Ben Gilbert

Yes, definitely one of the dumbest deals ever, if you just look at it as it was in that moment, but would be sort of Coca-Cola's second great business model innovation after couponing.

And Candler's like very anti-bottling, right?

Yes, he is extremely skeptical.

But this five cents per bottle, operating a bottler is a tougher business than operating the soda fountain in this respect because there is one meaningful additional cost, the bottle itself.

And gosh, there's got to be something in there about how that $1 per gallon could change over time, right?

Nope.

No, there is not.

So the Coca-Cola company, as long as this bottler continues to satisfy the demand and doesn't violate any of the other terms, is obligated to keep selling syrup at $1 per gallon to the bottler.

In fact, they're not doing any different advertising.

They're just amortizing the cost of the same advertising against one more touchpoint that they could have with the customer.

They're still painting the same barns.

They're still putting up the same signs.

And at this point in history, in 1900, the Coca-Cola company is still just 20 employees.

So they're about to get ridiculous leverage on just a handful of people that work at the parent company.

And that includes making the syrup.

It's a small head office.

It's a kind of low margin, very upfront capital intensive thing to bottle Coca-Cola.

That have no contractual relationship with the Coca-Cola company.

They have a relationship with this quote-unquote parent bottler company.

This is the ultimate rent seeker.