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The True Cost of a Can of Coca-Cola®
Publish Date: Tue, Jun 27th 2006
Tags: business, money, oil, economics, sustainability, coca cola, coke, true cost economics, contract distribution, non-renewable resources
Coca-Cola: Get It While It's On Sale!

Laramee Land is a fictitious place (it exists only in my head). It's a wonderful place really. In this land, there are ten laws I'd like to think that make Laramee Land a reasonable, if not interesting, place to be. In this article, I'd like to cover Rule #9, the "offficial text[1]" of which reads like so:

Laramee law #9: True Cost Economics is the basis on which the cost of all things is determined.

The best way to understand this law, as well as it's implications[2], is by example, so in this article I'd like to examine what the true cost of a can of Coca-Cola® might be using True Cost Economics.

The True Cost of a can of Coca-Cola® would need to take into account the following set of aggregate costs (the percentage of each one that eventually accrues in the ultimate cost of a single can):

  1. The cost of acquiring the ingredients that go into the actual beverage, which include mostly water and sugar:
    • The cost of the water is mostly measured in transporting it (via trucks [gas/oil/diesel] or pipelines/viaducts), and the lost opportunity costs for piping it into both villages for drinking water and onto farms for irrigation (like these nice people articulated so very well).
    • The cost for the sugar, which is also measured in transporting it, generating the raw materials, harvesting and processing them, as well as related environmental destruction.
  2. The raw cost of acquiring the aluminum necessary to make the can, both in terms of energy consumed, waste generated, and environmental damage (strip mines, mountain top removal, etc).
  3. The cost of the energy consumed (electricity mostly) and waste generated by melting down the aluminum and rolling it out (waste oil from the hydraulic rollers and cutters, etc), including, if some of that is electricity is generated by a coal-fired power plant:
    • The cost of acidification of lakes from sulphur emissions.
    • The cost of birth defects from exposure to excessive levels of mercury by nursing mothers.
    • The contribution of coal-fired plants to people dying prematurely from exposure to coal-fired emissions like soot.
    • The lives of miners who die acquiring coal.
    • The cost of using a non-renewable resource.
    • (etc)
  4. The cost of the energy consumed (gas/diesel) and waste generated (CO2, oil on the roads, etc) in delivering that can from wherever it is manufactured to wherever it is that I can buy said can[3].
  5. The cost of that can ending up in a landfill or, the cost of recycling that can so it may be reused.
  6. The cost of all of the media and advertising that the Coca-Cola® company generates to sell that can of Coca-Cola®[4]. This cost is based on:
    • Acquiring paper on which to print.
    • Disposing of nasty chemicals related to both bleaching paper and producing ink.
    • Environmental damage from paper processing plants.
    • (etc)

Add it all up, it's about $42.17 per can.

That's quite a cost. It makes me wonder if we need Coca-Cola® around at all, given that its creation and distribution is based almost entirely on non-sustainable resources and processes. The answer for the Coca-Cola® company (that I not violate Laramee Land Rule #1[5]), is to decentralize the production of Coca-Cola® so it is created in the place wherever people want to drink it.

This article (which isn't the exact article I was looking for, but it's close enough), talks about what's known as contract brewing ... just extrapolate contract brewing to micro-contract brewing and you'll get the basic idea.

In this MO, the formula for Coca-Cola® is distributed to local areas where people can acquire the requisite ingredients locally and then assemble the Coca-Cola® for local distribution. This new paradigm will necessitate sustainable practices, as if you don't have any water, you can't make Coca-Cola®, same goes for sugar. As well (and most importantly), it eliminates the shipping requirements, as the raw materials and gathered and assembled locally, as well as the final product being consumed locally.

It also gives local residents power to distribute Coca-Cola® in more reasonable containers than aluminum cans ... I could go so far as to have no containers, other than a drinking mug you bring up to the tap and pour your Coca-Cola® into the cup ... the same mug you've used for 1,000 glasses of water and 1,000 cups of coffee.

That would be pretty rad.

--tom

[1] There is no official text per se, though you have to admit it makes things seem a but more "official" (for lack of a better word) to suggest that there is an official text - yeah?.
[2] That is, if you're considering visiting Laramee Land(i), it's probably best to brush up on the ten laws(ii).
  1. Not sure how this is possible really.
  2. The monkey wrench here being that the complete "official text" of all 10 laws is, as of this writing, unreleased.
[3] It's going to become very clear that any product that involves the use of motorized vehicle incurs a relatively large True Cost. The reason being that trucks, cars, and buses depend on oil, for which the true cost is based on such factors as:
  1. The cost of using a non-renewable resource.
  2. The environmental damage from both oil tanker spills and the slow poisoning of the ocean (e.g.: Elliott Bay) as car and trucks drip oil onto roadways, which is then washed out into the bay by the rain).
  3. The cost of waging wars (e.g.: the Iraq war, est. to be $100B in 2006) to acquire oil and keep it flowing.
  4. The cost of disposing the by products of oil refining including oil refinery pollution.
  5. The percentage of the cost of internal combustion engines towards global warming.
  6. The cost of people dying in places like Nigeria when an oil pipeline springs a leak and 300 people are burned to death while trying to collect oil to make money to feed their families.
  7. The cost of all of the people killed on the roadways each year by trucks that drive over them.
  8. The true cost of cars and trucks ending up in landfills, which is where they all go eventually.
  9. O(etc)
Each one of these has a non-trivial True Cost Basis (TCB) itself. Take waging war for example:
  • The cost of environmental destruction related to testing our own weapons of mass destruction, as well as for disposing of them afterwards
  • The cost of birth defects at home and birth defects abroad, and infant deaths in countries where we use our WMDs.
  • The cost of acquiring the raw materials to build our armies.
  • The cost of destroying entire cities during war.
  • The cost of caring for veterans of wars who have lost limbs, or their eyes, or have been burned, or have broken backs as a result of serving their country during wartime.
  • The cost of children in Afghanistan stepping on landmines and either dying or losing their limbs.
  • The massive amount of energy consumed, both in terms of acquiring raw materials, processing them, developing technologies, testing the technologies, disposing those technologies that are obsolete, etc.
  • The cost of dealing weapons to other countries, which then turn around and use the arms to attack us.
  • The cost of defending ourselves against the former.
  • (etc)
So the True Cost for any product or technology that involves oil/petroleum in any way has a massive and complex TCB that cannot be ignored.
[4] I haven't completely convinced myself that this is a "direct cost", meaning, it's more of a peripheral and/or tangential cost. Therefore, I didn't include it in the final cost calculation (for those of you who are doing the math at home).
[5] Laramee Law #1: There can be no manifest empty criticism(i). What this means is that the prevailing idea reigns, no matter how bad of an idea it is(ii), (iii).
  1. Said another way, in order for an idea to become the de facto "best idea", all you need to do is propose a better idea, but the idea of simply "removing and idea" with empty criticism is disallowed.
  2. Said yet another way, just ripping on an idea is not allowed.
  3. Said a third [and hopefully final] way, doing nothing is not an option in any situation, as it's always possible to find a trivial (and oftentimes bad) solution, which will get you started.