How Chattanooga Brought Coca-Cola to the World – Business History – The American Business History Center

Here is an unsung but key part of the long and illustrious history of Coca-Cola, one of the world’s most successful and well-known brands.  Few realize the links between the company and the patent medicine (quack) products of the 19th century, which connect it to such other products as Gold Bond Medicated Powder and a French pharmaceutical giant. And to one of the world’s great aquariums (not the one in Atlanta)!

In 1888, Atlanta Pharmacist Asa Candler bought the rights to Coca-Cola because the soda fountain drink’s carbonation settled his upset stomach while its caffeine relieved his headaches.  His total investment to buy the struggling company was $2,300 (about $68,000 in 2020 dollars).  The entrepreneurial Candler quickly improved the formula and began selling concentrated syrup to soda fountains, where the syrup was mixed with water and the final drink was carbonated.  He soon realized the product was better positioned as a refreshing beverage than as a medicine.

Asa Candler

Candler opened syrup factories in Dallas in 1894, Chicago and Los Angeles in 1895, Philadelphia in 1897, and New York in 1899.  During 1899, the company sold 280,000 gallons of syrup, enough to make about 36 million drinks, sold mostly in the South and Southwest.  (Dr. Pepper began in Texas in 1885 and Pepsi in North Carolina in 1898, as the soft drink craze swept the southern states.) 

Meanwhile, in Chattanooga, Tennessee, 118 miles north of Atlanta, two young lawyers, Ben Thomas and Joseph Whitehead, searched for business opportunities.  While serving in Cuba in the Spanish-American war, Thomas had witnessed swift sales of bottled carbonated fruit drinks; the idea intrigued him.  The two men’s’ search led them to Coca-Cola in Atlanta.  They wanted to bottle the stuff.

Whitehead and Thomas

Asa Candler was not moved by their pleas, confident that the best way to sell Coca-Cola was through soda fountains, fresh-mixed on the spot.  But Thomas and Whitehead were persistent, and after much prodding Candler relented, signing a contract with them on July 21, 1899.  He thought so little of the bottling idea that he sold them the rights to bottle Coke everywhere but Texas, Mississippi, and New England for one dollar.  Legend has it that the dollar was never collected.  (Texas and Mississippi were later added to the deal.) 

Thomas and Whitehead believed they had a permanent bottling right, but Candler remembered differently.  The conflict was not resolved by the courts until years later, when it was determined that the Chattanoogans did, indeed, have permanent bottling rights.

But the two lawyers soon realized they did not have enough capital to carry out their plans.  Just one bottling plant required an investment of $7,500, which they did not have ($240,000 today).  After being turned down by the first people they approached, they found another Chattanooga attorney willing to invest their “crazy scheme.”  His name was John Thomas Lupton.

John Lupton

John Lupton had made many successful investments.  He also married the daughter of the owner of one of Chattanooga’s most successful businesses, the Chattanooga Medicine Company.  This was the era of patent medicines, before the creation of the Food and Drug Administration (FDA), which cracked down on the many fake remedies.  Chattanooga Medicine, under the wonderfully named owner Zeboim Cartter Patten, successfully sold “Wine of Cardui” and other patent medicines.

John Lupton helped manage the Medicine Company for his father-in-law.  At one time, Chattanooga newspaper publisher Adolph Ochs also served as President of the Chattanooga Medicine Company and was likely an investor.  (Ochs went on to buy the down-on-its-luck New York Times and turn it into America’s most prominent newspaper.)   

In designing their plan to bottle Coca-Cola, Thomas and Whitehead must have been aware of the success of the Medicine Company and its bottled products.  Certainly John Lupton knew how lucrative the mass-produced consumer product business could be.  Lupton became the primary backer of the bottling venture.

But even with this additional capital, the three men did not have enough money to build bottling plants across the United States.  So they developed a tiered system of bottling.  They decided to establish “parent’ bottling companies in each major region of the country.  These companies would not make anything or have any plants, but instead would re-license Coca-Cola bottling rights to a local bottler in each city.  Those independent bottlers would buy their syrup from the parent bottlers, which bought the syrup from the Coca-Cola Company.  The parent bottling companies, controlled by Thomas, Whitehead, and Lupton, would collect a few cents on every gallon of syrup sold (12 ½ cents by 1960).

Within a year of gaining the Coca-Cola rights, Thomas and Whitehead disagreed on business strategy.  Thomas thought the independent bottlers should be granted a two-year license, keeping them on a short leash.  Whitehead thought they should be given perpetual licenses, like their own.  The two decided to divide up the nation and parted amicably.  They laid out a map on their desk and began to figure out how to divvy up America. 

At the time, most soft drinks were sold in the South and Southwest.  They were not yet a big success in the big cities of the Northeast.  Joseph Whitehead took the deep South, Southwest/Texas, and the Western states except for the West Coast.  This was where demand for soft drinks was the greatest.  John Lupton joined Whitehead and they created parent bottling companies for each of the three regions. 

Ben Thomas took the Northeast and West Coast.  While the demand was not great there, he thought it had more “upside” given how many people lived in these areas.  His parent bottler was named Coca-Cola Bottling Company (Thomas).  Now separated, the two groups, Whitehead/Lupton and Thomas, also owned selected bottling plants, such as in Dallas and Atlanta.

It has been said that owning a Coca-Cola bottling business in a city was a ‘license to print money.”  Some say that, as of the 1960s, Coca-Cola had created more millionaires than any other company because of this system.  There is no question that many people got rich, not the least of which were Thomas, Whitehead, Lupton, and their heirs.

Over time, the Coca-Cola Company has had many legal squabbles with their bottlers, but also realized their critical importance.  Coca-Cola has also purchased the bottlers from time to time.  These purchases included the interests of the three Chattanoogans.

In 1934, Coca-Cola bought out Whitehead and Lupton’s interests in the South, followed by the West in 1935 and the Southwest, including Texas, in 1940, for unknown amounts.  Yet Lupton’s heirs kept some bottling operations, remaining the largest bottlers of Coke.  In 1974, Coca-Cola bought Coca-Cola Bottling Company (Thomas) from Ben Thomas’s heirs for $35 million ($190 million today).  In 1986, the Atlanta giant paid John Lupton’s grandson $1.4 billion to acquire his bottling operations, which bottled about 12% of the Coke in America.

The 400,000 gallon Tennessee Aquarium was the largest fresh-water aquarium in the world when it opened in Chattanooga in 1992.  This beautiful tourist attraction, which has drawn well over twenty million people, was financed in part by the Lupton fortune.

But what of Chattanooga Medicine, which helped inspire this whole story?  Over time, the company moved away from patent medicines and into more effective remedies.  It went public in 1969, with shares trading on the stock exchange.  Chattanooga Medicine was renamed Chattem, Inc.  The company acquired such brands as Corn Silk, Premsyn, Gold Bond Medicated Powder, Icy Hot, Cortizone 10, Rolaids, and Kaopectate.  French pharmaceutical giant Sanofi bought Chattem for $1.9 billion cash in 2010.  Their current product line-up can be seen here.

And thus ends the story of a few men from Chattanooga and the billions of dollars of value they created.

Please pass this along to anyone you think would find it interesting! We invite your comments here.

Gary Hoover
Executive Director
American Business History Center

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