78 THE WARREN BUFFETT WAY
company during the 1970s. It was a dismal period for Coca-Cola—dis-
putes with bottlers, accusations of mistreatment of migrant workers at
the company’s Minute Maid groves, environmentalists’ claim that
Coke’s “one way” containers contributed to the country’s growing pol-
lution problem, and the Federal Trade Commission charge that the
company’s exclusive franchise system violated the Sherman Anti-Trust
Act. Coca-Cola’s international business was reeling as well.
One of Goizueta’s f irst acts was to bring together Coca-Cola’s top
f ifty managers for a meeting in Palm Springs, California. “Tell me
what we’re doing wrong,” he said. “I want to know it all and once it’s
settled, I want 100 percent loyalty. If anyone is not happy, we will make
you a good settlement and say goodbye.”^23
Goizueta encouraged his managers to take intelligent risks. He
wanted Coca-Cola to initiate action rather than to be reactive. He began
cutting costs. And he demanded that any business that Coca-Cola owned
must optimize its return on assets. These actions immediately translated
into increasing prof it margins. And captured the attention of Warren
Buffett.
The Washington Post Company
“The economics of a dominant newspaper,” Buffett once wrote, “are
excellent, among the very best in the world.”^24 The vast majority of
U.S. newspapers operate without any direct competition. The owners of
those newspapers like to believe that the exceptional prof its they earn
each year are a result of their paper’s journalistic quality. The truth, said
Buffett, is that even a third-rate newspaper can generate adequate prof-
its if it is the only paper in town. That makes it a classic franchise, with
all the benefits thereof.
It is true that a high-quality paper will achieve a greater penetration
rate, but even a mediocre paper, he explains, is essential to a community
for its “bulletin board” appeal. Every business in town, every home seller,
every individual who wants to get a message out to the community needs
the circulation of a newspaper to do so. The paper’s owner receives, in ef-
fect, a royalty on every business in town that wants to advertise.
In addition to their franchise quality, newspapers possess valuable
economic goodwill. As Buffett points out, newspapers have low capital
needs, so they can easily translate sales into prof its. Even expensive