Counter-Cola: A Multinational History of the Global Corporation

The Coca-Cola World System

Studying a single corporation, The Coca-Cola Company, over time reveals transnational connections of economic, political, social, and cultural power as it attempts to configure and participate in global capitalism.[i]  A Coca-Cola world system internationally interconnects people and places, linked through relationships with the corporation, its capital, commodities and raw materials, and representational texts. The Coca-Cola Company itself conceives of the corporate network comprised of the underlying company, its bottlers, and vendors as “the Coca-Cola System.”[ii] Of course, no corporation is a world system entirely of its own making; it participates in, influences and is shaped by the international economics and politics that link markets, states, labor, consumers, and resources. But a corporation as large and transnational as The Coca-Cola Company has “a social system. . . that has boundaries, structures, member groups, rules of legitimation, and coherence.”[iii]  These mostly overlap with those of the larger international capitalist world system, but sometimes slightly vary: the Coca-Cola System has some of its own centers of power, governing structures, and justifying logics, which reveal with greater specificity the workings of global capitalism and the ways in which it is also shaped at its margins.[iv]

Two international systems of corporate production constitute this Coca-Cola System.[v] The first is the material production of soft drinks by the Company and its bottlers. The Coca-Cola Company sells drink concentrates to bottlers around the world, who manufacture and distribute the final product. Second, as these bottled drinks are produced as much by ideas, associations, and business plans—their secret formulas, brands, and business and financial strategies—as by sugar and water and fizz, the Coca-Cola world system is constructed through the production and managed dissemination of immaterial products. As Peter Drucker, the “father of modern management theory,” noted, The Coca-Cola Company is fundamentally “an advertiser with tremendous access to a distribution system[vi]  Addressing a group of bottlers, a Coca-Cola executive reportedly explained the success of this immaterial production of the brand through advertising, and their almost secondary status relative to it, with this hypothetical: if the Company were to lose all its bottling plants, equipment, staff, and inventory in a fire or cataclysmic disaster overnight, the next morning an executive could walk into a major bank anywhere in the world and get a loan to rebuild it all based solely on the security of the value of the brand, the goodwill accrued to its trademark.[vii] The true business of Coca-Cola is the symbolic system of production, the construction of brands through texts that represent and distinguish its material products, and everything else about its business could be rebuilt on that immaterial foundation.[viii]

But this is not just about advertising and marketing. The Coca-Cola Company’s creation, management, and investment in the system of bottling production is central to its immaterial production. In fact, The Coca-Cola Company is not in the business of selling soft drinks, but in the business of selling the selling of soft drinks: the franchising of bottling production. The Company sells bottlers the business model of Coca-Cola production itself, and the Company and its stockholders make money through transactional and financial relationships between the underlying corporation and these franchise bottlers. The Coca-Cola Company charges them not only for soft-drink concentrates, but for the right to use trademarks, business strategies, technical services, and marketing materials. Additional profits are derived from financial machinations such as the setting of prices for these materials and services, hedging against changes in foreign exchange and interest rates, and investing in franchise bottlers. The Company thus displays elements of the immaterial turn in global capitalism that characterized the final decades of the twentieth century, as the commodification of culture, the commercialization of knowledge and information as intellectual property, and financialization emerged as defining features of the world economy.

The Coca-Cola Company has employed two very different business strategies to develop these two systems of production, material and immaterial. Coca-Cola globalized by externalizing material production, franchising soft-drink manufacturing to independently owned bottlers. Through this franchise model, the Company grew quickly, while minimizing the risks and responsibilities of direct investment and employment in overseas markets. Over the course of the twentieth century, bottling companies extended this externalizing logic even further, increasingly hiring subcontracted and temporary workers, for example, and externalizing the social, environmental, and health costs of its business model. Outsourcing material production through franchising also required managing the potential loss of control over production and representation of its commodities. While decentralizing material production, the Company centralized its immaterial production, since it was both the driver of its revenue and the means of asserting power in the Coca-Cola system. It produced intellectual property such as formulas, trademarks, marketing, and business plans over which it had monopoly control and upon which bottlers relied. It developed legal and economic strategies to manage bottlers, including restrictive bottling contracts, interlocking boards, and strategic investment in the bottling industry. And the Company strove to produce social and cultural associations, orientations, and practices through corporate relations, communications, and events to generate cooperation among its bottlers and, of course, consumers and the public at large.

I use “the Company” as shorthand for The Coca-Cola Company throughout this book, both for narrative ease and to distinguish the work’s main corporate subject from other companies. The Coca-Cola Company also refers to itself as the Company with a capital C. I also capitalize the T in “The Coca-Cola Company,” since that is its legal title. In 1919, the Coca-Cola Company, known then as now for its Atlanta “home,” was reincorporated and renamed in Delaware, establishing a legal address with little more than a mailbox. Delaware is one of the world’s most notorious tax havens, allowing companies to both dramatically reduce state taxes and obscure profits made in other countries, while offering business-friendly case law and state courts. And Delaware does not tax revenue from “intangible assets” like trademarks, patents, and copyrights—in other words, the Company’s immaterial production.[ix] So, the Coca-Cola Company became The Coca-Cola Company.

Over the century since its Delaware reincorporation, the Company has continued to hide profits from US and international taxation. As a US-based multinational corporation, The Coca-Cola Company is required to pay US federal taxes on profits earned around the world, minus a tax credit equal to whatever taxes the Company paid to foreign governments. But those taxes on foreign income become due only when profits are repatriated to the United States. So, the Company shields income generated in foreign jurisdictions by keeping it in the hands of international subsidiaries incorporated in low-tax locations. The Company’s immaterial system of production enables such economic manipulations: the bulk of the Company’s profits are generated from licensing intangible property—brands, services, and intellectual property such as formulas—to foreign subsidiaries who in turn charge bottlers for the right to manufacture, distribute, market, and advertise Coca-Cola products. These deals, governed by agreements between the subsidiaries and the parent company and involving payments for intangible assets with no market equivalent or documented value, take place in secrecy within the Coca-Cola world system. As a result, such transactions can be priced to effectively transfer profits to countries with lower tax rates. This is what the IRS accused The Coca-Cola Company of doing, when in 2015 it handed the Company a $3.3 billion tax bill for underreporting 2007–9 income and threatened to readjust the Company’s tax liabilities by reevaluating how it prices intangible assets. The Coca-Cola Company had allegedly given subsidiaries in Ireland, Swaziland, Brazil, Mexico, Chile, Costa Rica, and Egypt discounts totaling $9.4 billion in licensing rights so as to leave more of its profits in those low-tax nations.[x] At the end of 2017, The Coca-Cola Company’s international subsidiaries were holding $42 billion in offshore profits, shielding them from taxation in the United States.[xi] Much of this profit is held by subsidiaries incorporated in tax havens, which do business in various countries, but avoid paying taxes by bringing their profits home to the extremely low-tax nations in which they are “based.” The Coca-Cola Company has three subsidiaries in the Cayman Islands, for example, which are not there to serve the exceptionally small local soda-drinking population.[xii]

The Coca-Cola Company’s “genius, its secret formula in many ways, was staying out of the business of making stuff,” Bartow Elmore argues in his 2015 study Citizen Coke,[xiii] a compelling study of the Company’s relationship to raw materials, state support, and environmental impact. This characterization mistakes the Company’s genius, however, since its lack of vertical integration of raw materials like sugar, water, and aluminum was not that rare in the history of US capitalism. Its externalization of the production of its final products of bottled and canned drinks was, however. But then what becomes important for analysis is how the Company made stuff while staying out of the business of making stuff, in other words, without owning the majority of its bottling operations. The Company wielded significant power over “independent” bottlers through mechanisms that included monopoly power over its brands and formulas upon which bottlers depended, restrictive contracts that required exclusive manufacture of Coca-Cola products, and the strategic buying up of large stock positions in bottlers, enabling it to influence mergers and acquisitions. The Coca-Cola Company even bought up bottlers outright, when it was in its interest; in 2015, it directly owned and operated bottling operations in nineteen countries—25 percent of its global system volume.[xiv] Even more important, saying that the Company does not “make stuff” ignores its principal commodities—the brands, advertising, formulas, business strategies, and financial investments—which the Company produced more successfully than nearly any other corporation in history. It neglects the ways in which the Company’s ownership of this immaterial production is used to manage the material bottling of Cokes. Writing it off as “immaterial” (i.e., inconsequential) obscures how immaterial and material systems of production have worked together in this corporate system, and the ways in which this nineteenth-century corporation prefigured the power of cultural and financial capitalism in the externalization of material production that has defined the political economy of the twenty-first century.
[i] Studying a single commodity is a fruitful way to analyze economic, political and social power over time.  The book has benefited from the models and historical insights provided by Sidney Mintz’s Sweetness and Power: The Place of Sugar in Modern History (New York, 1985); Gary Okihiro’s Pineapple Culture: A History of the Tropical and Temperate Zones (Berkeley: University of California Press, 2010), Sven Beckert’s Empire of Cotton:  A Global History (New York:  Vintage Books, 2014), April Merleaux’s Sugar and Civilization:  American Empire and the Cultural Politics of Sweetness (Chapel Hill:  UNC Press, 2015), to name just a few.
[ii] TCCC, “The Coca-Cola System,” accessed July 27, 2016,
[iii] Immanuel Wallerstein, The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century (New York: Academic Press, 1976), 229.
[iv] See Casanova’s analysis of the power relations internal to the “global literary space” in World Republic of Letters.
[v] The production and sourcing of materials for Coca-Cola are also constitutional parts of the Coca-Cola world system, as are the stores, vendors, and machines that sell Coca-Cola products, as well as the commodity’s “afterlives” in waste or reuse. This project, however, focuses on the material and immaterial production of Coca-Cola drinks.  For an environmental history of the drink see Bartow Elmore’s Citizen Coke:  The Making of Coca-Cola Capitalism (New York:  Norton, 2015).
[vi] Kate MacArthur, "Peter Drucker, Father of Modern Management Theory, Had Profound Impact," Advertising Age, November 21, 2005.
[vii] Rosemary J. Coombe, The Cultural Life of Intellectual Properties: Authorship, Appropriation and the Law (Durham, NC:  Duke, 1998), 56.
[viii] For this reason, an analysis of Coca-Cola necessitates an approach to the history of global capitalism that integrates tools of media and cultural analysis and Counter-Cola has benefited greatly in this respect from Roland Marchand’s Advertising the American Dream:  Making Way for Modernity, 1920-1940 (Berkeley:  UC Press, 1986) and Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in American Big Business (Berkeley: University of California Press, 1998), Mona Domosh’s American Commodities in an Age of Empire (New York:  Routledge, 2006), Thomas Frank’s The Conquest of Cool:  Business Culture, Counterculture, and the Roots of Hip Consumerism (Chicago:  University of Chicago Press, 1998), Pamela Laird’s Advertising Progress:  American Business and the Rise of Consumer Marketing (Baltimore:  The Johns Hopkins University Press, 1998), Jackson Lears’ Fables of Abundance:  A Cultural History of Advertising in America (New York:  Basic Books, 1995), Charles McGovern’s Sold American:  Consumption and Citizenship, 1890-1945 (Durham:  UNC Press, 2006), Stuart Ewen’s Captains of Consciousness:  Advertising and the Social Roots of Consumer Culture (New York:  Basic Books, 2001), and Susan Strasser’s Satisfaction Guaranteed:  The Making of the American Mass Market (Washington:  Smithsonian Books, 2004).
[ix] Leslie Wayne, “How Delaware Thrives as a Corporate Tax Haven,” New York Times, June 30, 2012.
[x] Mike Esterl and Chelsey Dulaney, “Coca-Cola Owes $3.3 Billion in Taxes Over Foreign Transfer Licensing,” The Wall Street Journal, September 18, 2015.
[xi] Eric Mandel, “Reuters:  Tax Experts Closely Watching Coca-Cola’s $3.3 Billion Battle with IRS,” Atlanta Business Chronicle, April 2, 2018.
[xii] Citizens for Tax Justice, “Fortune 500 Companies Hold a Record $2.4 Trillion Offshore,” March 3, 2016
[xiii] Elmore, 9.
[xiv] Irial Finan, “10 Years:  Coke’s Bottling Investments Group Marks a Milestone,” August 11, 2015

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