12 ms·
Why Coke Cost a Nickel for 70 Years (2012)
- Strikingwolf 11y agoAwesome story. I wonder if the same kind of things have happened for other brands. Coke was also pretty clever advertising 5 cents a bottle to lock the price, brilliant plan to neutralize a bad move in the past.
- meric 11y agoThat's a nice story. The real reason was the US dollar was on a gold standard during that period of time. In the late 50's to 60's the US begin to issue more currency than their gold holdings were increasing, leading the countries like France withdrawing gold from the US (and apparently, inflation, according to this article), and finally the dissolution of the gold standard in 1971. Since the US dollar was fixed to gold there was little to no inflation, because the ratio of gold price to goods price is much more stable. In 1950 - A coke was 5c, median household income $4000[1] per year = 80000 cokes per year. In 2015 - A coke is $2[2], median household income $50500[3] per year = 25000 cokes per year. In real terms adjusted by the price of coke, the median household income has fallen by 69%. (for giggles). 1. http://web.stanford.edu/class/polisci120a/immigration/Median%20Household%20Income.pdf http://web.stanford.edu/class/polisci120a/immigration/Median... 2. http://www.humuch.com/prices/CocaCola-Bottle-20oz500ml/______/40#.VZDGuO2qqko http://www.humuch.com/prices/CocaCola-Bottle-20oz500ml/_____... 3. http://www.mybudget360.com/how-much-do-americans-earn-what-is-the-average-us-income/ http://www.mybudget360.com/how-much-do-americans-earn-what-i...
- dimitar 11y agoSince the US dollar was fixed to gold there was little to no inflation, because the ratio of gold price to goods price is much more stable. This is true only in some sense on average. There was in fact both very significant inflation and deflation, but they evened out over the long term. People thus could use gold-backed money for savings. It still was a worse asset than bonds to save in, even if you account for sovereign defaults in that era.
- deleted 11y ago[deleted]
- branchless 11y agoYep, money is not a store of value. They have us right where they want us.
- gnaritas 11y ago"They" don't have us anywhere, money is not supposed to be a store of value, it's a medium of exchange. Assets are stores of value.
- liopleurodon 11y agothen what's the point of a savings account? to get screwed over?
- dragonwriter 11y ago> then what's the point of a savings account? A savings account isn't cash, its an immediately-callable loan from the account holder to a financial institution; for the account holder, it provides an asset with very good liquidity (but perhaps marginally worse than that provided by a checking account), essentially zero risk, but poor returns (but perhaps marginally better than that provided by a checking account). Its a way of meeting short-term spending needs (but perhaps slightly longer term than that met by a checking account). Demand deposit accounts (both checking and savings) in general are, like cash, basically for short-term spending, but where the bank provides some benefits (actual storage, along with access mechanisms more convenient for many uses than pulling physical bills out of a storage locker).
- pionar 11y agoA savings account is nothing more than a loan from you to the bank.
- gnaritas 11y ago
- bbcbasic 11y ago> In real terms adjusted by the price of coke, the median household income has fallen by 69%. The price of a Coke isn't real terms though. Because at 5c it was artificially constrained as mentioned in the article. More interesting would be the price of a house, or daily groceries (of equivalent quality) vs. salary.
- ams6110 11y agoYou're not accounting for the size of the portion. The nickel bottle of Coca-Cola was 6oz. Today's standard vending machine bottle is 20oz.
- dunham 11y agoWhich gives us 480,000 ounces of coke in 1950 vs 505,000 ounces of coke in 2015. A 5.2% increase in the amount of coke you can buy for a year's salary. (I'm actually kinda surprised the price is that stable.)
- vetinari 11y agoIt's easier to sell one bigger package than several smaller. I would not be surprised, if the 505,000 ounces in 20oz packages cost less to produce in 1950 prices, than 480,000 ounces in 6oz packages. (Just one physical package, not three separate).
- peterfirefly 11y agoPlastic bottles instead of glass bottles probably also help. You don't have to be nearly as careful when you handle plastic bottles. (I /think/ they are also cheaper to produce.)
- csn 11y agoAnd considerably lighter. Good for logistics.
- ams6110 11y agoIt's a set of tradeoffs. The 6oz bottles were (I think) returnable. Even better than recycling, they only needed to be washed/sterilized to re-use. I'm old enough to remember Coke and other brands in returnable bottles up to 16oz. They were heavy. The transportation costs savings with the lighter plastic bottles (combined with maybe the raw materials savings, and savings not having to transport, handle, wash, and sterilize the emptys) made plastic more economical than returnable glass. Manufacturing cost for glass bottles almost certainly higher than plastic. You have to melt either sand or recycled crushed glass which takes a lot of energy. Some jurisdictions do have returnable plastic bottles. They are much heavier than the disposable ones but still lighter than glass. Interestingly for some reason beer in plastic bottles has never caught on, it's mostly sold in glass bottles and cans.
- jewel 11y agoHere is a chart that covers the time period in question. The 1880s was right in the middle of a long period of slow deflation, so a bottle of coke was actually getting slightly more expensive for a period of nearly 30 years: http://www.economics-charts.com/images/cpi-1800-2005.png http://www.economics-charts.com/images/cpi-1800-2005.png
- JohnyLy 11y agoInteresting comparison: inflation is much faster than wage rises.
- higherpurpose 11y agoSome countries have the minimum wage linked to inflation. While that can have some disadvantages as well (in certain short term periods), overall it's probably much better off in the long term for the population.
- eru 11y ago> [...] overall it's probably much better off in the long term for the population. [...] if a minimum wage is a good idea in the first place.
- bjelkeman-again 11y agoWhen isn't it a good idea to have a minimum wage?
- meric 11y agoIn an environment with little social welfare, a minimum wage will disproportionately negatively affect workers with disability because they can almost never get hired, and do not receive sufficient support from the government. They will be at the mercy of affection or pity from family and friends.
- superuser2 11y agoWhen you are optimizing for employment ratio. Zero minimum wage gives 0% unemployment and creates millions of jobs. Those are some great achievements to have if you're running for reelection. There is no reason to support a minimum wage if you don't care about quality of life.
- rogerbraun 11y ago
- derefr 11y ago> In real terms adjusted by the price of coke, the median household income has fallen by 69%. (for giggles). Not necessarily that far-out: since the core CPI that goes into inflationary figures is measured using things like the cost of a loaf of bread, I always thought it'd be nice to be able to flip that around, and see historical economic charts measured in loaf-of-bread-units. It would also allow for easy cross-comparison between figures from different countries. (To go actually far-out, though, wouldn't it be interesting to have a salary and a bank account denominated directly in inflation-compensated purchasing-power, such that if you got paid 1 BreadBuck, it would buy you exactly one loaf of bread today, tomorrow, or twenty years from now?)
- jcstauffer 11y agore: your parenthetical, this Planet Money episode (http://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil http://www.npr.org/sections/money/2010/10/04/130329523/how-f...), describes Brazil's real, which was introduced as essentially that - an inflation-proof currency, replacing the cruzeiro, which was destroyed by hyper-inflation.
- deleted 11y ago[deleted]
- tim333 11y agoIn 1900 A coke was 5c, average income $438 per year = 8760 cokes per year. So in coke terms wages shot up 1900 to 1950. Or coke was just cheap then. http://usa.usembassy.de/etexts/his/e_prices1.htm http://usa.usembassy.de/etexts/his/e_prices1.htm
- drzaiusapelord 11y ago>$1.00 at the beginning of 1900 had the same purchasing power as $5.38 at the end of 1972. I wouldn't call 2.3% Annualized Inflation Rate "little to no." >$1.00 at the beginning of 1990 had the same purchasing power as $1.86 at the end of 2014. What's interesting is that in the past 25 years we have a similar AIR. 2.5%. 72-1990 may have just been an anomaly, especially if you see that 1972-1980 alone had a AIR of 8.6%. I think a lot of the gold standard weirdos are purposely being disingenuous by ignoring the big economic issues of the 70s and 80s to play up their pet theory.(war spending/war debt, oil crisis, government overspending/massive deficit spending, manufacturing leaving, savings and loan scandal, 1980s recession, etc) If the gold standard is the only that that can bring out sub 3% inflation then you're simply wrong as we've been in the 2's since the 90's. I don't think many younger people on the internet really appreciate how crazy the 70s and 80s were. The loan my dad got on our house when I was a kid is like 3x or almost 4x my interest rate, which is insane. Clearly things have stabilized since then while we're still not on any precious metal backed currency. I think you guys are missing the forest for the trees here. Calculator here: http://www.moneychimp.com/articles/econ/inflation_calculator.htm http://www.moneychimp.com/articles/econ/inflation_calculator...
- ams6110 11y agoEven Pepsi had a jingle based on the nickel price for a 6oz bottle of Coca-Cola: Pepsi-Cola hits the spot, 12 full ounces, that’s a lot, Twice as much for a nickel too, Pepsi-Cola is the Drink for you!
- bbcbasic 11y agoI wonder... what would have happened if they fixed the price at 1c, forcing the bottlers out of business, then renegotiated the contract i.e. void the contract and we'll stop advertising it as 1c. The fountain stuff could have kept Coke in business then it is a war of attrition?
- Gustomaximus 11y agoCoke couldn't fix the puce, Coke advertised it. People were free to sell it as they pleased. I imagine if Coke advertised the product at 1c stores would disregard the advertising and it would be a pointless waste of money from Coke in that they would lose all control as no-one would now expect to pay the advertised price.
- interpol_p 11y agoThey are kind of fixing the price now. I see small cans of coke (250 ml) with a large logo stating: "Maximum price $2." [1] I'm guessing you could legally sell these cans for whatever you want, but consumers would probably not like to pay more for something that has its "maximum" price stated in the design of the can. [1] http://ausfoodnews.com.au/2014/08/11/coca-cola-launches-small-250ml-can-range.html http://ausfoodnews.com.au/2014/08/11/coca-cola-launches-smal...
- bjterry 11y agoArizona Iced Tea (used to?) have a prominent $0.99 price on the label and I occasionally saw it for sale at gas stations for substantially above that price, on a percentage basis, e.g. $1.69.
- hammock 11y agoFor those interested, fixing the price is called "resale price maintenance," and fixing it at an unsustainable low level to force someone's hand is called "predatory pricing," and it happens.
- paulpauper 11y agoWhen people bemoan how things were cheaper back in an earlier time, they are often forgetting to take into account: CPI Inflation (when adjusted for inflation, these 'cheap' things are often as expensive as they are today) this is seen with the movie ticket example http://greyenlightenment.com/debunking-the-gold-standard/ http://greyenlightenment.com/debunking-the-gold-standard/ Maybe some things are a little more expensive, but it pretty much all evens-out. Improved Utility (you get a better product despite the higher nominal price) New products (your dollar buys things that didn't even exist even as early as generation ago) Expenditures such as food & energy constitutes a smaller percentage of income than generations ago.
- brianwawok 11y agoI question things like "Improved Utility" Sure things have more buttons now. But are they better? A washing machine from the 60s lasted 20-30 years. A washing machine from the 2010s lasts 5-7 years. (On the flip side, pretty much any car from 2010s will last 15 years, whereas a ford from the 60s might last 5)
- lfowles 11y agoThe 60s washing machine likely uses 4x the water and energy of the 2010 washing machine though. While it may not outweigh the total cost to create a new washing machine every 5-7 years, it's a direct improvement for the consumer. Top google result: http://www.landtechnik-alt.uni-bonn.de/ifl_research/ht_7/huw3_2005124_131_oldwm.pdf http://www.landtechnik-alt.uni-bonn.de/ifl_research/ht_7/huw...
- crdoconnor 11y agoI'd swap my smartphone for affordable education, housing and healthcare any day.
- jsight 11y agoI wouldn't swap healthcare of today with healthcare from the 60s, though.
- 11y ago
- paltman 11y agoImagine how expensive coke would be without the US corn subsidy.
- benihana 11y agoMexican Coke isn't any more significantly expensive than US Coke.
- nowey 11y ago355ml glass bottle in mex costs 6 pesos, or 0.30usd, while the plastic bottle version at half a liter goes the same price. cans can go as much as 10 pesos in vending machines. 2L plastic is around 25 pesos or $1.50USD. I don't buy soda so my numbers may be off by 10%.
- TazeTSchnitzel 11y agoIt wouldn't be more expensive. Coke uses HFCS because of the corn subsidy. If that went away, they'd surely revert to sugar.
- jessaustin 11y agoIn that case we'd probably just import real sugar. Agricultural handouts lead to more agricultural handouts.
- searine 11y agoAnd less dead poor people! But we don't care about those. Your hipster sugar is more important.
- jessaustin 11y agoI support giving poor people any amount of money (or food, I guess?) directly. I don't support messing up the commodities market (and numerous other things as a result) for the alleged purpose of feeding them HFCS. Did you infer "hipster" from the italics?
- grecy 11y ago> At one point, the head of Coca-Cola asked President Eisenhower for help. (They were hunting buddies.) That line tells you everything you need to know about how big business gets what it wants from government.