How much will a 20oz Coke cost in the future with climate change?

How much will a 20oz Coke cost in the future with climate change? If delivery fuel prices grew to 400% of nominal, then the price of a Coke would balloon to $4.98.

Coca-Cola (Coke) is the world’s largest non-alcoholic, or soft-drink, beverage company. Their products are not only known everywhere, but the ice-cold refreshments can be enjoyed everywhere. However, Coke’s endeavor to refresh us comes at a significant environmental cost. Coke delivers sugary water, often in a disposable container, to far-reaching corners of the world. If externalities were taxed directly and energy prices were to rise, Coke’s operating model could be harmed or even endangered, along with other nonessential consumable providers. Specifically, this analysis will focus on the unit economics of a 20 oz. Coke for various future operating conditions based on the impact of climate change.

A 20oz coke from a vending machine for about $2 is a representative example of the many channels that Coke shares its products with consumers. This requires an incredible supply chain developed over 130 years [2]. A bottle and cap are first created using plastic injection molding and thermoforming, a petroleum based material. Water, sugar, and other ingredients are sourced to their factories. Coke already has a major initiative to focus on sustainable water practices, so those impacts will be ignored this analysis. After creating the soda, products must be carefully managed through various storage locations and transportation to ultimately land in your local vending machine or point of sale display. This latter part of the Supply Chain is where this impact analysis will focus. We’ll assume that Coke sells for $2, currently incurs $1.80 of costs, and maintain that $.20 margin.


Costs of Transportation and Refrigeration

The largest component of cost is distribution the finished goods. For this model, let’s assume that its $.65 of the cost is the fuel costs to ship the bottles throughout the supply chain. Assuming that transport does not require refrigeration, just the refrigerated vending machines still consumes five times more electricity than a typical home refrigerator with energy consumption ranges from 7 to 16 kWh/day/machine [4]. If we assume that a machine sells 25 bottles a day, that means each bottle consumes about $.10 of energy costs in the vending machine.

Changes Due to Climate Change

Rises in planet temperature will not significantly increase refrigeration costs on their own, however when combined with a potential increase in energy prices the refrigeration will scale directly. Testing increases of those costs directly increases the costs to the product. For example, if delivery fuel prices grew to 400% of nominal, then the price of a Coke would balloon to $4.98 in today’s dollar.

The New Price of Coke

With these new unit economics, Coke will have choices. Fortunately, these effects will be felt by their competitors as well. So one option is for the consumer to get used to the higher price of cold beverages over time. While climate change isn’t happening fast enough on its own to spike prices, the cost of externalities and therefore energy could change quickly which is a risk. Alternatively, Coke could prevent this change by reducing its energy consumption or moving to renewable sources faster. In reductions, technology could cool at purchase time instead of constant cooling since Coke is nonperishable. Solar panels or earned carbon credits through larger renewables investments could also diversify this risk for coke. Climate change is already listed in Coca-Cola’s financials as a risk of future earnings [1], so presumably they are already considering a future world with the true costs of refrigeration and transportation embedded.

More Generally for Consumables

As mentioned, these unit economics would apply similarly to a variety of beverages. It would be hard to imagine that bottled water could survive this change in price, since its competing with piped water. More broadly though, a drastic change in the cost of transportation energy would increase the costs of most consumables and cause a decrease in purchase parity. This is partly why efforts to implement carbon-credit or other systems have failed to gain traction. But we need an economic reason for firms and governments to curb their current CO2 and other free forms of pollution.


Exhibit 1

Coca-Cola Unit Economics

Refrigeration Model
Base Unit Economics  $0.12 kWhr
Sales Price  $2.00 16 Consumption/machine/day
20 Bottles sold daily
Inputs  $0.55  $0.10 Consumption per bottle
Miscellaneous  $0.50
Transportation  $0.65 200 kWh annual increase for every 1 degree rise
Refrigeration  $0.10 0.547945205 daily increase per degree
COGS  $1.80
 Changes in Unit Economics
Energy Price Increases
Planet Temp Rise 0% 50% 100% 150% 200% 250% 300% 350% 400%
0.25  $2.00  $2.37  $2.74  $3.12  $3.49  $3.86  $4.24  $4.61  $4.98
0.50  $2.00  $2.37  $2.75  $3.12  $3.49  $3.87  $4.24  $4.61  $4.99
0.75  $2.00  $2.37  $2.75  $3.12  $3.50  $3.87  $4.24  $4.62  $4.99
1.00  $2.00  $2.37  $2.75  $3.12  $3.50  $3.87  $4.25  $4.62  $5.00
1.25  $2.00  $2.38  $2.75  $3.13  $3.50  $3.88  $4.25  $4.63  $5.00
1.50  $2.00  $2.38  $2.75  $3.13  $3.50  $3.88  $4.25  $4.63  $5.00
1.75  $2.00  $2.38  $2.75  $3.13  $3.51  $3.88  $4.26  $4.63  $5.01
2.00  $2.00  $2.38  $2.76  $3.13  $3.51  $3.88  $4.26  $4.64  $5.01


[1] Coca-Cola’s earnings

[2]. Elmore, Bartow J. “Citizen Coke: An Environmental and Political History of the Coca-Cola Company,”

[3]. Coca-Cola’s Sustainable Water Initiative,

[4]. Vending Machine Energy Consumption


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Student comments on How much will a 20oz Coke cost in the future with climate change?

  1. This is a great article within insightful analysis! Having a massive global supply chain certainly increases the risks associated with climate change for Coca-Cola. You mentioned moving towards renewable energy sources as a potential solution. I’m curious to understand how this would work with transportation and could it be applied in other areas such as production. I know that Pepsico has a “Performance with Purpose” Sustainability strategy that has made significant progress with water conservation. I would hope that Coca-Cola has similar strategies in place to start proactively addressing these risks.

  2. Really interesting analysis.
    One of my favorite movies (CaddyShack), has a famous scene where the protagonist gets in an argument because he has raised the price of coke (in the caddyshack) from 25 cents to 50 cents – the buyer believed this to be an outrageous price for a Coke. That movie was released in 1980. It would be interesting to look at data from the last 30 years to see where Coke prices have gone relative to average household consumption or household income. My hunch is that one day in our lifetime we will pay close > $5 for a bottle of coke, but your right that day may come sooner or that price may be even higher when accounting for possible climate-induced externalities.
    I’d also be interested to see what Coke (and competitors) are doing by way of product / supply-chain innovation. You mentioned a few interesting ideas (keeping inventory at room temperature until sale), using more efficient/sustainable energy sources. One thing I know they have created is the Coca-Cola Freesyle Machine –>
    This machine has all the ingredients to make 127 flavors of Coke products through one fountain. I’ve seen it at a few restaurants and stadiums. I assume these machines are very capital intensive but inevitably become more efficient from a raw materials standpoint (think most of these drinks have some mixture of the same ingredients). However, I’m not sure it is more energy efficient – but maybe there is a version of this that will increase efficiency and sustainability? Maybe they can also create a version that bottles the beverages in real-time?
    Great post.

  3. Thanks for the interesting article and analysis, Jon. In addition to what you’ve highlighted, Coke seems vulnerable to increased shipping costs as it continues to be purchased around the globe and as its sales mix shifts to more emerging markets. As you’ve outlined, the company needs to ship to and refrigerate its product in these foreign markets which increases greenhouse gas emissions. What can the company do to counteract those emissions? Can the company change its bottling locations to reduce the greenhouse gases without increasing overall costs? Can the company partner with local bottling operations to reduce emissions? Can the company increase its minimum order quantities to reduce the number and frequency of shipments to reduce emissions? These are likely expensive proposals but worth an analysis the geographic sales mix shifts toward emerging markets.

    Another potential vulnerability for Coke is the impact climate change could have on its product inputs. Given the significant amount of sugar in Coke’s products, can the company get involved with sugar beet farmers to reduce the impact of climate change on one of its primary ingredients? Can Coke encourage, support or empower farmers to implement sustainable practices or innovate new technology of processes to reduce the impact of climate change on their crops? Regarding Coke’s bottling and packaging, American’s throw away approximately 14 million tons of plastic bottles and packaging each year [1]. Given Coke’s iconic Classic Coke bottle, what can the company do to increase the likelihood that those bottles are recycled as opposed to burned off or disposed of in landfills? Coke should consider engaging its consumers in recycling and reducing emission initiatives to slow or counter the effects of climate change on its business and the planet.

    [1] The Link Between Plastic Use and Climate Change: Essential Answer,

  4. That’s one crazy expensive soda!!! I liked that you chose to focus on the costs of refrigeration and transportation as opposed to the more widely-discussed issues such as increasing costs of ingredients (like sugar) or water scarcity. I had no idea that refrigerated vending machines consumed so much energy. This small study found that soda machines used considerably more power than copiers, water coolers, coffee machines, and regular refrigerators: There are technological innovations in the refrigeration space that have led to more energy efficient refrigerators, but I wonder what the cost would be to replace vending machines with newer, more sustainable models. As for transportation, I imagine Coke is investing a lot to figure out how to reduce fuel costs along the supply chain — from more energy-efficient vehicles for shipping, to optimizing the delivery routes. It seems like many companies will face similar issues with increasing fuel costs, and I wonder whether, in addition to investing in renewable energy sources, Coke will change their bottling locations to be closer to where the items are sold or try to source more ingredients locally.

    There’s just no way Coke can pass on all those costs to the consumer — especially when there are substitutes in the market, like Pepsi and generic colas. I’ll be curious to see what actions Coke takes over the next few years to try to protect their supply chain.

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