For the 45th Anniversary of the BE
100s—
the nation’s largest black-owned businesses—we
share 45 milestone events that have had widespread impact on
black economic development and American industry across four
decades. This tribute salutes the iconic companies and CEOs
found on BE‘s annual list of the largest
black-owned companies.

Today we reveal No. 30 in the web series “Great Moments in
Black Business.” 

1990: BE Publisher Graves and Earvin “Magic”
Johnson partner with Pepsi-Cola to establish Pepsi-Cola of
Washington, D.C. L.P., creating the nation’s largest
minority-controlled Pepsi bottling franchise.

(Earl Graves Sr. and
“Magic” Johnson. Image: Black Enterprise Magazine, October 1990)

 

It was an all-star joint venture between the founder and
publisher of the nation’s pre-eminent black business
publication; an NBA superstar with entrepreneurial aspirations;
and one of the world’s largest beverage giants. When
BLACK ENTERPRISE‘s Earl G. Graves Sr. and
Magic Johnson completed the $60 million transaction to own a
Pepsi franchise in July 1990, their achievement became the
deal-making choice of a new generation; growth through
partnership and acquisition. For good reason: Graves and
Johnson’s milestone added some new fizz to the BE
100s
as the new entity, Pepsi-Cola of Washington, DC
L.P., ranked No. 19 with $44 million in revenues upon its debut
on the BE INDUSTRIAL/SERVICE 100 in June 1992.
(To make the BE 100s rankings, a new company
with at least 51% black ownership must be in operation for a
full calendar year.)

As you would expect, BE had the inside scoop
on the evolution of this sweet deal. Here’s the edited October
1990 account as reported by writer Fred Martin:

For Earl G. Graves, Sr. the road to acquiring a soft drink
franchise began not in a plush corner office but 35,000 feet in
the air.

In January 1988, the 53-year-old Graves was traveling by
plane en route to a speaking engagement when he struck up a
conversation with his seatmate, a senior-level Pepsi-Cola
executive, After both men exchanged routine pleasantries,
Graves showed him a copy of
BE. After
familiarizing himself with the magazine, the soft drink manager
told Graves that Pepsi had been looking to do business with a
prominent black businessman. Two years later, Craig E.
Weatherup, then-president and CEO of Pepsi-Cola Co.—not the
executive on the plane—announced creation of the
largest-minority-controlled Pepsi-Cola franchise in the
country.

In a move exemplifying the growth of African American
business at the time, Graves and Earvin “Magic” Johnson, the
Los Angeles Lakers veteran, officially entered the $40 billion
soft drink business by teaming up to purchase Pepsi-Cola of
Washington D.C., a Forestville, Maryland sales distribution
facility serving the District of Columbia and a small area of
Prince Georges County, Maryland. The $60 million deal marked
only the second time in 20 years that Pepsi had brought new
ownership to its franchise network.
At the time, the
only other black-owned Pepsi franchise was a Houghton,
Michigan-based enterprise owned by Dr. William Harvey,
president of Hampton University.

 

 

This is a unique venture,” said Weatherup, “one
that we’ve been discussing and evaluating over two years. Earl
and Earvin bring more to it than just their knowledge and their
expertise. They bring their experience. Their stature and the
unique position they occupy as role models for the black
community.”

Graves and Johnson, CEO and executive vice president,
respectively, were responsible for the new company’s
operations, strategic planning and general management.
Pepsi-Cola was a limited partner in the venture. Graves
remained BE‘s publisher while he spent a
significant amount of time in the Washington metro running his
franchise. In terms of the partnership, Graves owned more than
65% while Johnson held more than a 30% stake and both had the
right of first refusal for other purchases. Pepsi remained a
limited partner and its equity stake could change, opening up
possibility for a greater share of the operation for Graves and
Johnson.

The plant, which sat on a 6.1-acre plot, had about 160
employees, its own sales staff and a fleet of trucks. It
distributed soft drink brands such as Pepsi, Diet Pepsi,
Mountain Dew, Mandarin Orange Slice and Mug Root. Key accounts
included the White House, the U.S. Capitol and Air Force
One.

(Graves to the left
of Sen. Bill Bradley. Image: Black Enterprise Magazine, October
1990)

 

The idea of buying a franchise was nothing new to Graves.
For several years he investigated several potential candidates
and chose the Pepsi franchise, which sold 4.3 million cans of
soda annually, because the company had market presence, solid
leadership and spent $325 million with minority vendors between
1982 and 1992.

Sealing the deal was not easy. The “tough but fair”
negotiations, which began in 1988, continued right up until the
announcement in July 1992. During the lengthy talks, the
principals got to know each other well. “When I would receive
telephone calls at 6:30 a.m. on Sundays,” recalls Weatherup.
“My wife would say, ‘It must be Earl.’  

Finding the right partner is also key to any successful
joint venture. Graves knew he had his man in Magic Johnson, the
30-year-old three-time NBA Most Valuable Player. Johnson was a
man with resources of his own and a stellar reputation o—and
off—the court. Johnson’s association with the Pepsi trademark
was a major plus since he had great appeal in black and white
communities.

Graves and Johnson met in 1988 at New York City’s 21 Club
to talk business. “I was looking for someone who was mature and
committed to making this business venture a success,” Graves
said. The two hit it off and shook hands on the deal. Two years
later the franchise deal was done. For Johnson, he was eager to
work with the publisher: “This is an opportunity to learn some
business magic from Earl Graves.” 

(Image: Black
Enterprise Magazine, January 1992)

 

Pepsi-Cola of Washington, DC was BE 100s
leader for several years until Pepsi-Cola engaged in buybacks
of its bottling operations. In 1999, Graves sold a majority
stake in the franchise. But he still maintained a strong
relationship with the soft drink giant, which served as a title
sponsor for the popular Black Enterprise/Pepsi Golf &
Tennis Challenge—an event that brought African American movers
and shakers together for recreation and power networking—over
two decades. Graves held a prominent position on the company’s
minority business advisory board and served as general partner
of Egoli Beverages L. P., a short-lived Pepsi-Cola franchise in
South Africa.

As for Johnson, he often cites Graves as one of his mentors.
Since the franchise’s formation, his business career has been
effervescent. Through partnerships with powerful brands such as
AMC Theaters, Starbucks, TGI Friday’s and L.A. Dodgers, the
prolific entrepreneur he has built a diversified commercial
empire over the past 25 years. These successful ventures, in
turn, have made Johnson an MVP in business.

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