Trivia 003: The 7.5 cent coin that never was

One is a single event. Two is a coincidence. But three? Three is a pattern. Welcome everyone to the third installment of my weekly trivia.

As anyone who has studied economics knows, the value of currency changes over time. The prices of goods and services fluctuate, as do people’s wages. This means that the purchasing power of a dollar (or any other currency) fluctuates. Most of the time, things tend to end up costing more. These are the basics of inflation. So you know what you probably shouldn’t do? Make the one item you produce always cost the same amount, no matter what. However, this is exactly the situation Coca-Cola found themselves in for the first 60 years of their existence.

Currently, a glass bottle of Coca-Cola will run you about $1.50. But back in 1886, Coca-Cola cost a mere 5 cents. Its creator, Dr. John Stith Pemberton, did this to compete with other sodas which marketed themselves at 6 or 7 cents. This pricing persisted through 1899 when the bottling rights were purchased by Benjamin Thomas and Joseph Whitehead for just one dollar (which was never collected). As part of the agreement, the Coca-Cola company agreed to sell the syrup to the bottling company and soda fountains at a fixed price. Forever. In business circles, they call this a “bad idea”. The Coca-Cola company quickly realized that because they were selling their syrup to the distributors at a fixed price, if the distributors raised their prices, the amount of Coca-Cola sold would go down. The distributors might be making more money, thanks to the increased price, but the Coca-Cola company would start making less money. Their solution? Blanket the nation in an advertising campaign that stressed that Coca-Cola only cost 5 cents. The Coca-Cola company couldn’t set the prices, but they could make everyone else think the prices were supposed to be 5 cents. And it worked! At least long enough for Coca-Cola to renegotiate the contracts.

But because it took so long for things to change, another problem cropped up. Vending machines. By 1950, it is estimated that Coca-Cola owned 85% of all the vending machines in America. And most of these vending machines were designed to take a single coin – a nickel. Coca-Cola tried many ways to get around this bottleneck without having to replace all their machines. They did not want to have to double the price to the next available coin – a dime. Nor did they want people to have to put multiple coins into the vending machines. One crazy solution was that one in every nine bottles loaded into the vending machine would be empty – an “official blank”. I’m shocked that such an idea which would certainly infuriate customers even got near the drawing board.

But perhaps the most insane solution was to change the US’s monetary system by introducing a new 7.5 cent coin.

Woodruff submitted a request in 1953 to the newly elected President Dwight Eisenhower (his hunting companion and friend) himself, to get the U.S. Department of Treasury mint a new 7 1/2-cent coin. Eisenhower forwarded the request to the Treasury Department officials who did not like the idea. A handwritten note made by Robert W. Woodruff on his letter dated October 22, 1951 and addressed to Ralph Hayes (Robert W. Woodruff Papers, Special Collections, Emory
University Library), suggests that Woodruff also contemplated a 3-cent coin. This would “enable” the Company to increase the price of Coke to 6¢, so that with vending machines, and otherwise, the public would only need to use two coins of a single denomination.

Things started to become especially troublesome in the 1940’s with rising inflation. It also didn’t help that in 1951, Dr Pepper (the clearly superior soda) sued Coca-Cola for selling their product below cost. In 1950, Coca-Cola started being sold for 6 cents in some places. In 1951, Coca-Cola halted all advertising of the price being 5 cents. And by 1959, the last 5 cent Coca-Cola was sold.

The moral of this story? If you’re friends with the president you can convince him to change the nation’s currency to help your business out.

On a side note, I bet most people have heard that Mexican coke tastes better than American coke (insert joke about drugs here). After all, Mexican coke is made with real cane sugar, none of this high fructose corn syrup nonsense. However, I have bad news for everyone who enjoys that taste. It’s all a lie. Or, at least, it is now. In 2013, a major Mexican bottler announced that they would no longer be using real cane sugar. And even before that, in 2012, a scientific study found that Mexican coke did not contain sucrose (sugar), but instead glucose and fructose (found in corn syrup). Evidently if you want to get the good stuff, you have to go to New Zealand.

Finally, here’s a quote I found about Dr Pepper moving into the Japanese market to take on Coke.

“Jumping into Japan was like waving a red flag,” says Richard McStay, formerly research director at Atlanta’s M. Irby & Co., a securities firm. “To Coke, Japan is motherhood, virginity, apple pie or anything you want to call it. All along Coke had been saying, ’Don’t mess with Japan, fellows.’”

What a weird way to put things.

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