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Comment by ses1984 | Hacker News Reader

ses1984

Coke actually has regulatory protections in place. They can use flavor extracted from coca plant through a special arrangement with the dea.

Anyway they sell all kinds of varieties of sugar water, and the margins are extremely thin.

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Margins are thin?

"Coca-Cola's latest twelve months Net Income Margin % is 23.1%."

"Coca-Cola's Net Income Margin % for fiscal years ending Dec, 2014 to 2018 averaged 14.3%."

https://finbox.com/KO/explorer/ni_margin

They split off Coca Cola Enterprises to achieve this.

https://en.wikipedia.org/wiki/Coca-Cola_Enterprises

I mean, the law itself doesn't say only Coca-Cola can use the coca leaves.... they just have an exclusive deal with the only company that is licensed to import it.

Does that sort of regulatory capture accomplish the same effect though? If you're a competitor in the space, you'd either a) not have any access to an ingredient you want, or b) would have to go through the trouble of finding a new company to import it AND get them licensed (which I assume is likely a difficult thing to do).

To an extent, the barrier to entry could end up so high that it's effectively _as if _ Coca-Cola has a legal stranglehold.

Yes, it does. Just pointing out that Coca Cola isn't named in the law.

The specific flavor/process of coke is protected, but you can get pretty close outside of that. Their other products are often indistinguishable (e.g. sprite/sierra mist). The value there is the brand, not the specific flavor.

The special dispensation for Coke works on a branding level: "we have a special process dating back to 1890".

I'm not sure if this is how you're defining brand, but the real value is in their exclusivity agreements with restaurants and (some) grocers.

This is the reason any restaurant that doesn't just resell soft drinks they bought at the grocery store only sells either Pepsi / Coca-Cola.

It would be really interesting to see what kind of rates major chains/conglomerates (E.g. McDonalds, Subway, 3G, Recipe Unlimited, etc.) get for their soft drinks as these guys are big enough that they can probably push their own soft drinks and really bite into Coca-Cola/Pepsi's turf.

FWIW, the exclusivity agreements only work because they interact in a virtuous cycle with the incredible amount of effort Coca-Cola has put into building their brand with consumers. Nobody signs exclusivity agreements with PC Cola[0].

[0]: http://www.presidentschoice.ca/en_CA/products/productlisting...

Wendy's does have their own "Dave's Sodas" brand.

Did I read that correctly. The margin on coke are thin?

If you think the margins aren't thin, why don't you swoop in and undercut them?

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