Society
The New Statesman Profile - Douglas Daft
Published 18 September 2000
Globalisation - Meet Douglas Daft, the non-American revolutionary at the helm of Coca-Cola
If you thought that selling Coca-Cola was a matter of getting the famous syrup to enough plants where fizzy water could be added, lining up hundreds of containers to be filled and trucks to be loaded, you would be right . . . as far as that goes.
But Coca-Cola goes a very great deal further, so much so that it has become the template for much else. In its continuing huge success, and with the new strategy it has adopted to ride the globalising processes and deepen these processes as it does so, Coca-Cola is establishing a paradigm of global behaviour that is not confined to its business.
That the core product is so uniform, simple and tasty (although Coca-Cola has many brands that are not called Coca-Cola - Fanta, for instance) allows this drink to be the supreme global product more easily than cars or knitwear. It is a humble product: unlike McDonald's, which attracts odium because it must make war on the slow, careful preparation and enjoyment of food that is part of national culture, Coke is simply a means of slaking thirst, a few seconds of enjoyment that hold no cultural threat.
Coca-Cola's tremendous success after the Second World War derived in part from its steady identification with the "American" virtues of freedom and ease, at a time when these qualities were held in greater and less critical esteem than ever before, or any time since. (In 1950, Time magazine ran a cover featuring the globe drinking a Coke, with the cover line "World and Friend".)
Over the past 20 years, Coca-Cola has cut the number of bottling plants from many thousand to a few hundred. These plants, often substantial companies independent of Coca-Cola, but closely connected to it, were able to achieve economies of scale and make technological innovations that allowed them to decrease the weight of the can or bottle, get the product to the market more quickly and expand production rapidly to meet the galloping growth in demand of the 1980s and 1990s. Using what it called "anchor" bottlers - often headed by former Coca-Cola executives - in which Coca-Cola had a minority stake and which employ roughly one million people across the globe, the company created a system that motivated the bottlers to expand.
In his 1999 study of Coca-Cola (Coca-Cola and the Global Business Revolution), Professor Peter Nolan of the Judge Institute at Cambridge found that Coca-Cola, like other globalised companies (most of them based in the US), had found success because of its unremitting attention to long-term growth and high investment. These attributes are common to the two main types of global company: ones that, like Coca-Cola, put most stress on pushing their brand image; and high-tech companies such as General Electric or Microsoft, for which vast expenditure on research and development is central to their global position. Both types confound those critics of capitalism who see it as a system of short-term reward: in the case of global firms, it is a set-up whose main focus - apart from the provision of shareholder value - is very high investment in the constant renovation and development of the system itself.
Where the critics are right is that the competition is squeezed out: the little companies must either find a niche for themselves in the national market or go out of business. For Coca-Cola itself, the huge economies of scale (and the vast increase in income and profits) of the past two decades meant an increasing centralisation. The brain of the company became more important, and that was in Atlanta, Georgia; senior executives were shuttled through the company rapidly, losing "national" loyalties in their common quest for global perfection. The company developed a global information system called Ask (Always Share Knowledge) to act as a reservoir and a disseminator of information and experience culled from Coca-Cola's employees around the world.
The company thus created one of the clubs of the corporate global elites - one that was probably more global, more integrated and more dedicated to successful integration than any other. Yet now Coca-Cola seems to have appointed a boss whose style contradicts its success; indeed, Coca-Cola is becoming post-global.
Douglas Daft, the new chairman, is nicely self-deprecating about everything, including his name - quoting, in a speech to the US-UK Chamber of Commerce in London in May, the Daily Telegraph headline on his appointment: "Daft choice for new Coke head." A casual dresser with a soft Australian accent and a liking for discussion, he could pass for a youthful professor. He is, he says, "different from the other Coke leaders - I came up from the field, from outside". He has not made his career in the Atlanta imperial centre, but in the provinces; and he is not American.
Born in 1944, Daft joined the company in his mid-twenties in Sydney, his home town. Apart from a very brief spell in business for himself between 1975 and 1976, he has been with Coca-Cola ever since, moving up a regional hierarchy in south-east Asia. Although he stresses his "outsider" status, he spent most of the Nineties in Atlanta.
Since taking over as chairman in December last year, Daft has laid down a principle for Coca-Cola that, given its status as the ace globaliser, will be influential far beyond its own system. "During the Eighties and well into the Nineties, we were riding the wave of globalisation with extraordinary success," he said in his May speech. "But then the world kept changing. A very real backlash developed - which, in hindsight, was predictable, natural and relatively healthy. Local governments and individuals responded with a renewed zeal for keeping control over their local politics, local culture and local products. The very forces that were making the world more connected and more homogeneous were simultaneously triggering a desire to preserve what was uniquely local."
This is not new to political or social science: the late Ernest Gellner wrote of the attractiveness of nationalism and "the local" to men and women unmoored by the processes of globalisation in the Eighties. But it is new to a company that has been so tremendously successful by working to centralist principles, and one that - unlike McDonald's or the big oil and chemical companies - is not in the ecological firing line. But Coca-Cola did have warning signals last year: its growth slowed in many developed markets; it found itself pilloried in Belgium over allegations that some of its product was contaminated; and it lost a lawsuit it brought against the European Commission over a competition judgement.
At a lunch with the EU's Competition Commissioner, Karel Van Miert, Daft found himself in the dock. "He told me that we were opposing everything he had worked for all of his political life: the creation of the European Union. By taking the suit, we were calling into question the very culture of Europe. It was a mistake for us. It's an American thing, to immediately go to law and let the courts work it out. The European culture is negotiation." Daft has, however, brought a large slice of American hire-and-fire culture with him: in his efforts to clean up what he calls "the mess in Europe" and in pursuit of devolution, he replaced swathes of senior American executives in Europe with locals: only one American remains a European division head.
During a speech he gave in the US earlier this year, Daft showed four Coke commercials, each one from a different national market, and made by a different agency. The German advert showed an attractive woman rising from her bed on a hot night, putting a towel around her, going to the fridge, taking out a cool Coke and padding back to the bedroom. Nothing different about that . . . until she stops, retraces her steps to the fridge, reaches into the vegetable tray and selects one pair from a pile of panties, puts them on (just off shot) and smiles beatifically. Daft told the audience that Coca-Cola would not run such an ad in the publicly puritan US market: in Germany, with a raunchier media culture, it worked well.
The moral of this narrative is that the local is now all. Daft's new motto is "Expanding from global to local". He says that the business is, at bottom, "building relationships" - with suppliers, with bottlers, with transport companies, with supermarkets and with customers. "In every country," he says, "our workforce must truly represent the local society - not because it's politically correct . . . but because the very nature of our business requires that kind of diverse insight and perspective to really flourish."
All large multinationals are struggling to find a response to the in-your-face opposition that they are now encountering around the world; and the International Monetary Fund and World Bank meeting in Prague this month is bound to attract protesters against the visible symbols of globalisation. Coca-Cola cannot become invisible. But its new strategy has something of a Maoist ring to it - a directive from central command to the cadres to become part of the environment.
It is a matter of ceasing to be the world's buddy and becoming the world's copain, amico, Freund - whatever - and so to survive, and grow even greater.
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