Authors: Michael Moss
“Magically, when they would turn twelve, we’d suddenly attack them like a bunch of wolves,” said Putman.
In many ways, teenagers are even fatter targets than younger kids. Starting at twelve, kids have more allowance to spend, travel to and from school on their own, and often leave the school grounds for lunch. Most critically, they begin to form the likes and dislikes that will define them for the rest of their lives. Coke studied these metrics, of course, and planned its campaigns accordingly. “Say kids started drinking 250 soft drinks a year,” Dunn told me. “They tend to carry that consumption behavior all the way through their life. Then it was a brand battle from that point on, because the core brand decision—i.e., I’m a Coke drinker, I’m a Pepsi drinker, I’m a Mountain Dew drinker—tends to be made by the time people are in their mid to late teens.”
As important as teenagers were to Coke in establishing loyalty to the brand, much of the company’s marketing effort was directed at young adults, where the goal was to sustain and grow consumption rates. In this matter,
Coke left nothing to chance. It created an entity whose task is to guide the marketers toward their targets with laser precision. Called the Coca-Cola Retailing Research Council, it plumbs the social science of shopping to identify the ways in which both teens and adults can be made more vulnerable to persuasion. Soda already rivals bread in grocery sales and easily tops other staples like milk, cheese, and frozen foods. In 2005, however, the council produced one of the largest studies ever undertaken about America’s shopping habits, and it was loaded with tips and advice for grocers to increase their soda sales further still. The study included a “shopper density map,” done up in bright yellows and reds to mark the “hot spots” where most shoppers go. Whisked through the front doors, they typically start on the right side of the supermarket—moving counterclockwise and, in a surprise, from back to front. Thus, the main racks of soda should be placed toward the rear of the store, on the right side. By contrast, much of the center of store has light traffic, the report warns, calling this area the “Dead Zone.”
Coca-Cola, in this study, also urges grocers to find ways to catch shoppers off guard. Federal health officials who are fighting the obesity epidemic advise consumers never to enter a grocery store without a shopping
list, which helps to ward off the impulse to load up on sugary, salty, and fatty snacks. But Coke’s study offers the grocer numerous strategies for snagging even the wariest consumer. “Engage the shopper early,” the study says, with giant, eye-catching displays of soda, up front on the right for maximum traffic. These should be parked outside the aisle where sodas are usually found. Nor should gum, candy, and magazines get exclusive use of the most valuable part of the store, the checkout zones, where impulse buying is at its highest. Tall coolers loaded with Coke should be placed right next to the cash registers. “Sixty percent of supermarket purchase decisions are
completely unplanned
,” the Coke study says. “Anything that enables the shopper to make a faster, easier, better decision” will help spur these unplanned purchases.
Over the years, Coca-Cola has also paid careful attention to how sales are affected by the gender, race, and age of consumers. Dunn told me that Coke deepened its demographic knowledge by mining the customer loyalty cards of grocery chain shoppers. It learned, for instance, that African Americans tend to like drinks that are not only sweeter but fruit-flavored too. “We could tell you by shopping basket, by market, by demographic, what people bought,” Dunn said. “And then we made targeted offers to those people based on what they’d be most likely to consume. Buy two liters of Coke and get a free bag of potato chips, or whatever it was.”
The company’s shopper study cites the sweet tooth of minorities, along with the benefits of marketing soda in combination with other grocery items. It also lumps American shoppers into five basic groups—from rural to suburban upscale to urban ethnic—and provides details on each group’s drink preferences so that grocers can calibrate their displays. The new energy drinks have the best chance with the “urban upscale” shopper, while the “urban ethnic” and “rural” shoppers remain slightly more loyal to soda. Depending on its clientele, “each store has a unique DNA,” the report says.
Perhaps the greatest influence that Coca-Cola has had on American shopping habits is in the arena of the convenience store, or “C-stores,” as they are known in the trade. These range from mom-and-pop groceries in
the inner city to the national chains of drive-up food-and-gas stores in the suburbs. Besides convenience, they sell foods that have the heaviest loads of salt, sugar, and fat. To nutritionists, these stores are to obesity what drug dens were to the crack epidemic. The C-stores attract young kids and teenagers because they are closer to home and sell single drinks. Inside is a layout calculated to grab these kids at every turn. The staples—the bags of rice, canned soup, and bread—are all in the rear of the store. Up front, typically right by the door, are the stacks of soda bottles, joined by the racks of chips and pastries, with the soda cooler on one wall and inexpensive candies next to the cash register to snatch up any leftover change. In big cities like New York and Philadelphia and Los Angeles, there are thousands of corner stores strategically located near the schools, to catch kids coming and going.
As powerful a force as the C-stores might be in the nation’s health, they didn’t get that way without considerable help. Indeed, the number of C-stores surged in the 1980s as a direct result of the marketing strategies developed by Coke and Pepsi, along with the snack food manufacturers, like Frito-Lay and Hostess. These companies have divisions of employees or contractors who visit and service the convenience stores every week to deliver their products. Paid by how much they sell, these workers stock and clean their displays, maximizing their visibility by making sure no other items encroach on their space. In fact, such companies actually
own
the racks and the coolers. I met one C-store owner in Philadelphia who tried to improve the nutritional profile of his offerings by positioning bananas up front, only to be scolded by a soda delivery crew, who claimed this space as their own. But it’s the rare C-store owner who would look upon the deliverers with anything but the utmost affection. The soda and snacks are not just the most profitable items in the C-store; they make the C-stores the cash cows that they are. Grocery industry officials told me that C-stores are now bought and sold by syndicates who make loans at exorbitant rates, which only deepens the owner’s need for profits.
The industry marketing strategy that begat this boom in C-stores has a name: “up and down the street,” as in driving the delivery truck up and
down the streets of a neighborhood, from one C-store to the next. For the soda and snack companies, the goal in this wasn’t just selling more goods; they wanted to win the loyalty of the kids who frequent these stores. “Up and down the street” became a rally cry among marketers, something they returned to time and again to boost sales and expand their customer base.
“Coke was doing it and Pepsi was doing it, and the candy guys were figuring out the same thing,” Dunn said. “All the food companies started to engineer a strategy around immediate consumption, and as they put more effort into it, the sales in those stores went up, and there was a huge build out of convenience stores. So now you go to a city like Atlanta, and on every corner there’s a convenience store.”
“You start to get into the question of what drives what,” Dunn said. “Does the preference for soda and snacks drive the availability of soda and snacks, or does availability drive the preference? None of the players stop to think about whether people should really be eating a bag of chicken wings and a bag of potato chips and a 2-liter Coke. They’re thinking, ‘Is this going to get me an increase in sales?’ ”
In 2005, the research arm of Coca-Cola sought to answer that question with another shopping report, this one aimed at the owners of convenience stores. Focused on “building loyalty with the next generation,” it revealed that the most profitable person who walks through the door is not who the owner may think it is.
“Who’s worth more to your store?” the study said. “The 32-year-old who just spent more than $10.00, or the teen who rang up a Coke, a sandwich and a candy bar? Surprisingly, the teen is worth nearly as much as the 30+ shopper today. Teens spend less, but they visit more often. If C-stores can hold on to teens’ business as they move into their 20s, these customers have the potential to be worth substantially more.” Even in the suburbs, where older teens visit convenience stores most often to buy gasoline, their second most-cited reason is to “satisfy a craving,” and these urges present a huge opportunity for growth. “Teens buy a little gas, a lot of times a month,” the study said. “Retailers need to recognize and take advantage of this frequency by making it easy for them to enter the store.”
Suburban or inner city, kids offered an opportunity to create lifelong brand loyalty. Or, as the study put it, “Teens are at a crucial stage on the learning curve of ‘how to be me.’ ”
J
effrey Dunn wasn’t around when that study’s findings confirmed what he already knew.
One day in 2000,
a book arrived at Dunn’s corner office in the Coca-Cola headquarters complex, unsolicited, and set in motion a chain of events that would convert him from the loyal soldier to the disbeliever he is today. The book was called
Sugar Busters!
, and the team of authors included two physicians from New Orleans. In it, they argued that the rapid increase in sugar consumption had caused a massive disruption to America’s health, and they placed much of the blame on soda. “During the meteoric rise in adult and childhood obesity in the last thirty-five years, the consumption of soda has roughly tripled,” they wrote. “To put 10 teaspoons of added sugar per regular soft drink into perspective, how many of you would scoop 10 teaspoons of sugar into a glass of tea and then sit and drink it?” Even when mixed with healthy snacks, the physicians argued, the sugar in soda encouraged the body to store the calories as fat.
Dunn took the book home to read, and as he turned the pages, two thoughts began running through his head: This makes sense, and this isn’t good.
That same year, he became engaged to a woman who unsettled his view of Coke even more. She was a free spirit, rail-thin, who consumed no sugar and was very anti–junk food. She traveled repeatedly to the Amazon rain forest, and after every trip she returned home with new arguments for why Dunn should apply his talents to something other than selling Coke. “I’m marrying her, I’m reading this book, and I’m simultaneously in the running to be the next president of the company,” he said.
In early 2001, at age forty-four, Jeffrey Dunn was already directing more than half of the company’s $20 billion in annual sales as president
and chief operating officer for Coca-Cola in both North and South America. He made frequent trips through Mexico and on to Brazil, where the company had recently begun a push to increase consumption of Coke. Brazil was a huge potential market with a surging economy and a booming young generation that was poised to become the country’s new middle class. But many of these Brazilians still lived in barrios, had limited savings, and had little familiarity with processed foods.
The company’s strategy was to take over the barrios by repackaging Coke into smaller, more affordable 6.7-ounce bottles, just twenty cents each. Coke was not alone in seeing Brazil as a boon or in embracing the strategy of miniaturization. The food giants, Nestlé and Kraft, were starting to shrink much of their grocery lineup, too, from Tang to Maggi instant noodles, putting them into smaller containers so that they could be sold for less. Nestlé began deploying battalions of ladies to travel the barrios hawking these American-style processed foods door to door, enticing people who, although they still cooked from scratch, aspired to the trappings of middle class. But Coke was Dunn’s concern, and as he walked through one of the prime target areas, an impoverished barrio of Rio de Janeiro, he had an epiphany. “A voice in my head says, ‘These people need a lot of things, but they don’t need a Coke.’ I almost threw up. From that moment forward, the fun came out of it for me.”
He returned to Atlanta, determined to make some changes. He didn’t want to abandon the soda business, but he did want to try to steer the company into a healthier mode. First, he developed Dasani, Coke’s bottled water company. Then he pushed to stop marketing Coke in public schools, where the financial incentives to sell soda soon became all too apparent. The independent companies that bottled Coke viewed his plans as reactionary. The largest bottler’s chairman, Summerfield Johnston,
wrote a letter to the Coke chief executive and board asking for Dunn’s head. “He said what I had done was the worst thing he had seen in fifty years in the business, just to placate these crazy leftist school districts who were trying to keep people from having their Coke,” said Dunn. “He said I was an embarrassment to the company, and I should be fired.”
In February 2004, the company
underwent a restructuring, and Jeffrey Dunn was indeed fired by one of his rivals for the presidency, Steven Heyer. Before leaving, Dunn gave one last speech to his colleagues, who gathered in the auditorium to say goodbye. “I had asked Peter Ueberroth, who was on the board and was kind of my mentor. I said, ‘They’re not going to want me to do this, but I really would like to say goodbye. The company has been in my family since I was born.’ And so Steve introduced me and I walked by and I hugged him and whispered in his ear, ‘Thank you.’ He looked at me and said, ‘For what?’ And I said, ‘You did for me what I would never have done for myself. I would have never left Coke.’ ”
Dunn told me that talking about Coke’s business today was by no means easy, and, given that he continues to work in the food business, not without risk.
“You really don’t want them mad at you,” he said. “And I don’t mean that like I’m going to end up at the bottom of the bay. But they don’t have a sense of humor when it comes to this stuff. They’re a very, very aggressive company.”