What does the Coca Cola company spend the most on:
- The liquid inside a 16 oz bottle of Coca Cola?
- The bottle itself?
- The accumulated shipping costs to get it to my 7 Eleven?
- The advertising to get me to buy it?
Given that generic colas cost less than half of what Coke costs, this has to be it. The generics are paying the same for the bottle, the sugar water, and the shipping: What else is left?
The Secret Formula.
Corporate contracts and price fuxing
The profit margin, for a start. Maybe Coca-Cola makes 30 cents profit per can, and store brand cola makes 5 cents profit per can.
None of the above, actually. We know the ingredients and bottles account for only pennies. As for advertising, Coca Cola spends roughly $4 billion per year, but sells a staggering 30+ billion cases per year ( a case being defined as 24 eight-ounce units.) So even the advertising costs only work out to about a half-cent per eight ounces.
Shipping costs are trickier to figure, because they may or may not include end-to-end costs as opposed to plant-to-wholesaler costs, etc. But I found a site that says transportation is roughly 5 percent of the cost of goods sold. So let’s add a nickel on to the cost of that can of Coke you get from a vending machine.
At my local supermarket, the store brand 2-liter bottle of cola costs about half as much as a 2-liter bottle of Coke or Pepsi. Of course, Coke and Pepsi run endless promotions which pull the actual price down, while the store brand never changes its price. Even so, there’s still a sizable price difference between the name brand and store brand.
But Coke and Pepsi are supporting worldwide empires, and a sizable share of the profits their flagship brands bring in are being used to develop and prop up the various different flavors of soda, bottled waters and other products that the big companies sell to maintain their place in the market. By contrast, all my local supermarket has to do with its line of soda is keep the bottles on the shelf.
The generics actually use slightly cheaper ingredients. Like, less vanilla. A friend swore that the generic was exactly the same as the name brand, and no one could tell the difference. So a group of us set up a blind taste taste. All of us could tell the difference easily, even her. Pepsi had a richer and more complex flavor than the store brand.
I doubt that’s much of the difference, but it’s a little piece of it
Oh, I don’t doubt that most folks can tell the difference. I’m pretty sure I can distinguish between Coke, Pepsi, and RC, and in a side-by-side comparison, I think I could probably also pick out the Aldi store brand. Which is not to say that the big names are necessarily better: Of the four, I like RC best.
With the low cost of all of the ingredients, though (especially with bulk buying and vertical integration), I suspect that differences between the recipes are more just because they want a particular flavor profile than because they’re trying to scrounge a little extra profit.
As mentioned shipping isn’t much, plus a local bottler is making the soda and only shipping locally or regionally. Of generic sodas, the cola flavor is usually terrible and nothing like a name brand cola, but half the price.
A couple of other things to add to the mix.
5. Operation costs of the bottling plants and
6. Financing of operational/distribution costs.
Being part of the marketing strategy with the global brands, you need to get precisely the same stuff readily available everywhere, including places where the volumes are not profitable to service.
I think the estimates of transport costs are low.
Much like with beer, many towns/cities have their own local brand with a high barrier to the entry of “imports” being the cost of transporting the equivalent from the neighbouring town. Nobody in that game transports bulk “cola” like say petrol or other industrial liquids and then bottles it. It moves as the finished product. The trick with these products is to get the stuff manufactured/brewed and bottled as close to the end-consumer as possible, and then through marketing convince the locals that the “imported” stuff is worth a premium over the local.
I gues SOME unit has to be chosen as the standard in light of all of the different sized bottles and cans. But a 24-pack of 8 oz cans is something I’ve never seen in the wild (or thought of.)
4 six-packs in one box.
They’re probably using what they ship out, not how it gets displayed in the store.
My guess would be the shipping. Bottles probably cost more than the liquid. Selling prices have gone up quite a bit at some places, though I don’t think the manufacturing costs have proportionally (?) given frequent sale prices and the price at cost cutting locations.
During the World Wars, part of Coke’s strategy was to make a bottle of Coke “available worldwide for a nickel”. Obviously that was a specific time, but my personal belief is they still use this strategy. In any country a bottle of Coke is sold at a reasonable price compared to what the market will bear (though France charges tourists a lot; this is meant to apply at a reasonable local grocery). So I would doubt the traditional shipping cost approximation in this case. But I think they license things to local bottlers in most cases now.
It isn’t now, but the eight-ounce bottle used to be the standard. Presumably using the same size allows for comparison across time.
From 1915 until 1955 Coke was available two ways – at a soda fountain or in 6 1/2 oz bottles. The 6 1/2 ounce bottle was in use until 2012, though by then 12 ounce cans had become the primary single serving size.
I don’t think the 8 ounce bottle became a standard until 2000.
The Coke in McDonald’s and other fast food joints comes as syrup in plastic bags in a cardboard or wire cage case; it’s plugged into the syrup line in the back to feed the drink fountains. (Sometimes the minimum wage slaves get confused and plug in a Root Beer to the Cola line…blech). The restaurant also has a water filter and an industrial high pressure tank of CO2. If you get a flat drink, tell the supervisor someone forgot to change the CO2 and the tank is empty. Moose Jaw, SK, among others is notorious for it’s very salty water, and the restaurnats around town had signs “all our products made with bottled water”.
But this is why restaurants can offer “bottomless cups” or “fill your own” - the cost of the actual drink is almost nothing, the cost of a glop of syrup and some CO2. So presumably, the cost of individual 12oz containers is the bottling process, shipping and handling. The shipper sends only syrup, not large shipments of what is basically water. The restaurant doesn’t have to wrestle pallets of drinks into place, and put them neatly on shelves. If you are paying TGIFridays or Outback $2.49 for a cup of a soft drink, it’s all profit.
See this:
This is retail, 4L $32, mix 5:1 with (carbonated) water. The restaurant size IIRC was about 5 gallons.
Quick search has a 5 gallon bag-in-box syrup that, mixed at recommended ratio, yields 30 gallons of soda for $150.
IIRC a typical can today is 12oz or 355ml.
30gal = 3840oz= 320cans
$150/320 = 46¢ per can.
However, the big chains probaby get a much better deal - Coke likes the idea that McD’s or Burger King serve their product exclusively.
And presumably, a significant part of that syrup cost is what they refer to at Coca Cola as “profit”.
FWIW, Coke’s operating costs last year were $32 billion against a revenue of $43 billion. From that $32B comes $18B for cost of goods (liquid and packaging, I assume) and a little more than $4B for advertising. The other $10B would include everything else like logistics (shipping), and administration (including whatever their top execs and lawyers make).
https://www.alphaquery.com/stock/KO/fundamentals/annual/operating-expenses
Looking at all that, I’m going to guess the answer comes from that $18B; probably the bottle, especially if you add in any additional packaging.
There’s this detail, too:
The Coca-Cola Company produces syrup concentrate, then sells it to bottlers around the world–over 275 independent businesses with over 900 facilities at last count–who hold an exclusive territory in which to bottle and sell the end product. These bottling partners manufacture, package, and distribute the finished product to vending partners, who then sell the product directly to consumers. (The Coca-Cola Company owns its anchor bottler in North America, Coca-Cola Refreshments.)
With this franchising model, the franchisor avoids the costs normally associated with manufacturing, storage, and distribution of the end product.
So odds are some of the money goes to the franchised bottler unless you’re supplied by that one bottler Coke owns. Presumbably syrup buyers like restaurants bypass the bottler system.