What is the difference between 2300$ and 115 billion$? Story Inventor of Coca-Cola-Part 1

Presentation prepared by

Prof.K.Prabhakar,

prabhakar.krishnamurthy@gmail.com

Assisted by Ms.P. Subha

Objectives

This slideshow is about how a great idea was sold for small sum of 2300$ and inventor was not able to leverage it.

It is a story of Entrepreneurship. This slide show provides information for you to reflect on why Pemberton failed? How others had a phenomenal success? Part 1 will talk about J.S.Pemberton.

What we all know about Coca-Cola

We all know that Coca-Cola is valued at 115 billion $ and its rivalries and grudges with Pepsi.

www.stern.nyu.edu/~adamodar/pdfiles/brand.pdf

We also know that its formula is the secret and very few persons know the ingredients of coke.

Some questions which all of us may not know

Who invented this formula? Is he still the owner of Coca-Cola? How this product evolved over years

from the 1890’s till now? Let us take an excursion into history.

May 1886 Atlanta, United States of America-General state of feeling among people

Southern parts of America was still depressed by its defeat in the civil war.

And the loss of war make many of the southerners to turn to religion and patented medicines. The north American all cure snake oils and Rum are all demon created products.

Patent Medicine makers in south wanted to replace alcohol with other ingredient that is safe, healthy and morally pure.

Brief history of John Styth Pemberton

Permberton graduated from medical school at the tender age of 19 in 1850. He also received a graduate degree in pharmacy at an early age. He worked for many years as a druggist in Columbus before moving with his family to Atlanta in 1870.

In Atlanta he served on the first pharmacy licensing board in Georgia. He also created a chemical laboratory which was the first state-run facility to test soil and crop chemicals as well as served as a trustee for the Emory University School of Medicine. During the Civil War he served in the Confederate Army, achieving the rank of lieutenant colonel.

John Styth Pemberton

Atlanta chemist J.S.Pemberton has been reformulating his “French Wine Coca-Ideal Brain Tonic( French Wine Coca, was actually an imitation of Vin Mariani, a coca-wine drink invented by Angelo Mariani in 1883) to remove the alcohol and replace it with another that will provide same effect.

He found it in Kola nut, a stimulant that slaves from Africa has brought to have a wonderful hang over cure.

He blended the kola nut with coca extract and found that the concoction is a potent “Brain Tonic”.

However, its taste was very bad.

Ultimate Product

He made thirty gallon brass kettle in his back yard to develop finally an ideal mixture of oils, herbs, and extracts to mask the flavor of the potently psychoactive mix.

It was not a carbonated beverage. It was thick, sweet brown syrup, packaged in reused beer bottles.

Pemberton sold them for 25 cents a bottle. The Druggists either sold the entire bottle or in small doses mixed with tap water. One of the Druggists was Jacob’s Drug Stores.

Jacob’s Drug Stores

A customer came to Coca-Cola’s outlet complaining of severe hangover.

He was given a bottle of Coca-Cola by Mr. Willis E. Venable, the soda fountain man. The customer insisted to have the water from soda fountain and wanted to have the drink immediately. He was given the soda fountain water mixer and he said it is much better than taking it with tap water. This incident spread in the town and many started demanding the same. Thus, It has become a recreation drink.

Pemberton’s Reaction

Pemberton was marketing Coca-Cola as a medicine for all nervous afflictions-sick headache, Neuralgia, Hysteria, Melancholia ,Etc. He never considered it as a recreational drink. However, he saw the opportunity. He changed his ads to note that Coca-Cola makes a delicious, exhilarating, refreshing and invigorating beverage in addition to its medicinal qualities.

The birth of Coca-Cola

And the Coca-Cola beverage, whose unit sales totaled a mere 3,200 servings in 1886 ("nine drinks per day" based on the twenty-five gallons of syrup sold to drugstores by Pemberton Chemical Co.), is today called the world's most popular soft drink--accounting for billions of servings at restaurants in 195 countries.

Passing of Dry Laws

Atlanta passed its first dry law, making alcohol illegal. The coke syrup sales jumped from 25 gallons a year to 1,049 gallons the next due to marketing effort of Frank.M.Robinson, who coined the name of the drink, created coke’s first ad campaign and ornate script “Coca-Cola” logo that is still not changed.

1887

Pemberton’s Health began to fail. Coke sales was not sufficient to be financially sound. On July 8th 1887, he sold a third of the company to Willis

Venable and another third to George Lowndes. Neither man had the time to market, make or sell Coke so they sold their portion of the company to Woolfolk Walker and his younger sister Margaret Dozier. Dozier owned two-ninths and Walker four-ninths of the formula rights. Now here is where it gets interesting. Venable somehow disposed of his portion of Coca-cola twice. During some time in 1887, he gave his share of Coca-cola to Joseph Jacobs, owner of Jacobs' Pharmacy. In early October, 1887 Pemberton ran a blind ad looking for additional investors

The Blind Advertisement

WANTED: AN acceptable party with $2,000.00 to purchase one-half interest in a very profitable and well-established manufacturing business, absolutely no risk, and guaranteed a 50 per cent profit on investment, with possibilities of much large profits and rare opportunity to right party.

The Result

He was able to get three investors with this ad. He took $2,000 from each of them. Their names were J.C. Mayfield, A.O. Murphey and E.H. Bloodworth. In late December the three new partners moved to Atlanta, ready to produce all of Pemberton's wonderful medicines.

Last days

In 1887, Pemberton’s health began to fail. Before his death, he sold the last of his stock to Asa Candler, a more prosperous fellow druggist. With the help of two partners, Candler quietly bought the rest of the stock in Coca-Cola from Venable and other investors. The full investment has amounted to 2300$ including the formula.

Pemberton died as a destitute on16 August 1888 and was buried in an unmarked pauper’s grave.

A write up on what is soft drink

A soft drink is a drink that does not contain alcohol, as opposed to hard drinks, that do. In general, the term is used only for cold beverages. Hot chocolate, tea, and coffee are not considered soft drinks. The term originally referred exclusively to carbonated drinks, and is still commonly used in this manner.

  Fizzy Drinks   Fizzy drinks (carbonated beverages) are produced by injecting carbon dioxide into the drink at a

pressure of several atmospheres. Carbon dioxide dissolves readily at normal atmospheric pressure, particularly in cold beverages, but far more so at high pressure and large volumes of gas can be dissolved. When the pressure is released the carbon dioxide comes out of solution forming numerous bubbles and begins releasing the carbon dioxide back into the atmosphere. After many minutes most of the carbon dioxide has been released and the drink is said to be 'flat'.

  The chemical phenomenon whereby carbonated drinks taste fizzy is due to carbonic acid

inducing a slight burning sensation, and is only indirectly related to the bubbles- both phenomena are caused by the carbonic acid concentration.

  Carbonation can also be produced by partial fermentation in a sealed container. This is the

method used in the production of ginger beer and by careful control, and use of appropriate yeasts the alcohol level can be kept very low.

http://www.solarnavigator.net/solar_cola/soft_drink.htm

Formula of Coke

The Coca-Cola formula is The Coca-Cola Company's top-secret recipe for Coca-Cola. The formula is considered one of the most closely-held trade secrets in modern business. Only a few top Coca-Cola employees are reported to know or have access to the formula.

Merchandise 7X is the "secret ingredient" in Coca-Cola. The ingredient has remained a secret since its invention in 1886. The description of the ingredient is kept in a security vault in a bank in Atlanta, Georgia. Only two people in the company know the formula at any one time.

Published accounts say it contains or once contained sugar, caramel, caffeine, phosphoric acid, coca leaf and kola nut extract, lime extract, flavoring mixture, vanilla and glycerin.