Handout #5: Soft Drinks Conquer America

Global Perspectives on Fast-Food History

Long before fast-food chains dotted our landscape, the cola industry was running full speed ahead. While apparatuses for making soda (Carbon dioxide, CO2) water were invented in the early 19th century, they became particularly important after the Civil War. In 1876 soda vendors popularized soft drinks at the Centennial Exposition held in Philadelphia. Alcoholic beverages had been banned at the exposition, and the summer proved to be extremely hot. Many fair goers liked what they drank and demanded soda drinks when they returned home. Soda fountains, which sold combinations of ice-cream and drinks composed of fruit syrups, sugar and soda water, sprung up around the nation. One early soda beverage which was destined for success was created by Charles E. Hires, a Philadelphia pharmacist. Originally called "Herb Tea" it became famous under the name of "Root Beer." It was considered "The National Temperance Drink." By 1893 three million bottles of Hires Root Beer were sold annually.

Coca-Cola was invented in 1886 by the Atlanta druggist John Pemberton, who blended extracts of two stimulants coca leaves and kola nuts-with sugar and other ingredients to produce a syrup. He considered it a cure for headaches and sold it as a medicine in drugstores. Pemberton's health failed in 1887, and he sold his business to Willis Venable for a total sum of $283. Venable mixed the Coca-Cola syrup with soda water and served it as a drink. Soda water gave Coca-Cola a sparkling, bubbling effervescence. Shortly after making this change, Venable sold the business to Asa Chandler, who began distributing the syrup throughout the South. Local druggists and soda fountain jerks combined the syrup with the soda water.

In 1890 Chandler sold a total of nine thousand gallons of Coca-Cola syrup annually. He plowed most of his profits back into his business, and his efforts paid off. Within nine years, sales reached 281,000 gallons of syrup. In the same year the first Coca-Cola bottling plant began operation in Chattanooga, Tennessee. Due to criticism by pharmacists and medical professionals, Coca-Cola began using spent coca leaves in the preparation of its syrup. By 1900 Coca-Cola's revenues topped $400,000.

There were several reasons for this early success, but the most important were Chandler's decisions to franchise the bottling operation and his decision to massively advertise his product. The decision to franchise made it possible for the Coca-Cola Company to concentrate on making the syrup. This was easily transported, and permitted bottlers to combine the syrup and soda. Chandler quickly developed a national distribution system. Chandler's advertising associated his "soft" drink with the temperance movement that opposed the production and sale of liquor. But advertising expanded to include a variety of other themes by the early 20th century. During this time Chandler spent more than 25 percent of Coca-Cola's annual budget on advertising. By 1904 Coca-Cola was the most recognized brand name in America.

Meanwhile, in New Bern, North Carolina, Caleb D. Bradham had also been experimenting with extracts of coca leaves, kola nuts and sugar. Bradham had purchased a pharmacy in 1893. At the drugstore's soda fountain Bradham experimented with concocting soft drinks for his friends. One beverage based upon an extract of the cola nut was first named "Brad's Drink," but by August 28,1898, he christened the new drink "Pepsi-Cola." The Pepsi-Cola Company was incorporated in 1902, and Bradham began to rapidly expand his sales. By 1910 Bradham had franchised more than 300 bottlers in twenty-four states to produce Pepsi-Cola. But Bradham ran into financial problems and the company went into bankruptcy in 1922.

Pepsi-Cola was resurrected by a Wall Street broker, Roy C. Megarel. He controlled the company until 1931, when the company again went bankrupt. It was saved by Charles Guth, the president of a candy company. By 1934 Pepsi-Cola turned the corner and began purchasing bottling operations throughout the United States. By 1939 Pepsi's net earnings had risen to over $5.5 million.

Then World War II broke out. The war greatly affected the soft drink industry. Pepsi-Cola's and Coca-Cola's operations throughout the world were disrupted by German and Japanese conquests. In the United States, sugar rationing was imposed early in 1942. Rationing drastically restricted the amount of soft drinks that Pepsi-Cola could produce. The Coca-Cola Company, however, received contracts from the U.S. government to supply America's military with soft drinks.

After the war, the sugar restrictions were removed. Pepsi had a hard time competing with Coke. By 1950 the company was almost forced to declare bankruptcy for a third time, when a highly successful advertising campaign came to the rescue. Throughout the 1950s Pepsi continued to expand aggressively abroad, particularly into Latin America and Europe. During the 1960s Pepsi introduced several new products, including Mountain Dew and Diet Pepsi. In 1965 Pepsi bought the Frito-Lay company and renamed the new corporation PepsiCo. Subsequently, PepsiCo acquired several fast-food chains, including Pizza Hut, Taco Bell, and KFC (Kentucky Fried Chicken). All of these establishments sell Pepsi-Cola. Why have soft drink businesses been so successful?

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