost the case but got the decision overturned after appealing to the Texas Supreme Court, which ruled th
at while such deals had the potential to be anticompetitive there was no evidence suggesting this was the case. Shoppers could go to other stores if they wanted and, the court concluded, Royal Crown seemed more a victim of too much rather than too little competition.

  The war of attrition in retail may have been intense, but it looked tame compared to the battle for vending machine dominance. Soda companies found themselves not only fighting each other but also facing down mobsters and armed criminals in their crusade to offer ice-cold refreshment. The first coin-operated soda vending machines had appeared in the late 1930s, and after World War II ended they rapidly spread across America. By 1952 more than six hundred thousand of these silent soda sellers had been installed across the nation, dishing out millions of bottles of pop every year to impulse buyers outside gas stations, in hotels, in shops, in the street, in the workplace, and pretty much everywhere people went. By the end of the 1950s vending machines accounted for 11 percent of Coca-Cola’s sales. “Typically vending machines were free to the retailer, but they had to do x cases a week or a month to keep it and they paid for the electricity,” says McGarrah. “In return, we were getting these signs—big, beautiful signs. You’d drive past the gas station and there would be vending machines with signs bigger than the gas station’s and when the station shut down at night, all you would see were the vending machines all lit up. Even if a place didn’t sell much it had a big impact.”