“Something under a dollar is attractive,” and knowing exactly how much more a drink is going to add to your lunch offers a sense of security. “It’s been like that since cavemen, the 99-cent price point was exciting then, and it’s exciting today,” he said. Vultaggio has his own explanation for the 99-cent appeal. Surprisingly, this affinity for 9s holds even in online shopping, in which digital payments don’t require exact change. But when they do jump, they jump big - 10 cents, to land on another nine, or even further. “If you look at these 9s, they’re much more rigid,” Chen said, as retailers resist edging up by one or two cents and losing the supposed psychological benefit of that final 9. Haipeng (Allan) Chen, a professor of marketing at the University of Kentucky’s Gatton College of Business and Economics, studied what happened to prices in Israel during a period of runaway inflation in the 1980s. More generally, economists have shown that prices that end with a 9 are more resistant to change across the market, even when inflation is raging. The end result, however, was a world-spanning soft drink empire geared toward volume, not margins. Then, when the company managed to renegotiate, there was so much five-cent price advertising and so many vending machines that accepted only nickels that it took another couple of decades before Coca-Cola could break the nickel’s spell.
Arizona drink net worth series#
The Nickel Coke phenomenon developed in a different retail era, and grew out of a series of accidents: first, Coca-Cola agreed to sell its syrup to bottlers at a fixed price in perpetuity, thinking bottling was just a fad. But who’s buying it, and why?ĪriZona’s 30-year run at 99 cents is exceptional, but the record for longest-holding beverage price still goes to Coca-Cola, which held the cost of a 6.5-ounce bottle at five cents for more than 70 years, from 1886 to 1959. You’ve seen the signs advertising $6.95, $6.99 or even $7.05 for a gallon of regular unleaded. “And if you break their back, nobody wins.”īusiness The truth about L.A.’s most notoriously expensive gas stations “Your company has to deal with cost increases, but your customers have to deal with cost increases too,” Vultaggio said. Vultaggio’s calculation is that raising prices and losing customers in the process just isn’t worth the short-term profit. enough to fill Echo Park Lake 10 times over. That amounts to 255 million gallons of AriZona iced tea sold, according to data from Beverage Marketing Corp. by volume in 2020, second only to PepsiCo’s slate of Lipton, Pure Leaf, and Brisk. Pure Leaf, the upscale Pepsi-Lipton label, goes for $2.09.ĪriZona products commanded nearly 16% of the ready-to-drink tea market in the U.S. An 18.5-ounce container of Gold Peak, Coke’s brand, costs $1.99.
AriZona was cheaper, but only because it contained 50% more tea per can. When Vultaggio started out, Snapple also charged 99 cents for its signature 16-ounce glass bottles. Its fruit drinks, energy drinks, bottled teas, snacks, hard seltzer, and other offerings move less volume, but have higher prices and higher margins. The company sells about 1 billion 99-cent cans each year, Vultaggio said, which makes up about 25% of its total revenue.
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