Why a bottle of Coke cost 5 cents for 70 years

Excerpts from a Cool Culinaria story follow.

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One of the ways Cool Culinaria dates a vintage menu is by looking at the prices of the food and drink on offer and comparing them to other years. We could never work out why the cost of a Coke remained at five cents through several decades until we heard a fascinating piece on NPR by David Kestenbaum. He reported that the price remained at a nickel throughout three wars, the Great Depression and against the onslaught of competitors because two lawyers bought the bottling rights in 1889. Two Emory University Economists, Daniel Levy and Andrew Young, investigated the fascinating story of the price of Coke in their paper: "The Real Thing:" Nominal Price Rigidity of the Nickel Coke, 1886–1959" after a visit to the Coca Cola Museum in Atlanta alerted them to this strange price anomaly.

This is what they discovered. In 1899, when the drink was only being sold in soda fountains, the two lawyers went to the President of Coca Cola and pitched the idea of it being sold in glass bottles. The then-boss of Coke didn't believe this new-fangled idea would catch on and he agreed to sell the lawyers the syrup to do it — at a fixed price. The professors noted that he probably just wanted to get the pair of persistent lawyers out of his office so he signed the paper without thinking through the consequences.

Bottled drinks took off, of course, and Coca Cola found itself in a sticky situation. If the bottlers raised the price of bottled Coke they would get all the increased profit and the Coca Cola Corporation wouldn't get a penny. The company got around the problem by blitzing the country with advertising signs promoting Coke at five cents a bottle and were thus able to stifle any price rises.

Another complication in raising the price arose when Coke began to be sold in vending machines that could only accept nickels. The company thought about changing them to accept dimes but quickly realized that doubling the price would be hugely unpopular. In desperation its executives asked the US Treasury Dept and President Eisenhower if they would consider issuing a 7.5 cent coin. The idea was nixed. Not even the world's favorite soft drink has that kind of pull. The contract was eventually renegotiated and the price of Coke began to rise after 1959.

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[via NPR]