Ben Gilbert: commitment

Transcript context

…Yeah, he started that in the 1920s. He also realizes, wait a minute. This bottling franchising operation works pretty well here in America. Pretty sure we can do it overseas too. So during the 1920s and 1930s, he goes to Europe, to South America, starts setting up international bottlers there. Same model. Local entrepreneurs, locally-owned businesses, with every incentive in the world to push Coca-Cola. Now, there is still that one term of the deal that was we will always sell a gallon for a dollar. That starts to become problematic with inflation. You want the ability to change the price at some point over several decades. It’s pretty interesting to think about the two sides of the coin of having to sell it at $1 in perpetuity. The con is obviously, well inflation’s going to happen, so our margins are going to get squeezed, where it’s just going to cost more and more and more To make Coca-Cola. The bet that they basically were making is, well since we can’t raise prices at all, we need to scale, to amortize all of our fixed costs and get greater and greater economies of scale on manufacturing. It forced them into this massive scale mentality that they were already in. They wanted to be the one Coca-Cola for the world. But this really backed them into that strategy as you don’t have another strategy. Your economies of scale in manufacturing need to outpace inflation, so get going. The flip side of it is, it was also in the contract that the bottlers had to sell to retailers at the enforced retail price of 5¢ a Coke. As we get into the depression, that becomes a huge lever against potential competitors.…

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