Why Coca-Cola Keeps Up

| About: The Coca-Cola (KO)

Focus has kept Coca-Cola (KO) ahead of other food companies and f most of the consumer goods sector for decades. Getting people to spend upwards of $1.50 per drink of sugared, fizzy water, which when taken to excess leaves them fat and lethargic, sounds almost as crazy as the tobacco business. Extending your focus so that it remains consistent yet enables growth may be one of the toughest tasks in corporate America, and it's worked for nearly 90 years.

When Robert Woodruff took over the company, it was failing due to a dispute between bottlers and syrup providers, mainly due to the price of sugar. Coca-Cola at that time was a syrup company that franchised production. Woodruff's solution was to change the subject. “What can we do,” he supposedly asked in 1923, “to make certain every bottle of Coca-Cola tastes like every other bottle of Coca-Cola, all around the world?”

Coca-Cola is no longer in the syrup business. Since that statement, it has actually been in the drinks business, more precisely in the water business. Coca-Cola now makes over 3,500 products, all non-alcoholic liquids.

Spurred on by investment bankers and others, Coca-Cola's competitors throughout the consumer goods space have mostly ignored the lesson. Having attained success in KO's original niche, KO's gone far afield looking for growth. And KO's paid the price, as when it acquired Columbia Pictures.

The lesson should be clear: It needs to be in the business school curriculum, and it needs to be in your portfolio. Focus on what you know. Expand only into related fields. Expand geographically, into related products, but keep your focus on your business.

Disclosure: I am long KO.