The eighty-nine billion dollar man.

"Shareholder value," the CEO mantra of the '90s, takes on special significance when sizing up Roberto C. Goizueta's 15 years at The Coca-Cola Co. Interestingly, he reckons the company's best growth opportunities are just ahead.

Coke's secret formula is not about the syrup. It's all about doing a million simple things well - and integrating them cohesively every day. "Coke may have created the closest thing we know of to a perpetual motion machine. If so, this fountain may continue for some time," says Robinson-Humphrey analyst David Goldman. When told that The Coca-Cola Co.'s Roberto C. Goizueta was named CE's Chief Executive of the Year, Goldman responds, "Hell, considering what he's done for the shareholders, you should make him CEO of the Century." The sentiment is echoed by all the peers who nominated Goizueta, 64, for the honor. "He has led Coca-Cola to become the first truly global company residing in America," offers Nabisco Biscuit President James Postil. "Coca-Cola is a role model for the long-term view buttressed by great short-term performance." Says Charles LaMantia, CEO of Arthur D. Little and a CE Selection Committee member, "Goizueta is the Olympic champ at getting the balance right among stakeholders."

Since 1981, when the reserved, Cuban-born Goizueta became CEO, the company has consistently hit long-term growth targets. It increased net annual income from $482 million in 1981 to almost $3 billion in 1995. Its share of worldwide soft drinks grew from 37 percent to 47 percent. The company's share price grew at an average annual compound rate of 26 percent, creating almost $89 billion in share-owner wealth as of fiscal 1995. Coca-Cola's market value in 1981 was $4.3 billion; at the end of this May, it was $115 billion. Goizueta has become something of a CEO poster boy for Stem Stewart in its effort to proselytize EVA (Economic Value Added, the financial management system that measures how much real wealth has been created - or destroyed - over a given period). One of the first companies to adopt this way of keeping score, Coca-Cola now ranks first among the largest 1,000 firms in creating shareholder wealth. At the end of 1994, the latest year analyzed, the Atlanta-based company produced $60.8 billion in MVA - Market Value Added, the amount by which a company's market value exceeds the capital invested in it since its inception, according to Stern Stewart. GE, which ranked No. 2, produced $52 billion. No. 3-ranked Wal-Mart produced $35 billion. Nearly all that Coke MVA was created by Goizueta.

Founded in 1886, and enjoying the most widely recognized brand name in the world, The Coca-Cola Co. wasn't in the best shape when the young Goizueta was picked from relative obscurity to succeed CEO J. Paul Austin in 1981. It had been slowly losing market share for years, hampered by stodgy thinking about the soft drink business. The brand name, revered as a cultural icon, seems to paralyze managers: They shy away from taking risks with the trademark. Although the ubiquitous Coke bottle traveled with GIs to Europe and Asia during World War II, efforts to exploit international markets further seemed tentative. As Goizueta reveals in the following interview, the company in real terms was gradually subtracting value.

Goizueta's obsession with cash flow and generating value changed all that, but shifting the cultural goalposts was a slow and sometimes painful process. Goizueta's re-education occasionally was viewed as the "Spanish Inquisition," a term he acknowledges with unfond memory. For E. Neville Isdell, now president of Coca-Cola Greater Europe Group, one of the major turning points was Goizueta's $30 million plunge to acquire 30 percent of Coca-Cola's bottler in the Philippines. It was the first major decision Goizueta made, and it was also the company's largest single investment outside the U.S. Coca-Cola had 31 percent of the Philippine soft drink market to Pepsi-Co's 69 percent - and the bottler was losing money. Many in Atlanta thought the Philippines was a problem market that couldn't be fixed. "I didn't really know Roberto at the time," recalls Isdell, "but he said we were going to invest in foreign markets. Clearly, it was a major commitment of his." Today, The Coca-Cola Co. outsells PepsiCo internationally 3.2-to-1.

In breaking free of the old Coke mold, Goizueta demonstrated that the company could outgrow the soft drink industry. Since 1985, its U.S. soft drink business has grown at an annual average rate of 5 percent compared with 3 percent in unit growth for the industry. Today, Coca-Cola derives two-thirds of its volume and 82 percent of its operating income from outside the U.S. While Mexico is its most important foreign country in terms of volume, Japan generates about 20 percent of Coke's total profit - a bigger bottom-line contributor than the U.S. The company also sees its opportunities differently and has shed its operating management structure that divided the business into "North America" and "International." Today, five operating groups led by operating presidents cover the globe.

Although the $18 billion company's worldwide soft drink market share is 47 percent, it no longer measures itself in such a narrow way. Coke now focuses on every human being's fluid intake, which it estimates at 64 ounces a day and reckons that if its products currently account for fewer than 2 of those ounces worldwide, opportunities for growth are large, indeed. "If we move from 2 ounces to 4, which isn't a big stretch," says Coca-Cola President and COO Douglas Ivester, a soft-spoken Southerner, "we can double our size."

When asked to identify the company's opportunity markets, Goizueta often responds, "Detroit" or "Southern California." Most think the courtly son of a Cuban sugar refiner is teasing. However, there are regions and pockets of the U.S. that have lower consumption rates than Hungary or South Africa, and to Goizueta, they represent a growth opportunity. "People see where Coke is; I see where it is not," he quips. And Goizueta views company stumbles - as when it introduced New Coke or allowed its Canadian bottler to raise prices to the point where private-label soft drink makers seized market share - as important reality checks about consumers and the elasticity of the brand.

Ever the strategist, Goizueta thinks Coke's biggest challenge in the future is developing its people's skills and educating them to identify and develop opportunities. "We do this now here and there, but we have to be systematic about it," he says.

"One of the rewarding things about working here is that it's a learning company," says Douglas N. Daft, Coca-Cola's senior vice president and president, Middle and Far East Group. "With Roberto's focus, everything else flows from there."

JUST FOR THE CAPITAL OF IT

When did you have your epiphany about the Importance of capital and value-added?

I was elected chairman in August 1980, effective March 1, 1981, so I had a year to think all these things through. I have an absolute fetish for return on capital. That's No. 1 for me. Today, we earn about three times our cost of capital. If you invest in the business at less than your cost of capital, you're liquidating the business.

That's what happened to us in the 1970s, when we were paying out in the high 50 percent range of our earnings in dividends. We were strangling the business, not investing in it. At the same time, we began to get involved in other businesses to make up for the slow growth in the soft drink industry. We acquired a reverse-osmosis technology for treating water, but we later ended up on the Arab boycott list and couldn't use any of that technology. We acquired a Wisconsin firm that made plastic bags, cutlery, and straws, but when the oil shortage hit, the price of resin rose. We got into the wine business, figuring that wine sells on image, and we knew how to sell a product based on image. But we forgot that the wine business has the lousiest returns of almost any business I can think of, because you squeeze the grapes and then live in debt for 12 years without getting any return.

In September 1980, then-CFO John Collins and I called our division managers from around the world to Atlanta to examine their business plans for the next year. At the time, all 17 chiefs were running their own shows with their own goals, such as market share and bottler ownership. Clearly, we needed to establish a sense of direction in the organization.

By March 1981, the top 40 people were ready to do things differently in the company. For example, we knew we had to change our attitude toward our bottlers. In the past, we thought of them as our customers, rather than our partners. Consequently, we applauded their success or criticized their failures, but never did anything about them. Many of our bottlers became complacent; they were out of sync with any growth plan. So we decided that for us to get a handle on our bottling business, we had to have an equity participation in the companies.

It took five to six years to get the locomotive moving and turn this company around. The people closer to top management were easy to convince, but the rank-and-file took longer to embrace the new religion. Once in a while, to drive home a point, you have to have a flogging in the town square, so to speak. Luckily, we only needed a couple of those.

THE NEW COKE?

In the process of reorienting the company, you seem to be redefining its universe. Has Coke outgrown the soft drink industry?

Not at all. And I don't foresee it happening for at least another five years. Humans need an average of 64 ounces of liquid a day to live, and we only supply fewer than 2 ounces worldwide, and 7.5 ounces in the U.S. That means we have an infinite growth opportunity.

Does it matter to you what beverages you produce and market - whether fruit drinks or soda - as long as they are Coke drinks?

If they have the same margin, no. We are getting into non-carbonated beverages, but keep in mind that the world is first a cola world, then an orange world, then a lemon-lime world. The rest just come and go. The growth potential in a 110-year-young product such as Coca-Cola is great. Last year, we sold worldwide 425 million more unit cases of Coca-Cola than in 1994. You won't sell 425 million cases of a new product in the first year.

If somebody can come up with a product that will make money, we'll certainly put it out there. Currently, for example, we have new non-carbonated products out in Japan, Argentina, and Mexico.

If water accounts for about 24 of the 64 ounces people drink, you are fighting for the remaining 40 ounces. How many more ounces would you like to get, and how many do you realistically think you can get?

I'd like to get them all. In the U.S. last year, Coca-Cola products captured 80 percent of the growth of the soft drink industry. The industry is growing at 3.1 percent; we are growing at 8 percent in the U.S. as of the first quarter of 1996, but there are so many other global opportunities we haven't even tapped yet.

What's your overseas strategy?

In China, we are busy building the infrastructure - bottling, distribution centers, service centers, and vending machines. It's the same strategy in Germany, where we're putting together a company with three southern bottlers in Stuttgart, Munich, and Nuremberg. We have to start creating consumer demand and letting the bottlers fulfill it.

We also have to make sure we market our products correctly in countries outside the U.S. For example, until the mid-1980s, people in Cuba thought Sprite was green, because they never drank it out of a glass, only a bottle. So Sprite was considered a filler product outside the U.S., meaning that if a bottler had excess capacity, we would sell him Sprite at a low price. Finally, we decided we would charge for it, but we would market it properly.

Some analysts say that price increases in local markets in the absence of rising raw material costs, the ensuing margin expansion, and the resulting cash flow have been the dominant sources of Coke's overall earnings per share growth in the past. Is this true?

No. In Canada, for example, we made a mistake by raising prices. That opened the door for private labels. People may pay $6 for a case of Coke, but if the price goes to $8, they'll turn to private labels that are selling a case of cola for $5. We learned our lesson. A consumer will pay only so much for a brand he or she recognizes and has faith in, but not too much more.

People are getting more accustomed to paying less because of the rise of discount and high-volume retailers such as Home Depot and Wal-Mart. Are consumers' savings coming out of your pocket or the retailer's pocket?

It doesn't come out of our pocket. Wal-Mart operates at about 11 points less overhead cost. It may cost them $5, so they sell it for $6. Somebody else might have to sell it for $6.09 just to be at the same level. Also, soft drink sales tend to be occasion-based. For example, you will pay $3 for a Coke at the circus, even though you can get a whole case at Sam's Club for $5.

BEYOND SMOKE AND BUBBLES

Coca-Cola often is perceived to be more of a sales and marketing machine than a product development/operations/financial company. Is that true?

That's a myth. Granted, we spend about $3.8 billion on direct marketing and advertising. However, we also have three labs - one here, one in Germany, and one in Tokyo - and can put together any non-alcoholic beverage you can think of. We have as good a financial team around the world as anybody, and we have an excellent operations team. We only started hiring young marketing executives last year. We just have a handful now, but I hope that 10 years down the road, we'll have many more on the marketing side.

At the moment, with our focus on global growth, finding people with the necessary skills - whether marketing, [TABULAR DATA OMITTED] financial, or operations - is our biggest constraint. China, for example, is a cash society, so we have to teach our employees there about accounts receivable. As a result, we've established Shanghai University, Moscow University, and Coca-Cola University in the U.S. just to train our people.

How do you develop your assessment skills priority?

We're in the middle of doing that now. The skills necessary for a division president for South Africa are not the same as those needed for the division president for the U.K. The most important skill is being able to best serve the needs of our customers, meaning retailers. Our employees should know the retailer's business almost as well as the retailer knows it. Right now, we don't have much retailing knowledge in this company; we know more about the quick-service restaurant business.

When will you know you have arrived as a learning company?

Never. The situation in the world changes so fast you're always one step behind. And the need for different skills changes as the situation changes. The skills needed to run our business today will not be the skills needed to run it five years down the road.

What kind of person do you envision as your successor?

He or she must have energy; intellectual character; integrity; an inquisitive, innovative mind; determination; a sense of purpose; and an engaging personality. He or she must be able to fulfill the CEO's three key responsibilities: being ultimately accountable to stakeholders, employees, cities, and society for company growth, character, and perpetuation; providing moral, ethical, and dynamic leadership; and deciding what and when to delegate. Everything starts from there.