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September 19, 2011
Coke debuts smaller bottles
The company hopes its smaller, cheaper packages will appeal to consumers on tight budgets.
The idea is to offer smaller quantities at more appealing prices. The hope is that they will resonate at a time when unemployment stubbornly sits above 9% and many households are living paycheck-to-paycheck.
It is really nice to see Coca-Cola help out the little guy during this period of great economic uncertainty. Offering smaller more affordable packages is something we all can appreciate. Their move definitely resonates with me.
I'm sure that Coca-Cola executives would like to do more but how could they? Dropping prices just isn't an option. They are up against a wall with their razor thin 30% profit margin and their most recent $11.8 billion annual net income.
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25 comments:
We drink Coca-Cola by the way.
I generally pay less than 25 cents per can for it (less than $3 for a 12-pack).
Wait for the sales. Stock up. That 30% profit margin is ridiculous.
I don't drink Coca-Cola, but am nevertheless convinced that they have made an important contribution, as does Tom Standage, who wrote A History of the World in 6 Glasses, and contends that Coca-Cola is one of the drinks that has contributed to the story of history, not in the least because it (along with beer, wine, tea, coffee and spirits) they provided on alternative to (often dangerous to drink if not boiled) water.
I was going to try to go somewhere sarcastic with that, but just don't have the edge tonight.
I am a Diet Coke addict. No coffee in morning, I get a big gulp fountain diet coke.
Disclosure: long KO in long term account.
I hate both coke and pepsi...not for the taste or their profit margins, but for the intense lobbying they do to keep soda machines in schools...this in a country where obesity among children is rampant.
And, do yo think they use sugar...naw, just high-fructose corn syrup. So, if you really want to taste coke or pepsi, you have to go to France, where real sugar is used.
So, we get a substandard product, in smaller bottles at the same price. Truly, living large in America.
Audrey,
I was actually feeling a bit guilty with your first paragraph.
You managed to calm my concerns with your second one though, lol. ;)
GYSC,
No coffee in morning, I get a big gulp fountain diet coke.
A big gulp fountain? Do you drink from it or do you bathe in it? ;)
Choose wisely!
fried,
I disagree.
When you remove physical education and music programs from schools then you've got a problem that needs a solution.
And technically speaking, mixing high-fructose corn syrup and carbonated water *is* a solution. There's no denying that.
Oops! I think I just had another sarcasm outbreak. Sorry about that!!
Mark and fellow readers, if you haven't done so yet, it's worth it to track down Charlie Munger's essay on how Coke is among the greatest companies in history. It's in Poor Charlie's Almanack and may be in other sources as well. It's a very eye-opening story. If you think the product is good for people, it's a wonderful business story. But if you're inclined to place Coke next to cigarettes on a list of "tempting but ultimately bad for you" products, then it's a very distressing example of how the great corporations exploit others.
In this case, Coke's spin on the new "smaller" sizes is horsefeathers. If Coke cared about budget-conscious shoppers it would be emphasizing "big gulp" type products with rock bottom cost per unit volume...
Meanwhile, we're glad that since Coke was invented, water has become safe to drink nearly everywhere.
Widsom Seeker,
Poor Charlie's Almanack sure isn't priced for the poor! ;)
In this case, Coke's spin on the new "smaller" sizes is horsefeathers. If Coke cared about budget-conscious shoppers it would be emphasizing "big gulp" type products with rock bottom cost per unit volume...
No joke! I'm picturing altruistic shot glasses of Coke in the distant future, you know, for the benefit of those who cannot afford a full can.
This is an interesting development.
KO has tons of margin but they don't want to give their product away. Overheads cost more than the COGS, LOL.
I'm a recovered addict of the Splenda Diet Cokes.
But them when there's a buy 2 get 2 deal going. works out to 30c a can.
But KO could lower prices 50% if they cut the advertising and profits, LOL.
Troy,
I can't really blame Coke for wanting to keep their staggeringly high profit margins where they are.
I can heckle their "resonate" theme though! ;)
Mark,
Recently had the experience of buying a new 8oz bottle of Coke at a very upscale restaurant bar in NYC. $4.50 for the pleasure. I thought to myself, are they putting "coke" back in the formula?
"I generally pay less than 25 cents per can for it": for about that price Tesco (British supermarket chain) will sell me a two-litre bottle of sparkling water. Sometimes we even get them to deliver it to our house.
When I was a kid, you could go up to a vending machine and get an 8 oz. Coke in a glass bottle for a quarter. And believe me, on a hot Texas summer day, there's nothing better than cold Coke in a bottle.
You could also get a nickel roll of peanuts for 5 cents. The great thing about that was, if you were lucky, sometimes you'd find a nickel in the peanuts and could buy another roll.
Those were the days. But that was before Coke changed the formula, made it sweeter and less carbonated, then switched to cans and plastic bottles.
These days the closest thing you can get a real Coke in a glass bottle is made in Mexico. Coca-Cola didn't change the formula in their manufacturing plants down there.
When New Coke came out, I wrote an open letter to Coca-Cola, lambasting the product, and sent it to the local newspaper. It was published first as a letter, which won the Golden Pen award, and was republished as an editorial.
The owner of the largest Coca-Cola distributor lives down here. I know for a fact that he read it. Three weeks later, New Coke was gone, replaced by Classic Coke (which is better, but not the same as a real Coke). True story.
nanute,
Recently had the experience of buying a new 8oz bottle of Coke at a very upscale restaurant bar in NYC. $4.50 for the pleasure.
Wow. That puts the premium Coke to premium gasoline ratio at roughly 19 to 1! ;)
dearieme,
You can buy any beverage for 25 cents in a supermarket chain? Fascinating.
(I meant single beverage, without it being in a multipack.)
GawainsGhost,
Great story!
The profit margin on the grocery product is around 15%. It's the fountain and institutional/vending sales where the margin is over 40%.
Charles Kiting,
I wouldn't doubt it.
I have a soda story.
When I was in college I worked at Rax for a summer.
One day one of the root beer syrup containers broke open and flooded the floor in the food preparation area.
I was told to clean it up. About 30 minutes later my boss was wondering why it was taking so long. I pointed to the mop's bucket and said something like, "I'm making a heck of a lot of root beer."
She watched me for a while and then realized the scope of the problem, lol. It took FOREVER to clean up.
"(I meant single beverage, without it being in a multipack.)" Yes, tho' I don't think of two litres as "a" beverage. Mind you, the last time we bought it as part of a delivery to our house, they limited us to 6 bottles.
They have now developed a new compromise between delivery and ordinary shopping, which we've not tried yet. You place your order over the web and they pack it up for you and then you collect it by "drive through" from outside the store during a pre-agreed time slot. But their delivery is so good - they literally carry the stuff in and plonk it on our kitchen table - that we'll probably stick to that (as long as we can acculmulate vouchers to pay the delivery charge with). It's like a return to the fifties except that they don't whistle like a butcher's boy.
dearieme,
Okay, single beverage wasn't what I meant either. I'm determined to get the wording right! ;)
You can buy a big enough beverage to cause extreme bladder discomfort for a mere 25 cents in a supermarket chain? And have it delivered to your kitchen table for free? Fascinating.
An acquaintance told us that she always asks for delivery in the last slot on a Friday evening, because that's when they are likeliest to be late. They then pay you the delivery charge by way of apology. My how we laughed.
dearieme,
LOL!
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