Coke Returns as a More Spritely Buyer

NEW YORK -- Walk through any room of the sparkling New World of Coca-Cola museum here and you get a sense of the unusual purchase Coke has on the American imagination. With a huge, glowing Coke bottle beaming from its roof, this $96 million museum includes a mini-bottling plant, interactive gadgets and a short movie about collectors of Coke memorabilia. Sure enough, a woman wearing a red-and-white Coke pantsuit, with a matching purse, is among the viewers at a recent screening of the film.

But while it still maintains its enviable pop-culture status, the Coca-Cola Company no longer wields the kind of business clout it did decades ago.

Coke has found itself outmaneuvered, at least in the United States, by a host of more creative competitors, like PepsiCo. As those rivals have diversified and taken risks, Coke, the beverage industry's Goliath, has struggled to reinvent itself.

Some, like Neville Isdell, Coke's chairman and CEO, say the company has a good playbook in hand.

Yet the future of the company that Isdell took over in 2004 is in jeopardy. Coke's tightly knit and long-serving board selected him after it had unsuccessfully pursued several other big-name chief executives.

Coke is at a crossroads, and it has been slow to make its mark in the booming U.S. market for energy drinks, bottled water and other noncarbonated drinks. Isdell took a step toward addressing that problem Friday when Coke announced a $4.1 billion takeover of Glaceau, a producer of vitamin-enhanced water.

The Glaceau deal is a milestone for a company that has never pulled off a takeover of this magnitude before. Even so, some analysts still wonder whether Isdell and his board remain too conservative to break from traditions that once served them well but may no longer be suited to a world in which consumer tastes are rapidly -- sometimes constantly -- shifting.

Under Isdell, Coke is now trying to be a more spritely buyer. Coke's deal for Glaceau, the company that makes Vitaminwater, offers evidence of that. Vitaminwater is a huge hit among young people, and is on its way to being a $1 billion brand. In other words, it is exactly the type of hip brand that Coke has unsuccessfully struggled to produce on its own or to buy outright in recent years.

If the deal goes through, it would be the biggest in Coke's history and significantly bolster the company's portfolio of noncarbonated beverages in the United States -- a portfolio that still pales next to Pepsi's.