Why Coke Cost a Nickel for 70 Years

An oilcloth sign advertising Coca-Cola from 1905.
The Coca-Cola Company

In 1886, a bottle of Coke cost a nickel and the price stayed the same for 70 years. Even in the face of war and increasing competition, the price of a bottle of coke remained a nickle. But why? How? Fundamental economic theory posits that inflation is inevitable.

Early in company history, Coke was sold at soda fountains. But a group of lawyers had the idea of selling drinks in bottles, and then posed the deal to the president.  The deal was the lawyers bought the bottling and selling rights for Coca-Cola. According to the terms, they could also buy the syrup at a fixed price forever.

As bottled drinks grew in popularity, Coca-Cola faced a profit wall. Competitors could raise prices for more profit or to balanced costs, but Coke could not reap any more than a nickel. Since the companies contract required a locked in price, it developed a new strategy: sell as much syrup as possible to the bottlers and then flood the market with advertising that prominently featured the five cent price. It became such a phenomenon that retailers didn’t want to raise the price and risk losing customers altogether.  Since the company could not increase price, it sold as many Cokes as possible, building its empire around the globe. When the contract was finally renegotiated, Coke still had one more hurdle to overcome; vending machines only accepted nickels. But before the company could determine what to do, inflation won out ending the 70 year price ceiling, with the last nickel bottle selling around 1959.

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