Pepsi’s retreat isn’t drawing applause this time-at least not from an extraordinary group of African-Americans. Houston was only one of perhaps dozens of prominent, prosperous blacks and institutions who invested $15 million to $20 million in New Age Beverages, the South African soft-drink company of which 25 percent is owned by Pepsi. Among them: basketball star Shaquille O’Neal; Earl G. Graves, publisher of Black Enterprise magazine, and Hampton University. The group offered an aura of high-profile celebrity that Coke couldn’t match and New Age hoped to translate into a marketing advantage. All of the investors are undoubtedly smarting over losses as high as $1.5 million. But for some there’s also a sense of betrayal. They had expected Pepsi to tough it out in South Africa. “This wasn’t to be a quick kill,” says actor Danny Glover, who invested $750,000. “I thought Pepsi was part of the long run.”
For now, the dismay has translated into little more than a series of phone conferences. But several investors, including attorney Johnnie Cochran, are attempting to forge a common front. “We haven’t fully and finally decided what we are going to do,” Cochran says. Group members are consulting lawyers, including one who has traveled to South Africa in part to investigate. They are also mulling over theidea of enlisting civil-rights leaders as a bridge between themselves and Pepsi. And although no one has used the B word–boycott–some have suggested that the group could influence Pepsi’s image among African-Americans.
Same boat: Pepsi says there’s not much more it could have done about the situation on its own. The company told NEWSWEEK that as a shareholder in New Age, it’s in the same boat as its co-investors. “We share in the same disappointment as everyone else,” a spokesman says. Pepsi invested $65 million in equity, loans and management. The company was willing to ante up even more to keep the venture going, the spokesman says. But New Age had large institutional financial backers in addition to its prominent investors, and the largest, which Pepsi didn’t identify, refused to go along with an effort to prop up New Age, the company says. It was probably a losing battle in any case. Coca-Cola became “an entrenched monopoly,” Pepsi says, by remaining in South Africa during the apartheid era. New Age Beverages was a “noble experiment,” but “the challenges proved to be too great.”
How the experiment evolved is a matter of considerable confusion-at least to some of the investors. Right now they’re focusing their disappointment on Pepsi, but others may come in for a share of the blame. Pepsi says the black investors had been assembled by Egoli Beverages L.P., a partnership that owned 75 percent of New Age Beverages. Others say the prime mover was Graves, who in addition to his publishing interests controls the nation’s largest black-owned Pepsi bottler. In his new autobiography, Graves, who didn’t respond to NEWSWEEK’S requests for comment, repeatedly credits himself as the main force behind the South African venture and indicates that Egoli is part of his business empire. Another especially savvy investment professional had a major role in the undertaking. A large investment–said to be $$0 million-came from Apollo Advisers, a firm headed by Leon Black, a former top lieutenant to Michael Milken who has become a high-stakes investor. It was made through Savant, a black-owned investment firm headed by another Milken acolyte. Now these smart players have learned a lesson that most cola warriors already know well: never underestimate the power of Coke.
