The Business Beginnings of Toyota, UPS, and Pepsi

The Business Beginnings of Toyota, UPS, and Pepsi

On this day in economic and business history...

Toyota traces its history back to the end of the 19th century, but the Toyota most consumers are familiar with -- Toyota Motor -- was founded on Aug. 28, 1937. That day, the auto-manufacturing subsidiary that began as part of Toyoda Automatic Loom Works was spun off under the control of founding scion Kiichiro Toyoda.

By 1937, Toyota (its name was changed in the spinoff because the kanji symbols representing its new name had eight strokes in total -- a lucky number in Japan and other Asian countries) had already manufactured several car and truck models. Kiichiro had visited American automakers several years earlier, and many of the company's original designs closely resembled popular American models. In some cases, the first Toyota vehicles were practically interchangeable with their American counterparts, right down to the component parts! Unfortunately for the freshly established Toyota Motor, World War II would soon pressure its assembly lines into service to the Japanese military.

Toyota, like many other Japanese companies, was nearly destroyed by the failing war effort and the severe economic hardship that followed. In an ironic twist, the American military saved Toyota in the early 1950s by ordering thousands of vehicles for use in the Korean War. By 1957, Toyota had revived its fortunes enough to begin exporting cars to the United States; the first shipment of two vehicles arrived almost exactly 20 years after Toyota's establishment as an independent company. Toyota's international exports surpassed 1 million cumulative vehicles by the end of the 1960s, and the rest is automotive history.

Special delivery!
The American Messenger Company was founded in a Seattle hotel basement on Aug. 28, 1907. It would eventually become United Parcel Service . Here is the story of its earliest days, according to James R. Warren of HistoryLink:

On August 28, 1907, 19-year-old James E. Casey ... and Claude Ryan start American Messenger Service ... with $100 borrowed from Ryan's uncle, Charley Jones. They operate out of the basement of a saloon (at one time a livery stable) at 2nd Avenue and Main Street, and deliver packages and messages in Seattle by foot, bicycle, and streetcar. They convince other boys in Seattle to buy uniforms and to agree to a strict code of behavior which includes courtesy to customers and no whistling.

By Christmas 1912, the company employed 100 messengers and moved to 1602 1/2 2nd Avenue. In 1913, American Messenger merged with McCabe's Motorcycle Delivery Service to become Merchants' Delivery Service, and they bought their first car, a 1913 Model TFord. In 1919, the firm expanded to San Francisco and became United Parcel Service. By 1930, it covered cities all over the West Coast and New York City.

Exactly one century after its creation, the former American Messenger Company had grown into a global shipping behemoth worth $79 billion. That's an annual growth rate of 22.7% from its founders' original $100 investment!

Broadcast is so commercial
The first paid advertisement on any broadcast medium went out on the airwaves during a radio broadcast for New York City's WEAF station on Aug. 28, 1922. This was years before radio had firmly established itself as a mass-market method of entertainment, and true to the experimental nature of the new medium, this first advertisement bore little resemblance to the short, snappy skits most of us take for granted. According to a 1956 issue of Broadcasting Magazine:

At 5 p.m. ... an announcer stepped to the microphone of WEAF New York and said:

"This afternoon the radio audience is to be addressed by Mr. [H. M.] Blackwell of the Queensborough Corp., who through arrangements made by the Griffin Radio Service will say a few words concerning Nathaniel Hawthorne and the desirability of fostering the helpful community spirit and the healthful, unconfined life that are Hawthorne's ideals."

Mr. Blackwell then came forward and talked for 10 minutes about the happy, healthful, unconfined advantages of Hawthorne Court, a group of "high-grade dwellings" in Jackson Heights, New York ... in the spirit of Nathaniel Hawthorne, then 58 years dead, Mr. Blackwell exhorted the "city martyrs" to heed the "cry of the heart," a voice which he described as clamoring for "more living room, more chance to unfold, more opportunity to get near Mother Nature, to play, to romp, to plant and to dig."

By this point, total annual radio advertising expenditures had grown to $456 million in the U.S., but another, more engaging medium was already pushing past it: Television advertising, which had only begun in 1941, was already driving $681 million in annual expenditures by 1955.

In 2012, 90 years after that first long, long ad, total radio ad spending had risen to $14.3 billion. That trails far behind television ad spending, which generated an estimated $350 billion in revenue over the same time frame.

A cola by any other name would taste as sweet (but sell much worse)
The drink (and company) you know as Pepsi almost never made it. Part of the reason is that its original name was simply awful: Inventor Caleb Bradham, since developing the soft drink's formulation in 1893, had taken to calling his concoction "Brad's Drink." Finally, on Aug. 28, 1898, Bradham realized that this name might not be the promotional dynamite he was looking for, and the drink -- consisting of carbonated water, sugar, vanilla, kola nuts, and pepsin -- was renamed "Pepsi-Cola." The new name and logo convinced local consumers near Bradham's North Carolina pharmacy to give it a try, and once they tried it, they found they liked it. Pepsi-Cola was on its way to consumer greatness.

Bradham incorporated the first Pepsi-Cola in 1902 and applied for a trademark the same year. It was granted a year later, and by this point Pepsi-Cola was much bigger than Bradham's pharmacy -- the company sold nearly 8,000 gallons of syrup that year. In 1904, sales more than doubled to nearly 20,000 gallons. Bradham's marketing savvy wasn't enough to stave off bankruptcy, but despite a 1923 failure resulting from bad bets on the price of sugar, the company was acquired from its founder, and it continued to grow until 1931. That year, it fell into bankruptcy again but was saved from the dustbin of business history by Charles Guth, who helped create the PepsiCo you know -- and might be invested in today. Click here to read more about the origins of the present-day PepsiCo.

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Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool recommends Ford, PepsiCo, and United Parcel Service. The Motley Fool owns shares of Ford and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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