Coca-Cola Took Decades to Build an Advantage No Rival Could Cross
The inventor sold out for $2,000, and thousands of rivals came and went while slow ads and wartime bottling built an advantage.
In 1886, in Jacob's Pharmacy in Atlanta, Georgia, a druggist named John Pemberton mixed up a new drink and started selling it by the glass.
If he had a lasting advantage from that day, investor Warren Buffett says, he blew it. He sold out for $2,000.
That sale is an example he uses for what he calls a moat, a business advantage so strong that rivals cannot take its customers away. In a question and answer session, Buffett used Coca-Cola to show that some moats take decades to build.
For Coca-Cola, the advantage did not come with the invention. It took decades, while thousands of competitors came and went.
The work was slow and steady. Buffett said they were "painting one barn at a time and designing one Saturday evening post ad at a time." Each barn and each ad put the name in front of more Americans.
Then, about 60 years after the product was invented, the war gave that advantage a huge push. During World War II, Gen. Dwight Eisenhower, the American commander in Europe, asked Coca-Cola's boss for a Coke to be within arm's length of every American serviceman, as "something to remind him of home."
The company answered by building many bottling factories to make Coke around the world to follow the troops. What had begun as a pharmacy drink sold for $2,000 was now being made near U.S. military bases overseas, with a Coke in reach of Americans far from home.
Questions people ask
What does Warren Buffett mean by an economic moat?
He means a lasting competitive advantage that lets a company earn high profits without being undercut. It can come from a strong brand, low costs, network effects, or habits that keep customers coming back. Once dug, a wide moat means rivals can compete but cannot easily take the business away.
Who actually bought Coca-Cola from John Pemberton?
Atlanta businessman Asa Candler acquired control in stages around 1887 to 1888 and built the Coca-Cola Company. Pemberton died in 1888, the same year Candler consolidated ownership. Candler was the one who pushed aggressive sampling, coupons, and advertising.
Why did World War II matter so much for Coca-Cola?
Coca-Cola got support to build more than 60 bottling plants near U.S. military bases overseas. Soldiers drank billions of bottles during the war, and many tasted Coke for the first time in uniform. After the war, those plants became the base for civilian expansion in Europe, Asia, and Latin America.