Nostalgia and the need for change
PAN American World Airways and Coca-Cola have always been looked upon as ``flagship'' companies of the American business sector. Pan Am has been the unofficial US flagship carrier overseas -- with its giant jets carrying Americans and other travelers to all parts of the world. And the soft drink's ubiquitous billboards have become familiar symbols to millions of people around the globe. Thus this week's announcement of major changes by both US companies will capture the attention of many people abroad as well as in the United States. Pan Am has agreed to sell its profitable Pacific service (except for flights to Hawaii) to United Airlines. Coca-Cola, meantime, after almost 100 years, is changing the taste of its flagship beverage product. What is interesting in both announcements is that at a time when corporate America is often accused of being inflexible in its willingness to adapt to new conditions in the global marketplace, here are two well-known US companies -- in a sense, corporate institutions -- making major changes to shore up their competitive positions.
``Sometimes in the interests of shareholders,'' Pan Am chairman C. Edward Acker is quoted as saying, ``you have to sacrifice sentiment and nostalgia.'' Pan Am's association with Asia goes back to the 1930s, with the introduction of the giant China Clippers -- large flying boats -- that carried travelers to such then-faraway places as Japan, Singapore, and Australia. But Pan Am needs cash to modernize its fleet. Thus, the reason for seeking to sell its profitable Asia runs. Coke, of course, is in a continuing ``soda fizz'' battle, particularly with arch rival Pepsi-Cola, which has made strong inroads among younger consumers with different product demands.
Whether the respective decisions prove sound in the long run will be answered in the months and years ahead. The Pan Am proposal must be approved by the US government -- and governments abroad. But for both Coke and Pan Am, the ultimate test will occur in the marketplace, where consumers pick and choose among competing products. And in the case of Coke, more and more consumers are moving away from the older cola products that contain the drug caffeine.
Caffeine-free products are picking up a sizable market share, a trend that analysts expect to continue. Indeed, both Coca-Cola and Pepsi-Cola are now actively promoting their own noncaffeine products, as well as various sugar-free sodas.
In short, then, the airline and beverage company moves are interesting for what they tell us all about the responsiveness of American companies to demands for change.