The World's Most Valuable Lie - Part 2
The World's Most Valuable Lie - Part 2
Like Schrödinger's thesis, Coca-Cola's vault both does and doesn't hold its most important intangible asset
By Nathaniel Nelson
[Recap: Urban legend has it that Coke’s recipe was a deep secret only four people in the world knew, and they couldn’t travel on the same aircraft. But it turns out this story is nonsense. And yet in its own way, it has also become one of Coca-Cola’s most valuable intangible assets. Part 2 finishes the story.]
That three-meter-thick vault door in downtown Atlanta is always wedged open, like a metaphor for the casual comfort Coca-Cola has with everyone knowing its “secret” formula.
It’s no big mystery that the vault is a museum for tourists. The recipe is highly valuable as a marketing stunt. Humans love a bit of mystery, and playing on intrigue is a clever way to boost any brand. Coke knows exactly what it’s doing.
Indeed, when the buyer of Coke Ernest Woodruff moved the lone print copy of the recipe to a bank vault in 1925, his motive was not security. According to Snopes, Woodruff “revelled in the secrecy of the formula, knowing that making a big to-do would convince the media — and thus the general public — that they were getting something really special when they bought a Coke.”
His secondary motive for the intrigue, according to the author Mark Pendergrast, was “to keep people from knowing how cheap the ingredients were and how large the profits.” In other words, the whole thing was textbook early-20th-century corporate shenanigans.
There is no special slip of paper inside the tin can in Atlanta. The value is all on the outside – written on the hearts and minds of adults and, especially, children to build positive associations with the Coca-Cola brand.
Getting You To Drink Coke
Nevertheless, as with most intangible assets, the sum of Coke is greater than its parts.
Coke spends billions of dollars each year marketing its drinks. That sort of money implies drinking Coke isn’t a “natural” activity for humans in the way drinking, say, a glass of water might be. People need to be persuaded that Coke is worth drinking and that it has a tasty flavour. Advertising has been critical to Coke’s wild success over the last century to the point where most people now see drinking Coke as fairly normal (which is bizarre, when you think about it).
Creating that sentiment among consumers is a very expensive, ongoing, never-ending project for Coke. In fact, given the amount of money it spends each year, you could say that Coke is actually a marketing company that just happens to sell a beverage on the side. That’s how important advertising is for the business.
Why is all this skullduggery and intrigue to boost advertising penetration so important for Coke? Think about it this way: if you could go back in time 1000 years and offer a Coke to a Viking marauder, do you think he would enjoy drinking it?
“Enjoy” is the key word here.
That Viking would probably think you are nuts for offering such a ghastly, black, bubbling drink to them. If you think the Viking would “enjoy” the glass of Coke, you are essentially saying Coke is wasting billions of dollars in advertising spending each year, which is simply absurd. Clearly, it isn’t wasting money – those funds are integral to Coke’s success precisely because no one would rationally drink it on their own without some serious persuasion.
In other words, marketing is an intangible asset for Coke.
Coke’s Suite of Intangible Assets
Coke has a whole suite of intangible assets that make the company a global powerhouse. While the beverage itself is essentially 99% water and sugar, the absolute value of that sugar and water is probably a tiny fraction of the value of the rest of Coke’s enterprise.
For example, Coke boasts decades of industry know-how in manufacturing and distributing hundreds of millions of litres of its syrup to the world each year. Few other companies have the factories, the suppliers, the raw materials and the operating talent to replicate this.
It also has key approvals and certifications for producing its syrup that guarantee the final product is safe for consumption. This isn’t a trivial thing. In some places, due to poor city water infrastructure, Coke is often the preferred drink instead of tap water. After all, the locals know Coke is legally required to use clean water and they know it will arrive at the shop in a sealed bottle.
Coke also has deep “preferred-customer” relationships with its thousands of distributors, logistics companies, supermarkets, convenience stores and suppliers. Building trusted relationships takes time and effort. And sometimes these relationships are tied in important ways to specific people employed at Coke who developed those relationships from scratch and have the skills to maintain them.
The design of Coke’s bottles is also another example of the multinational’s intangible assets. Coke bottles might look innocuous, but the design is a result of millions of hours of scientific testing, modelling, ideation and feedback. The bottle designs have changed many times over the years, and for different reasons, but the overarching theme appears to be that a good Coke bottle should make it easy for a person to drink the beverage. Optimising the ergonomics of drinking takes a lot of investment in both money and time.
Coke is also clued up on the importance of Big Data for streamlining operations and maximising profit as any large multinational company. Coke knows which shelves in which shopping centres are the best option to get in front of a target demographic. The data reveals which areas of a city it should focus on, when to release new marketing campaigns, how to break into a new market, what emotional associations people make with Coke and thousands of other little insights. All of these are possible because Coke gathers data, washes the data with robust analysis and understands how to apply it.
Lying as an Asset (LaaA)
While each of these intangible assets is impressive on its own, plenty of other companies have similar assets. What they don’t have, however, is the world’s most valuable lie: the whirlwind misdirection of the “secret” recipe.
Call it LaaA – lying-as-an-asset – when you pitch it at your next marketing meeting.
Once a meme like this burrowed deep into the collective subconscious, it gave Coca-Cola a well-insulated position against any single aspect of brand failure by adding multiple layers of to the product which is otherwise just sugar water in a bottle.