The President of Coca-Cola tried to get two lawyers out of his office and ended up having to sell Coke for 5 cents a bottle for 70 years. Here's the story...
In 1899, two lawyers paid a visit to the president of Coca-Cola. At the time, Coke was sold at soda fountains. But the lawyers were interested in a new idea: selling drinks in bottles. Rumour has it that the president of Coke signed the contract just to get the guys out of his office.
However, according to the terms of the deal, the lawyers would be able to buy the syrup at a fixed price. Forever.
If you could somehow keep the sale price of a bottle down to 5 cents, you could sell as much syrup as possible to the bottlers and prevent them making much profit.
Coca-Cola couldn't just go and slap price tags on the bottles of Coke saying "5 cents." But they could paint a giant ad on the side of a building right next to the store that says, "Drink Coca-Cola, 5 Cents."
Suddenly everyone’s drinking cheap Coke - year after year. You’re forced to sell the syrup cheap to the bottlers, but in turn, they can't make a profit either. You can constrain the sale price with your ads until the bottlers are forced to come back and negotiate.
But here’s the second problem: You’ve managed to renegotiate your contract. Time to cash in on Coke sales, right? Wrong. You’ve put billboards up everywhere saying Coca-Cola is 5 cents. It’s always been 5 cents. Now demand is pegged to that price.
Coca-Cola wasn’t able to increase the price until America came off the gold standard, and inflation shot up to 20% after WW2. Everything became more expensive, so no one noticed the price of a Coke flying up. It only took 70 years.
Your ability to make good decisions, fast, under pressure, is your greatest point of leverage.
