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SOFT-DRINK INDUSTRY

SOFT-DRINK INDUSTRY. The Texas soft-drink industry dates from 1839, when Dr. Thomas Mitchell, an English physician living in Houston, operated an apothecary with a soda fountain from March until his death on October 1. Carbonated water had bubbled from springs in Europe since Roman times. During the eighteenth century, scientists experimented with "fixed air" and produced "aerated waters." Some of them used bicarbonate of soda in their experiments, and the term "soda water" became ensconced in the English language. By 1810 New York City had "soda fountains," where proprietors dispensed artificial "mineral waters" for therapeutic purposes. Flavored soda water, which developed with the rise of the ice industry, was available in apothecary shops, but bottled soda water was an expensive product. Sailing ships took ice from northeastern states to New Orleans in 1820 and later to Houston, and in 1838 a Houston newspaper noted that ice sold for 50 cents per pound. In 1850 Texas had none of the sixty-four bottling plants in the nation. The first notice of a soda-water manufacturer in Texas was issued in 1866, when the Houston City Directory listed J. J. C. Smith's establishment as a "mineral water manufactory." In the 1870 census, Galveston and Brownsville reported "manufacturers of mineral and soda water." Victoria and Austin had two ice-making machines. Texas had one of the four ice plants in the nation. In 1880 Texas had eleven bottling plants: four in San Antonio, two each in Galveston and Austin, and one each in Houston, Dallas, and Mexia. In 1890 Texas had forty-two soda-water plants, plus five unspecified bottlers and seven breweries (see BREWING INDUSTRY).

The 1890s saw major changes in the state's soft-drink industry. New plants appeared with the introduction of the Hutchinson bottle stopper, patented in 1879 and manufactured in Chicago. (In a Hutchinson stopper, a wire loop protruded from the bottle neck and was fastened to a rubber seal; when seated the seal blocked the escape of gas from the water in the drink.) Most plants served one or two counties, and occasionally they shipped by rail to neighboring communities. The bottler's largest investment was in bottles and cases. No deposit was charged and bottle stealing among bottlers was common, even when glass blowers embossed the name of the town on the bottles. In 1891 the Elliott Bottling Works of Paris called a convention to address the problem. Twenty-nine bottlers and suppliers, principally from East Texas, met in October in Dallas and formed the Texas State Bottlers Protective Association. They drafted a constitution and by-laws aimed at preventing "the unlawful use of registered bottles, boxes, siphons, etc." But policing was impossible.

By the 1890s two beverages had changed the character of the soft-drink industry. In 1885 Charles Alderton, a Waco pharmacist, originated Dr Pepper Phos-Ferrates (see DR PEPPER COMPANY), and in 1886 John Pemberton concocted Coca-Cola in Atlanta, Georgia. In 1885 Wade B. Morrison, who owned the Old Corner Drug Store in Waco, arranged with Robert Sherman Lazenby, owner of a small bottling plant, to mix and ship Dr Pepper Phos-Ferrates syrup to area drugstores. In 1891 a feed-store operator in Dublin, Texas, began bottling soda waters, including Dr Pepper. Other plants in Central Texas followed suit. However, during the 1890s no Texas bottling plant advertised a franchised soft drink and no company listed such a product in its company or corporate name. In 1898, during the Spanish-American War, Lazenby had an exclusive War Department contract to bottle and ship his Circle A Ginger Ale to servicemen in foreign lands. He supplied both army and navy installations until World War I. In 1900 Texas had 139 soda-water bottling plants. Lemon, ginger, ale, vanilla, orange, sarsaparilla, and raspberry were the principal flavors. The state also had seventy-seven ice plants, more than any other. Only one bottling plant used power-a four-horsepower central motor which delivered power by belts to carbonators and bottle-washing machines.

In 1899 two lawyers from Tennessee, B. F. Thomas and Joseph Whitehead, secured "bottling rights" from the Coca-Cola Company of Atlanta, Georgia. They issued contracts to produce and sell Coca-Cola within control areas. Although Texas and parts of New England were excluded, the system provided the capital and the entrepreneurship needed to develop the soft-drink industry nationally. Thomas and Whitehead offered contracts in specific geographic regions, Thomas taking the northern and eastern states and Pacific coast and Whitehead taking the South and Southwest. Thomas built a bottling plant in Chattanooga, Tennessee, and Whitehead built one in Atlanta. Whitehead sold a half interest to J. T. Lupton, a lawyer from a Virginia tobacco family. Lupton helped finance the Coca-Cola bottling plant in Atlanta, and in 1902 his relatives opened plants in Dallas and Houston. Within three years Coca-Cola was selling its syrup to twenty-nine Texas plants. Soft drinks were among the first consumer products controlled by the franchise system. In 1914 twenty Texas bottlers listed Coca-Cola as part of their trade name, and eight did not. Other Texas companies did not issue franchises until the 1920s. Delaware Punch, a noncarbonated drink formulated in 1913 in San Antonio, was among the first to join Coca-Cola in issuing franchises in Texas. Between 1899 and 1914 the number of Texas plants doubled and the value of production tripled. In 1914 Texas had 262 plants (4.8 percent of the nation's total), but only the Coca-Cola bottlers included the franchise in their trade name.

Between 1914 and 1924 a number of flavor manufacturers or distributors began offering franchises patterned after the Coca-Cola model. In 1922 Texas had 179 bottling works, but only 33 included a copyrighted soft drink in their trade name-30 with Coca-Cola and 3 with Whistle. By 1923 Texas had 205 plants (of 4,514 nationally). In 1924 nine bottlers were producing "cola" drinks besides Coca-Cola, including Chero-Cola, Tex-A-Cola, Lime Cola, Keen Kola, and Cola Hiball. Cola-Cola filed a lawsuit against all "imitators," won a raft of court decisions, and stopped the traffic for a decade. The Chero-Cola Company of Columbus, Georgia, changed its corporate name to Nehi Company and promoted fruit flavors. Other franchises in Texas included Whistle (six plants), Orange Crush (three), NuGrape (one), Grapico (two), and Cherry Blossoms (one). Bottling plants also manufactured other merchandise: ice (five plants), ice cream (ten), candy (eleven), creamery products (three), and beer (one). Out of 276 bottling firms, 114 produced no franchised soft drinks. In 1924 Texas bottlers marketed eleven trademarked products. By 1929 the state had thirty-four Nehi plants, ten Dr Pepper plants with name identification by trademark, three Orange Squeeze plants, and six other plants incorporating a beverage name. Coca-Cola gave bottlers "exclusive rights" to use its trademark in 6½-ounce returnable bottles in a specific territory. In 1929 Texas had 325 bottling plants, 16.3 percent of the national total. The number declined to 260 in 1931 and 210 in 1933.

During the Great Depression, Seven-Up and Pepsi-Cola sought markets in Texas, mainly under the promotion of Jodie W. McCarley of San Antonio. While shagging baseballs for the Cleveland Indians in St. Louis, McCarley met Pearl Whitcraft and Ed Taylor, who owned soda-water plants in the city. In 1929 Taylor offered McCarley a chance to get in the bottling business by assuming a debt owed a St. Louis flavor manufacturer. McCarley set up a small bottling plant in his home in San Antonio with second-hand machinery, and peddled his drinks each morning. In addition to generic flavors, he sold Knight Club Ginger Ale, mostly to bootleggers. Ed Taylor also put McCarley in touch with C. L. Griggs, owner of the Howdy Company, which offered franchises on Howdy Orange. In 1928 Griggs had copyrighted Seven-Up, a lithiated lemon drink promoted as a mixer. In January 1930 McCarley, the second bottler in the nation to receive a Seven-Up franchise (Taylor was the first), was given an opportunity to sell Seven-Up in seventy-eight Texas counties. Business was slow: he signed up only one bottler, Ed Knebel, who had moved his small plant from Pflugerville to Austin in 1930. In 1932 McCarley obtained a franchise to sell Hires Root Beer. Then Whitcraft notified McCarley that Pepsi-Cola was interested in Texas, and on April 1, 1934, McCarley and a partner secured a Pepsi-Cola franchise for sixty-four counties. McCarley was the first Texan to bottle Pepsi-Cola. In his first year he sold 13,300 cases of Pepsi in twelve-ounce beer bottles of brown, green, and "flint" (colorless). As his business expanded, he began operating five route trucks, and in 1937 he moved to a larger plant in San Antonio. By the 1930s, Pepsi and Nehi's Royal Crown Cola had established markets in Texas. Nehi had a statewide system known as Chero-Cola bottlers. Depression prices enabled bottlers to offer twelve-ounce drinks for five cents retail, and twelve-ounce bottles became popular. Between 1934 and 1939 Pepsi signed up bottlers in eighteen Texas towns, though many of these did not survive.

Texas bottlers were highly competitive. With Cola-Cola leading the way, they maintained an eighty-cent wholesale price for a case of twenty-four bottles. The Coca-Cola franchise system had developed, however, when each plant served an area that a horse-drawn truck could cover in a day. The motor truck expanded dealer territories. Although each community had a wealthy Coca-Cola bottler, Walter Mack, Pepsi president in 1938–39, saw opportunities. Coca-Cola maintained 1,150 franchise areas in the nation, but Mack was able to franchise 550 areas for Pepsi. Pepsi also ran ads at independent radio stations and later on the networks. By early 1938 many Texas Coca-Cola bottlers, under company pressure, had dropped all flavors except Coca-Cola. Dr Pepper started franchising in 1925 and offered the drink to Coca-Cola bottlers, who declined to accept. In 1938 the Texas soft-drink industry comprised 297 plants. Most held multiple franchises.

At the outbreak of World War II, the soft-drink industry faced rationing of sugar, crown caps, cork, gasoline, tires, trucks, and coolers. Though prices were frozen and labor became scarce, bottlers profited from the military bases established in Texas, since quota-exempt sugar was available to the military, which deemed soft drinks essential to morale. Coca-Cola promptly moved its vending machines, introduced in the late 1930s in service stations, grocery stores, and at-work outlets, to military bases. Few bottlers had vending machines, especially multiple choice vending. These bottlers found markets at the Post Exchanges.

After the war, soft drink demand soared. On October 23, 1946, wartime controls were lifted, but sugar rationing continued until July 28, 1947. Bottlers were reluctant to break the "nickel price." Coca-Cola advanced its price from 80 cents to 90 cents to $1 a case, but still did not raise the retail price of 5 cents. Some coin-vending machines had a six-cent mechanism, but they were awkward to use. While Coca-Cola kept sales prices down, other companies, especially Pepsi and RC Cola, were stuck with a twelve-ounce bottle and its higher ingredient costs. In1955 Coca-Cola introduced the "king-size" (ten or twelve ounce) and the "family-size" bottles (twenty-six ounces). The family-size returnable became popular in Texas, particularly in urban areas. Dr Pepper and Seven-Up followed. Nehi had authorized the "Par-T-Pak" in quart or family size in the 1930s, but sales had been slow. Bottlers soon saw the economy of returnable bottles. As prices and bottle sizes increased, a conflict loomed between "big-bottle bottlers" and "little-bottle bottlers." Clifton C. Carter, a vice president of the Texas State Bottlers Association, sought to resolve the problem. In 1952 the Texas State Bottlers Association enrolled 226 bottling plants as dues-paying members; 145 plants were non-members. Carter, membership chairman, sought new members and saw a major increase in membership to 71 percent of total Texas bottlers. In February 1954 Carter became president, W. L. "Brownie" Dorris became vice president, and J. Conrad Dunagan became second vice president. Association officers made swings through Texas to enlist members. Carter visited eleven cities, Dorris nine, and Dunagan five. Their efforts bore fruit. By enlisting members, the association began to defuse the bottling controversy and other problems. In 1957 the American Bottlers of Carbonated Beverages, of which the Texas State Bottlers had been an affiliate since 1919, cited the Texas group as the "outstanding state bottlers' association in the nation." Dunagan was elected to the ABCB Executive Board in 1961 to the presidency for 1957–58. Texas, with more ABCB members than any other state, brought the national convention to Dallas in 1961. Vice President Lyndon B. Johnson gave the keynote address.

As the Texas bottlers worked out their differences, innovations changed the industry in packaging, manufacturing, and distribution. Cans with linings that could withstand the acidity of soft drinks were introduced, along with materials to withstand high degrees of carbonation. Calcium Cyclamate and sodium cyclamate were combined with the synthetic sweetener saccharin to produce an acceptable diet drink. Nehi had tried to market Diet Rite in 1952 in Texas, but acceptance was spotty. However, diet drinks gained steadily and reached an annual rate of 15 percent of the soft-drink market by 1969. Major soft-drink companies, as well as major brewers, had developed canned drinks during World War II, but a "metallic" taste persisted because the cans lacked special acid-resistant linings. Coco-Cola introduced canned drinks in 1960, when it authorized the Kimble Food Products Company of Fort Worth to offer canned Coca-Cola to franchised bottlers. Although supermarkets quickly accepted canned drinks, they sold only 450 million cans in 1954, a fraction of the 30.3 billion bottles sold. Canned-drink sales fell to 317 million by 1956, when Royal Crown, Nehi, and Par-T-Pak entered the market. Canned RC Cola, Diet Rite, and Nehi flavors arrived in Texas by rail from Columbus, Georgia. The glass-container industry, aware that Texas supermarkets objected to handling returnable bottles, introduced light-weight glass bottles. The larger sizes, twenty-six to thirty-two ounces, easily competed with aluminum and steel cans. Marketing strategies also changed. In the 1920s, soft drinks were sold for home consumption. Grocery stores offered a twenty-four-bottle wooden case, and plants also sold cases from the floor or loading docks. In 1922 Coca-Cola sought additional markets by producing a cardboard six-bottle carton, but the boxes were too expensive for one-trip use. Strengthened paperboard solved the problem. In 1933 Coca-Cola distributed 2 cent postcards to bottlers for stores to use as coupons with which a customer could received a free six-pack by paying the twelve-cent bottle deposit. This encouraged housewives both to return the empties and buy more.

In the 1970s the federal government threatened the franchise system in the soft-drink industry. In 1971 the Federal Trade Commission declared the existing franchises to be illegal restrictions on interstate commerce and sued the major companies. After lengthy hearings, the FTC examiner ruled for the soft-drink companies. While the threat of franchise cancellation hung over their heads, some bottlers turned to cooperatives to build canning plants. Pepsi-Cola built a plant at Conroe, and in July 1970 turned it over to a corporation composed of Texas Pepsi-Cola bottlers. By 1972 West Texas bottlers planned a cooperative to produce Coca-Cola and other franchised products. Amarillo, Lubbock, and Monahans bottlers sought ties with New Mexico and Oklahoma bottlers. They established the Southwest Canners, with J. Conrad Dunagan as president, Pat W. McNamara as vice president, and R. E. Nickles as secretary-treasurer. But Coca-Cola warned that the bottlers who used their franchise territory to host a cooperative could incur substantial liabilities. The organizers also discovered that Texas lacked legislation to permit issuing tax-exempt bonds for industrial development, so Southwest Canners located its plant in Portales, New Mexico, in the Clovis Coca-Cola franchise. New Mexico permitted industrial bonds to acquire land, buildings, and equipment, and an Albuquerque investment bank underwrote $2 million in municipal bonds. The Portales plant opened in the spring of 1975. By then, however, the FTC decision favoring franchises had been overruled-a shocking set-back. The bottlers now sought federal legislation to rescue their franchises. As most congressional districts in Texas had bottling plants, the bottlers found wide support. But Texas representative George H. Mahon, chairman of the Appropriations Committee, would not release the bill. Finally, Sam Hall, of Marshall, introduced a measure to call the bill from committee by a House vote. Both House and Senate approved the measure, and the soft-drink franchise system was saved.

In the late 1970s and early 1980s, bottling franchises began to consolidate. Coca-Cola, which had relied heavily upon independents until the 1980s, began to purchase large independent bottling groups in 1986 and consolidate them into Coca-Cola Enterprises. In July 1986 Coca-Cola Enterprises acquired Rainwater Coca-Cola Bottling Companies in Texas, and in September they acquired control of the McAllen and Brownsville Coca-Cola Bottling Companies. By the mid-1990s many of the major urban markets for Coke were serviced by Coca-Cola Enterprises, supplemented by other company franchises and independents. In 1996 Pepsi-Cola had company-owned bottling facilities at Conroe, Houston, Mesquite, and San Antonio, and worked through independent bottlers at Abilene, Hallettsville, and Corpus Christi. Dr Pepper merged with the Seven-Up Company in 1986 and soon thereafter moved its manufacturing operations to facilities in St. Louis, although the company's corporate headquarters remained in Dallas.

BIBLIOGRAPHY: 

Harry E. Ellis, Dr Pepper-King of Beverages (Dallas: Taylor, 1979). Mark Prendergast, For God, Country and Coca-Cola (New York: Macmillan, 1993). John J. Riley, A History of the American Soft Drink Industry (Washington: American Bottlers Carbonated Beverages, 1958).

J. Conrad Dunagan

Citation

The following, adapted from the Chicago Manual of Style, 15th edition, is the preferred citation for this article.

J. Conrad Dunagan, "SOFT-DRINK INDUSTRY," Handbook of Texas Online (http://www.tshaonline.org/handbook/online/articles/disyk), accessed November 28, 2014. Uploaded on June 15, 2010. Published by the Texas State Historical Association.