Hot day fizz

10th February 2006 at 00:00
Ticket touts know all about it, and anyone buying a holiday in August will quickly master the general principles. In common parlance, it is called "the law of supply and demand", and it states that if more people suddenly get the urge to buy a commodity, then its price is likely to rise.

Take a can of pop. On a hot day beside a crowded beach, anyone with a fridge and a kiosk can charge whatever they like. But when temperatures drop, so does that mark-up.

In the case of a drinks machine, of course, there can be no such flexibility -no instantly adjusting the price to suit changing market conditions. Or can there?

In 1999, in an interview with a Brazilian magazine, Douglas Ivester, chairman and chief executive of Coca-Cola, mentioned in passing that the company was evaluating a computerised vending machine that could change the price of a can of Coke in line with outside temperatures. "Coca-Cola is a product whose utility varies from moment to moment," he pointed out.

On a hot day, people's desire for a cold drink increased. "So it is fair that it should be more expensive. The machine will simply make this process automatic."

In terms of economic theory, it was indeed a simple matter. But in terms of public relations, it turned out to be the company's biggest blunder since the disastrous launch of New Coke some 14 years previously.

The story was highlighted by news media around the world and soon editorials and chatrooms were fizzing with discontent.

A Pepsi spokesman told reporters that the idea sounded exploitative, and the word "gouging" cropped up more than once. Given the choice between a drink whose price was rising and a rival whose price was static, Coke drinkers, it now seemed, would pick the latter on principle.

Not surprisingly, Coca-Cola was quick to reassure customers. It was exploring "innovative technology and communication systems" that could improve product availability "and even offer consumers an interactive experience," it said. But no way would it be introducing machines that charged more in hot weather.

David Newnham

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