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It’s the Real Thing: The Economics of Coca-Cola

On this day in 1892, The Coca-Cola Company was incorporated in Atlanta, Georgia and since then continues to “refresh the world and make a difference.”

Coca-Cola like many other giants started out as a humble enterprise, when Dr. John Stith Pemberton, a resident of Atlanta produced the Coca-Cola syrup which he sampled in Jacobs’ Pharmacy for five cents as a soda fountain drink.  The syrup enhanced by the carbonated water was described as delicious and refreshing, a slogan that still rings true today.

During its first year, Coca-Cola would only sell a measly average of nine drinks a day.  Not realizing the potential of his product, he gradually sold shares of his business to various partners and eventually the remaining interest to businessman, Asa G. Candler.  Candler, realizing the untapped potential of Coca-Cola, bought out other business partners and eventually acquired complete control.  His innovative business acumen and distribution methods grew the company, and he eventually marketed Coca-Cola as a soft drink to distinguish it from hard liquor.


From then on, Candler was known as the father of the soft drink industry with Coca-Cola Company as the leader.  So what’s the recipe behind Coca-Cola’s success sans cocaine (yes, the original formula may have had some cocaine)?


The brief answer to the question: Happiness, or more specifically, the pursuit of happiness.  Coca-Cola’s marketing campaigns involve selling “moments of happiness” wherever you are. Moreover, many of Coca-Cola’s campaigns involve sharing the experience with others.  And there seems to be an economic effect to this:  happiness results from prosocial behavior and positively correlates with trust, while negatively correlating with selfishness.  Coca-Cola also conducted their own study on happiness and found that human contact brings the most happiness, especially in this increasingly digital world.


In fact, Coca-Cola’s most successful campaign thus far was the “Share-A-Coke” campaign.  In the early 2010s the soft drink industry was experiencing stagnating growth due to health concerns surrounding high sugar carbonated drinks.  Around 50% of teens have not tasted a Coke and view it as outdated and old.  So one day, Coke vending machines and retailers everywhere suddenly sold Coke cans and bottles with people’s names on it.  Imagine having your own personal Coke, and even better finding your friend, family and loved one’s name on it to share or send over.  

And of course, there is a behavioral economics explanation to this phenomenon and is explained by the liking bias.  By personalizing the packaging, consumers feel emotionally connected to the brand (imagine, your name on their website, billboards, etc).  This positive effect about the brand is even more enhanced by sharing it with your loved ones either in person or in social media.

It is no doubt that Coca-Cola is a corporate behemoth.  It is no wonder that 10,000 soft drinks from Coca-Cola are consumed every second globally (except in Cuba and North Korea where Coke is never sold).  And their secret sauce, or syrup in this case is the timeless, simple and enduring slogan of “Happiness.”  After all isn’t that what we humans regardless of how irrational we can be, are in pursuit of?




The Gist…

  • Coca-Cola’s secret to its success is one clear message: Happiness 

  • The liking bias fueled by personalization and shared experiences lead to brand loyalty.  This cognitive bias and used effectively by Coca-Cola’s marketing team to respond to decreased brand awareness from the younger market.



























Image Sources:

https://www.coca-colacompany.com/about-us/history#:~:text=The Origin of Coca‑Cola,new drink in the beginning.

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