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  • Coca-Cola: crisp, refreshing and, just to be clear, not an NPR corporate sponsor.

  • We swear, they didn't pay us.

  • It's also a bizarre economics aberration.

  • From 1886 to the 1950s — through continued industrialization, several wars involving the U.S., and prohibition — a Coca-Cola cost 5 cents, and frankly, that is really weird.

  • Ask any economics expert and they'll tell you, "Prices usually change over time."

  • So how did Coke keep their price the same for so long?

  • Well, it has to do with two lawyers from Chattanooga.

  • In 1899, those lawyers pay a visit to the president of Coca-Cola, a guy named Asa Candler.

  • And they tell him, "We're interested in this new thing."

  • "Selling drinks in bottles."

  • They want to buy the bottling rights.

  • The way the story goes is Candler just said, "You're out of your mind, it's not going to work. Coke is a soda fountain business."

  • And they said, "Well, look, you know. Give us the rights anyway."

  • And, so, he said, "Yeah, OK, I'll sell you the syrup at, uhh, 90 cents a gallon."

  • In agreeing to do that, Candler did something that companies never do.

  • He agreed to sell his product, the syrup, to bottlers for a fixed price forever.

  • The contract had no end date.

  • Now, this was about to be a problem for the Coca-Cola company because now any increase in price down at the corner store, that doesn't help them.

  • The profit goes to the bottlers and the retailers.

  • In fact, if they raise the price, it hurts Coke.

  • If Coke goes up to a dime, fewer people are going to buy Coke, and Coke sells less syrup.

  • So, if you're Coca-Cola, you want somehow to keep the price down at 5 cents.

  • What do you do?

  • Well, one thing you do is you blanket the entire country with ads for 5-cent Coke.

  • This was like, so clutch.

  • Coca-Cola is taking control of pricing away from the bottlers and the corner stores and anyone selling a bottle of Coke for more than 5 cents was just going to look like a jerk.

  • Coca-Cola was finally able to renegotiate their contract with the bottlers in 1921, and they might have changed the price then, but they couldn't.

  • They were trapped.

  • Coca-Cola said early on, "A Coke costs a nickel."

  • It put it on billboards and ads and painted it on buildings, and people got used to it.

  • It felt like a promise.

  • In a way, all prices kind of feel like a promise.

  • Once we see a price on something we have this feeling that it's some innate property of the thing.

  • That it shouldn't change.

  • And so the ads that Coke had run so prominently ended up trapping them.

  • The thing that finally undid the nickel Coke was inflation.

  • The price of ingredients started to go up.

  • But to this day, people feel very strongly about a fixed price for Coke.

  • Back in 1999, the CEO suggested charging more for vending machine Coke on hot days and was met with widespread outrage.

  • Whether it's a nickel or a dollar, people have a way of getting used to their prices.

Coca-Cola: crisp, refreshing and, just to be clear, not an NPR corporate sponsor.

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Why The Price Of Coca-Cola Didn't Change For 70 Years | Planet Money | NPR

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    April Lu posted on 2019/05/15
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