This came as a result of a startling revelation Roberto had upon taking the reigns at Coke’s headquarters in Atlanta. Once again quoting from Greising: “For years, no one had really focused on the cost of capital or the economic return on Coke’s investments. Because Woodruff would not let Austin [the former CEO] borrow money, Austin had responded by fueling his acquisition binge with Coca-Cola stock. But that capital actually cost more, about 16 percent per year, than even short-term bank borrowings would have cost Coke in late 1980. All the businesses except soft drinks – the wineries, the water purification, the plastics, even the foods – were generating less than 10 percent.” The author goes on to point out that Goizueta wisely realized, “We’re liquidating our business, borrowing money at 16 [percent] and investing it at 8 [percent]. You can’t do that forever.”
