Riot (4 page)

 

Rudyard Hart to Randy Diggs

October 11, 1989

I asked for India, you know. The office couldn't believe it. “What the hell d'ya want to go down
theah
for?” they asked in Atlanta. Coke had a decent-sized operation in India, but it was headed by an Indian, fellow called Kisan Mehta. Since he took over Coca-Cola India in 1964 the only Americans around had been visiting firemen, you know, checking out one thing or another, basically coming to remind the bottlers and the distributors that they had a big multinational corporation behind them. No American executive had been assigned full-time by Coca-Cola to India since the early 1960s.

But I was so goddamned persistent they relented and let me go after all. Just before Christmas 1976, I was named marketing director for India. I'd argued that a dose of good ol' American energy and marketing technique was all that stood between us and real takeoff. Coke had opened its first plant in India in 1950, and at the time that I was asking to be assigned there, late '76, we had twenty-two plants, with about 200,000 distributors. Not a bad rate of growth, you might think, but I was convinced we could do better. They were selling about 35 million cases of Coke a year in India in those days — a case had twenty-four bottles, seven-ounce bottles, two hundred milliliters in Indian terms. As far as I was concerned, that was nothing. A country with a middle class about a hundred million strong, and we couldn't get each of them to drink just one small Coke a week? I argued that with the right approach, we should be selling 200 million cases in India, not 35 million. And that was a conservative estimate, because a Coke a week per middle-class Indian was really nothing, and I was confident we could exceed my own projections.

Besides, I wanted to go to India. I'd heard so much about the place: my parents had been missionaries there. They'd loved it, the whole schtick, the Taj Mahal,
The Jungle Book
, you name it. They'd even named me Rudyard in honor of Kipling, can you believe it? By the time I was born they had moved to China, but my parents were still so nostalgic for India that they were dreaming Bengal Lancers in the land of Pearl Buck. The missionary life came to an end when China went Communist, and I grew up mainly in the States, but my parents left me with an abiding dream of India that I never shook off.

Much of my working life was spent in companies that had overseas operations everywhere but India. But when I joined Coke I knew this could be my chance. Katharine wasn't thrilled, I'll admit it. I had wanted to take her to India for our honeymoon, but she didn't want to go and we ended up in Niagara Falls instead. She always hated our foreign travels. Always preferred the life she knew in the States, her books, her teaching, to any exotic foreign adventure. She wasn't sure she'd be able to work in India. She was afraid the kids' schooling would be disrupted. She argued long against it, but I wouldn't listen. In the end she gave in and I figured she'd just accepted how much I wanted this for us. For us.

We arrived in Delhi in early 1977. January first week, I believe it was. God, it was great to be there. The weather was fabulous, cool and sunny in January. The government was making all the right noises about opening up the economy to foreign investment. Mrs. Gandhi had been quite hostile to America up to that point, and you remember she'd proclaimed a state of emergency in mid-'75 and darkly claimed the CIA was out to destabilize her government. But with her opponents locked up and the press censored, she thawed quite a bit, and when I was still in Atlanta I'd read about her unexpected appearance at Ambassador Saxbe's for dinner, which everyone interpreted as a major signal that she wanted to really open up to America. And, of course, to American companies. Her younger son, Sanjay, was already talking to McDonald's about coming into India. We, Coke, were already in India, of course, but the possibilities seemed limitless.

Mehta told me soon after I arrived about the earlier warning signs. India had passed a law called FERA, the Foreign Exchange Regulation Act, in 1973, which governed the activities of all companies involved in international trade. One of the provisions of the law, Section 29 I believe it was, required foreign companies doing business in India to apply again to the government for registration, in other words to be reapproved to do business here. We treated this as just another bureaucratic requirement in a country obsessed with forms and procedures — you know these Indians, red tape runs in their veins. So we applied, quite routinely, and the government sat on our application, also quite predictably, and we went on doing business, so nothing was really affected by FERA. Except that, as Kisan Mehta reminded me, our case was still pending with the regulatory bodies, and in the meantime a fair bit of political hostility had been whipped up against us.

It seemed faintly absurd to us in Atlanta or elsewhere in the world that Coke should have become an object of political controversy at all. Sure, there were always people on the hysterical left, whether in Latin America or in India, who would scream that Coca-Cola was a CIA plot, but the attacks on Coke in India were particularly bizarre. People would stand up in Parliament and accuse us of “looting the country” and “destroying the health of Indians.” One firebrand socialist, George Fernandes, demanded to know, “What kind of a country is India, where you can get Coke in the cities but not clean drinking water in the villages?” Another of his comrades stood up and asked in Parliament, “Why do we
need
Coca-Cola?” I remember, just before I came out to India, meeting the chairman of the company, Paul Austin, and hearing him marvel that, in a country with so many pressing problems, Indian members of Parliament actually had the time to devote to attacking Coca-Cola! But it didn't faze us. We'd been through worse as a company in France in 1949—50, when attempts to ban Coke nearly led to a trade war. We could handle our share of lefty nationalist hysteria.

Amidst all of this, Mrs. Gandhi ended her state of emergency and called an election. I guess you've done your homework on those days, but it was an incredible time, Randy. She had been a dictator, for all practical purposes, for the twenty-two months she'd ruled under emergency decrees, and here she was, allowing the victims of her dictatorship the right to decide whether she could continue her tyranny! India's an astonishing place, and this was India at its most astonishing. We'd barely unpacked when the election campaign began, and it was as if we'd pitched our tents in a hurricane. Before I had even drawn up my marketing strategy and got moving toward the first phase of my two-hundred-million-cases target, Mrs. Gandhi had been defeated in the elections and a new coalition government, the Janata government, took office. And guess who was named Minister for Industry in the new cabinet? Coke's favorite Indian politician, the socialist George Fernandes. Minister
against
Industry might have been a better title for him.

Kisan Mehta had already urged me not to be too ambitious. Our sales curves in India showed a growth rate comparable to Coke in Japan, he said. This is not the time to rock the boat by trying to double our speed when we should be happy that we're sailing at all. But I didn't listen to him. I thought I knew better.

Now, you've got to understand that Coca-Cola India was actually a wholly owned company, wholly owned by Coca-Cola in the U.S., and what we did was to manufacture and supply Coke concentrates, plus provide the marketing and technical support to our franchisees. The bottlers were all Indian-owned companies that bought the concentrates from us. This way we kept control of the product and of our secret formula, 7X, but we didn't need to employ more than a hundred people in India ourselves. The downside of this was that we were very definitely a foreign company in India.

Well, Mr. Fernandes lost no time in going after foreign companies. IBM and Coke became his first victims. He demanded that we indigenize our operations and that Coke, specifically, should release our secret formula to the authorities as the price of doing business in India. We refused. Paul Austin said at the time, “If India wants Coke, they'll have to have it on our terms.” Well, India — at least as represented by this Indian government — didn't want Coke on our terms. In August 1977, eight months after I'd gotten to India, our long-pending application under Section 29 of FERA was rejected by the government. Coke was ordered to wind up in India.

It was a helluva blow, I'll tell you that, Randy. Not just professionally, though that was bad enough. We spent two million dollars grinding up every Coca-Cola bottle in India, and all we got in return was publicity for the sanctity of our secret formula. Big deal. I'd uprooted my family and dragged them halfway across the world and now it seemed the whole reason for doing so had disappeared. It didn't make sense, when they'd just settled down to life and school in India, to uproot them again and drag them back, and frankly it's not as if Coke had something better to offer me back in Atlanta either. Plus there was the question of professional pride. Coke was keeping on a skeleton staff to handle all the liquidation work, including an interminable excise tax case going back decades, so I asked to stay on with them. I felt that if there was a creative way back for Coke in India, I was the man to find it. I wanted desperately to be able to vindicate, one day, my original decision to come to India.

So we stayed on. My eldest son, Kim, was in his last years of high school, and the company agreed I should stay until he'd finished, trying to get Coke back into business here. Katharine had found a job teaching at the American International School. The pay was terrible, but at least it meant she had something to do besides resenting India and me. Lance, the youngest, was just a kid, a bit slow, what they're now beginning to call learning-disabled, and he was happy enough wherever he was. It was Priscilla that India had the greatest impact on. She was twelve when we arrived, just awakening, I suppose, to adolescence and emotional maturity, and it all happened here. I never thought of her in making my decisions, whether to come or to stay, and now I know it was her I should have thought of the most.

Yes, thanks, I'll have another. Didn't have the time to think about getting this stuff. Glad you did. Nah, don't worry about soda. I like the stuff neat. Doesn't do anything to me, really. Except makes me talk.

The professional challenge soon turned out to be a hopeless one. I may as well admit it, though at the time I kept trying to persuade myself and Atlanta that I was on the verge of a breakthrough. With shrewd advice from that old veteran Kisan Mehta, I came up with one clever scheme after another, but nothing worked. I tried to work with the Indian bottlers, who were initially the hardest hit by the government's decision, to generate a change of attitude, pointing out that it was Indians, not just an American company, who'd been hurt by the expulsion of Coke. No dice. And the bottlers figured out soon enough that they could do just as well manufacturing Indian substitutes for Coke, free of the threat of international competition, so that argument lost its force as Thums Up and Campa-Cola were born and thrived in the vacuum we'd left behind. In fact George Fernandes even got the government into the soft drink business, converting a dozen Coke bottling plants to the service of a product called 77. Or maybe it was Spirit of 77. Anyway, it was a rather feeble spirit, and it disappeared pretty quickly from the market. But with all this stuff coming out, I needed another approach to try and bring Coke back into business.

One idea that occurred to me was to take a leaf out of the Pepsi strategy in the Soviet Union. You remember how Pepsi had slipped behind the Iron Curtain while we were still blacklisted there? Their trick was to offer a real quid pro quo — marketing a Soviet product, in their case vodka, in America in exchange for being allowed to market their product, Pepsi, in the USSR. It worked for Pepsi in Moscow, but not for Coke in Delhi. I suggested that we could use Coca-Cola's expertise to set up a chain of stores in the U.S. selling Indian handicrafts, bringing major export revenues to India, in exchange for resuming our sales of Coke in India. The Indian bureaucracy considered it for about three months, then nixed that too.

I kept on trying, Randy. That was the story of my three years in India — trying to get Coke back to a firm foothold in this market, in the face of impossible odds. How ironic it felt, during this time, to be attacked as a tool of Western imperialism! The old imperialists just marched in and took over, or took what they wanted, or both. Here we were desperately trying to court the Indian authorities, inventing new ways to please them, asking to be allowed to bring them the pleasure that our product could provide. This is imperialism?

I'll give you one example. The government had different rules for joint venture companies, so I tried to figure out a way to get those rules to apply to us. Coke itself would have to remain in American hands, of course, so I tried to invent a partnership between Coke and the bottlers that would qualify as a joint venture. But that didn't wash with the Indian regulators. Then I spent an incredible amount of time with a whole bunch of lawyers inventing a scheme under which we'd establish a different Indian company in which Coke would have only a forty-percent stake; we'd manufacture the Coke concentrate ourselves, of course, as before, but we'd transfer it, at cost, to this new company, which would be the company actually selling the product to the bottlers.

I was making some headway in getting the Indian authorities interested in the idea when I found my home base slipping away from under my feet. Atlanta was not interested in pursuing such an unusual strategy for the kinds of rewards India seemed likely to offer. One of the suits in Atlanta wrote me a stern memo: “Coke is a product avidly sought by countries around the world. We shouldn't dilute our own prestige by bending over backwards to accommodate every unreasonable demand of every intransigent government.” Every unreasonable demand of every intransigent government. I still remember the phrase. Those words are practically burned into my brain. It was with them, I think, that I began to stop trying.