Springing A Leak

• Share

Even in a company that venerates carbonated sugar water, Douglas Ivester stood out for his missionary zeal to spread Coca-Cola around the world. An accountant by training, with an eight-day-a-week work ethic, Ivester predicted a decade ago that he would be chairman and CEO of Coke by Nov. 1, 1998. He beat that brash forecast by a year when Roberto Goizueta, his charismatic mentor and predecessor, died suddenly of lung cancer in October 1997.

So last week the business world was shocked when Ivester announced he would retire next April to make way for "fresh leadership," putting an end to a tenure that was as extraordinarily rocky as it was brief. The Georgia native insistently echoed company statements that stepping down at age 52 was his idea. But veteran Coke watchers couldn't help speculating that there must have been a shove from disenchanted members of the company's board of directors. "This was a guy you would have had to carry out in a box," says Tom Pirko, president of Bevmark, a consultant to the industry. "The pressure for him to crack just had to be nuclear."

In barely two years as CEO, Ivester appears to have done what no mere soft-drink rival could have hoped to accomplish--dimmed the luster of one of the world's brightest brands. It wasn't just Coca-Cola's seven-quarter-long profit slide. When dozens of Belgian schoolchildren fell sick after drinking Coke products last June, Ivester maintained what looked like an arrogant silence for more than a week before traveling to Belgium to apologize. (The incident resulted in a 65 million-can recall.) Nor did he burnish his company's image by failing to promote Carl Ware, senior vice president for African operations, Coke's top black executive, during a high-level shuffle in October--an omission that sent Ware to the exits even as four past and present black employees were suing Coca-Cola for alleged discrimination.

Wall Street investors are fretting over the future of the global colossus, while business strategists ponder what went wrong. Last week Coke named Australian-born Douglas Daft, 56, who runs the company's Asia and Middle East operations, as president and heir- apparent. But that didn't do anything for Coke's stock price, which fell $4.125 a share last Monday on the news of Ivester's retirement--a 6% drop that knocked $9.9 billion off the company's market value--and dropped 75[cents] more by Friday's close.

The question gnawing at everyone is whether a company that already controls 51% of the world's soft-drink market can sustain Ivester's relentless strategy of pumping up sales 7% to 8% a year. "Coke has been this perpetual growth machine," says Ari Ginsberg, a management professor at New York University's Stern School of Business, "and now all this has happened."

In fairness, Ivester inherited Goizueta's strategy. And he took office just as Coke's foreign markets, which account for nearly 75% of its profits, were sinking from Moscow to Manila beneath a worldwide wave of currency devaluations. That tanked sales and turned many of the lavish investments that Coke had been making in overseas ventures into instant losers.