Hacker News Reader

Comment by hnburnsy | Hacker News Reader

Anyone notice that brand name soda (looking at you Coke) has increased almost 100% while the generic/house brand has had slight increases. I feel like Coke is testing the pricing limits of its customers especially with the smaller packaging and these prices will not come back down.

View on HN

If you check Coke's financial statements, you'll see that although revenue has risen quickly, cost of revenue has risen about as fast, leading to relatively unchanged gross profit margins (36% so far in 2022, compared with 40%+ in every year from 1985-2014 and between 33%-39% from 2015 to 2021). Word from industry press is that the rising price of aluminum has been a major driver of the increased costs.

I don't know why pricing for the generic brands wouldn't increase as much. Perhaps some stores see the large price increase in branded soft drinks as an opportunity to get people to shift to the store brands and are willing to tolerate lower profit margins to see if that strategy pays off.

Store brands have very little advertising costs, for one.

Coke spent $4B on advertising in 2021 [0], which is about a quarter of their costs. [1]

[0] - https://statstic.com/coca-cola-advertising-costs/

[1] - https://www.macrotrends.net/stocks/charts/KO/cocacola/cost-g...

I guess I must be wrong, but I'll never understand why Coke needs that much advertising. Or anything "that well known". The argument is maybe they are that well known because of advertising, but I just don't think that's the case. Maybe for a crappy product, but not a good product.

With Coke it's the quality (and consistency) of the product. I've never tasted anything "as good" as Coke. A new fresh cold can has a bite that simply nothing else has.

4 billion a year on advertising something everyone knows about...

In blind taste tests, Coke performs about as well as Pepsi. However, people still overwhelmingly seem to like Coke, so it's really because they like the brand. If they reduced advertising, their brand will slowly be eroded.

I interviewed a guy who worked at Pepsi. He said their own tests actually showed that people enjoyed Pepsi for the first sip but then preferred coke when drinking more.

Pretty sure that's because Pepsi is sweeter (the regular non-diet version). The sweetness is initially preferable, so it tends to win out in the "Pepsi Challenge" but then is overwhelming when you're drinking the whole thing.

In my case I am sure that I like Coke better because of the packaging and logo design. Red & white with an old-school cursive text focuses my brain on the spicy interesting flavors. The smooth blue Pepsi logo with the circular logo makes me focus on the sugar. That, and their various "look how cool and hip we are!" Pepsi ad campaigns over the decades always seemed goofy.

They could both stop advertising forever and I would still have those associations for the rest of my life.

Remember "New Coke"? The Coca Cola people responded to taste tests that indicated people like Pepsi better by making it more sweet like Pepsi. Sales and PR disaster ensued, famous case study in MBA courses.

https://en.wikipedia.org/wiki/New_Coke

still think it was a trick to change the formula of "classic" coke to cheaper ingredients.

I dont know if I am alone but for me I prefer Bottled Pepsi over Bottle Coke, but Fountain Coke over Fountain Pepsi

I also prefer Mt. Dew over them all so....

Blind tests sponsored by whom?

Blind sponsors

Coke’s advertising isn’t “hey this is what Coke is” it’s “hey aren’t you thirsty and don’t you remember how much fun you’ve had in the past while drinking Coke?”

I've never once grabbed a coke because of seeing a commercial. And I barely drink it because I have enough sugar in my life and don't want my kids chugging soda all day long like I did as a kid.

So I do see your point, I just don't get how that influences people. But again, I recognize it must to enough of a degree- I just don't feel like I'm one of them so it's hard to personally understand. Maybe I am, but I think I'm being objective about it.

>Maybe I am, but I think I'm being objective about it.

Sure, not every person is a Coke consumer. What drinks do you drink?

Keep in mind, a very meaningful part of Coke's (and any other CPG company) advertising budget is paying grocery stores to put their products in prominent locations.

The only reason you’ve ever drank a coke is because of these ads.

Do you think you’re immune to ads? Or that ads don’t work at all?

I think it’s reasonable that you’ve never seen an ad and consciously bought a coke, but that’s rarely the point of coke.

We’re not aware of all our subconscious motivations. I’d like to be, but it’s usually pretty hard for me to understand why I do things at a deep level.

> The only reason you’ve ever drank a coke is because of these ads.

This isn’t true in all cases. When I first drank a coke I was very young and wasn’t even aware of advertising. The first coke I drank was because my parents took me to McDonalds and that’s all they sell. Then I found I preferred it over Pepsi. Advertising had very little to do with my first coke, it was more contracts with fast food companies.

> it was more contracts with fast food companies.

Also known as 'advertising.' (Coke has an insane amount of control over how their products are sold at McDonalds, down to how the soda fountain equipment can look) Why do you think PepsiCo Bought KFC/Pizza Hut/Taco Bell (before spinning them back out as Yum!)?

Coke spends money so that every time you are thirsty you reach for a Coke, and part of that is the immense amount of work they do to make Coke the only beverage available in places like McDonalds, AMC, United Airlines flights, etc.

You have really loose definitions of advertising. At any rate I’ll say it again, advertising had no effect on me trying or continuing to drink coke. I’m not sure why you’re demanding to be right here on something so simple.

> This isn’t true in all cases. When I first drank a coke I was very young and wasn’t even aware of advertising.

Your parents were. Or whoever it was that bought that coke.

> Then I found I preferred it over Pepsi.

You "found" that either because of advertising, or because you were primed to like Coke more because of your childhood experience.

And the reason McDonald's only sold Coke? Advertising, of course. McDonald's believed they were better off selling Coke over Pepsi.

Advertising is everywhere. I try to avoid advertising as much as possible (adblockers, never watching ad-supported TV or movies, etc.) because I know how pervasive ads are, and how insidiously emotionally manipulative they can be. I know I can't make myself immune to their effects, so the best I can do is just avoid them as much as I can.

Maintaining a contract with a company is not advertising. It was simply matter of convenience. I could have easily been taken to taco bell and my first soda would’ve been a pepsi.

Coke does not pay to be in fast food restaurants. It’s the other way around. This would be the weirdest form of free advertising, but I think people are using that term very loosely in this thread.

Except when I watch broadcast TV and some TV shows with products embedded, I do not see ads. But the first time I had a coke was long before adblockers existed.

Coke is only one of their products, they probably need some advertising to promote their other 200 brands: https://www.coca-colacompany.com/brands

This comment sounds like you're getting a piece of that $4bn

Not sure what that is supposed to mean. I'm pointing out that it's a high quality product. There's a reason Coke absolutely dominates everything else out there. I guess to you I'm just a Coke shill though. Ok!

He means the reason you think it's a high quality product is that the $4B of advertising has had an affect on you subconsciously

Which is a pretty silly claim. There are great colas with far less advertisement, but they're small premium brands which cost the same or more. Store brands are typically awful, Pepsi is bad despite their advertisement budget.

Generic brands often don't come in aluminum cans, assuming the industry rumours are true.

In the US it is usually easy to find generic brand sodas in cans. Most large-ish grocery stores have them.

https://www.tomthumb.com/shop/product-details.208010001.html

https://www.kroger.com/p/big-k-cola-soda/0001111049680?

https://www.publix.com/pd/publix-cola/RIO-PCI-106059

https://www.walmart.com/ip/Sam-s-Cola-Soda-Pop-12-fl-oz-24-P...

https://www.heb.com/product-detail/h-e-b-original-cola-7-5-o...

I’ve shopped in the US for a few decades. The store brand soda has always come in aluminum cans (in addition to all the other forms of packaging coke uses).

Also, prices for coke in plastic bottles are also up.

Care to elaborate?

I'm guessing parent resides from the UK or Europe. Mostly "own brands" here come in 2 litre bottles

In my European country all own brands are available in cans.

Increase diameter couple of mm and reduce height couple of mm, will that work ?

Of course they are. There was a much-watched video that went around a few weeks ago that composed quite a few CEOs talking about pushing the pricing envelope to take advantage of inflation news (effectively saying: "People now expect price increases, we can leverage that to our gain!").

https://www.youtube.com/watch?v=psYyiu9j1VI

There's not really much we can do about this. Artificial price ceilings were tried in Venezuela and it only contributed significantly to their massive food shortages they experienced.

Most notably it resulted in a big reduction in the variety of food available because while some of the biggest companies could survive with the new lower prices (and work with the gov directly to set those prices) the bulk of small/medium sized ones couldn't, often as other expenses eventually increased while prices didn't.

I don't know. While price controls may not work in the long run, if businesses believe that there's a time-limited opportunity to raise consumer prices, you could try imposing time-limited controls until the opportunity is over. You might very well end up with lower consumer prices and thinner corporate margins, or at the very least, slow the rate at which the price increases occur.

Price controls are a pretty big deal though. Especially in a low margin industry you run the real risk of putting firms out of business and damaging supply. They're very dangerous when done wrong.

Most importantly you communicate to investors that your government does not respect the pricing mechanism of the market. That'll make investors worried about which other norms of economic stewardship your regime will violate. The uncertainty alone will be a heavy burden for the economy of a country that decides to impose arbitrary price ceilings on commodities.

There's not really much we can do about this.

Not directly or quickly, no. Fully agreed that price caps and other invasive measures are usually counterproductive.

I was only pointing out that in a market economy led by profit-seeking CEOs, pushing pricing up is expected. Listening to those clips, they sounds downright sociopathic, but it's just another Tuesday in America.

The best way to deal with this is likely ensuring workers are paid a fair living wage. And take the appropriate measures to curb the worst of the inflation.

One thing we can do is give the NLRB actual teeth to enforce its laws.

I agree that that would be a good thing, but it won't lower consumer prices.

It would create more competition, and put more money into people’s pockets.

Putting more money in people's pockets will not reduce inflation.

I don't see how it will create more competition.

Indeed, putting more money in people's pockets literally increases prices through higher demand.

Putting more money in people's pockets raises inflation, because they're willing to pay higher prices

I think the restaurant industry is going crazy with this. Yesterday I stopped at a food cart. The price of a gyro sandwich was $13. It didn't come with fries. I asked how much for a side of fries. $6. Throw in a drink and add another $2. So a sandwich, fries and drink "combo" is over $20.

And this is from a food cart, mind you - not a restaurant. And not a fancy food cart that people drive miles to try their unique food. Just a few years ago that sandwich would have been $8-9.

That's literally how the market is supposed to work and it's not a bad thing. This is not some conspiracy. Companies price test all the time. They will increase the prices until either the consumer won't purchase their product or a competitor comes in and undercuts them. Sometimes the market conditions favor the consumer, sometimes they favor the company.

The problem is companies are so big and consolidated now that competitors can't as easily come in and existing competitors were bought out.

I'm curious what keeps killing competition and incentivizing the growth of mega-corps over smaller companies?

Then buy generic. This is one way to fight inflation. Coke will get the message very quickly if their sales start coming down.

If you drink neither and choose water, then it'll really come down. Bonus: you'll feel better

And then your medical expense category of the CPI will not go up as much.

That's heretical & anti-consumerism. Be a good citizen: Drink your sugar water, blow up your healthcare costs, increase money velocity. Broken Window Fallacy for the win!

Water is healthier, but not a substitute.

Something like Spindrift is a partial substitute.

A real substitute is Izze. Less sugar, but still sugary. Tastes awesome - better than Coke.

http://blog.nawaz.org/posts/2021/Dec/taming-my-soda-addictio...

> Water is healthier, but not a substitute.

It can be, if you commit to really reducing your sugar intake. I did it, 20+ years ago, completely giving up soda. My go-to drink for every meal is water, and I drink water throughout the day from a large water bottle. I still consume sugar here and there in food (or the occasional cocktail), but I eat much less of the stuff than I used to. It's hard in the US, where everything has so much sugar, but it's doable.

The less sugar you consume, the less your body/brain will want and need it. It's like an addiction...

That's what I do. But I did not want to get too preachy towards the GP poster.

Are you assuming sugar for "feel better"?

I don't drink this kind of beverage, but from what I see in restauration, you don't really have a choice. Most fast-food and restaurant will have the "known" brand and no generic brand, so they will move the cost onto their customer.

Yes, restaurants (at least they used to) partner with either Coke or Pepsi and get things like free signage, etc. in exchange.

>Coke will get the message

Yes, you the single person going generic will definitely send a message to Coke!

Hey I get your "sending a message" concept. But you also have to be realistic. Coke is almost literally everywhere you could possibly go. A lot of times it's basically the only option aside from a grocery store. It's popularity is so high and it is to be fair a quality product, that you as the individual are never ever going to have anywhere close to a material impact no matter how hard you believe.

Also, most people agree it is objectively the superior product. So while you may save some money, you are also getting a shitter version of something that is already bad for you.

Send a message with your wallet- sure. But don't be so naive that it will actually have an impact for something like Coke. You are honestly just hurting yourself in the taste department to save a negligible amount of money. It's a no-win.

Why do you think coke cost what it does instead of $10 per can? The price is what it is because people are willing to pay it. If they don't, the price either goes down or the company goes out of business.

I understand your point on saving money. Switching to cheaper substitutes is accounted for in chained CPI. e.g. If steak becomes too expensive and more people buy hamburger instead this substitution effect is accounted for in the basket of goods. It's very rare for food items to deflate. It's usually a slow monotonic upward march.

I bet some people are buying generic now, and Coke doesn't care, because they've done the math, and have decided that losing a few customers (perhaps only temporarily) is worth the extra revenue generated by the customers who keep buying Coke at the higher price.

Yep, americans aren't nearly as price conscious anymore in general, and there are just so many that are flush with cash now due to cheap money that they still don't care.

If GP comment is right, and the price of Coke has really increased 100%, the sales would have to decrease by half before they were hurt in the profits.

Yeah, but those companies tend to track market share too. They certainly do not want to give generic brands too much air to grow in.

As a Pepsi guy, I can assure you: Coke drinkers will never switch to anything else.

I'm pretty low income ATM and I simply don't buy Coke zero or anything like that much anymore. I drink water, or tea. Loose tea is still pretty economical, even considering water and heating costs.

Yeah, coke can get expensive. I recommend you try cold brew tea, it's almost as refreshing as soda in hot days. You only leave water with tea in the refrigerator at night and enjoy it the next day.

Or make Sun Tea: https://www.simplyrecipes.com/recipes/sun_tea/

Oh, I didn't knew about that one. I'll try it, thanks for sharing!

I'm surprised to hear house brand cola still exists. My local Giant supermarket no longer ever has any in stock.

I’ve noticed this with many items. Nabisco Premium Saltine Crackers are $4.5 and Publix store brand are $1.5.

I’m not sure how much they’ve increased as I don’t remember the old price of crackers but I remember them being really cheap.

It seems odd that the inputs vary substantially between the two so is it just that Nabisco has very different labor costs? Or are they just jacking up the price because they can?

I suspect store brand have a very fixed cost-plus style of pricing where they just sell for a fixed markup over whatever their costs are and don’t really do market research for price points.

Is Pop Shoppe still a thing? http://old52blog.blogspot.com/2011/03/pop-shoppe.html

And bring back the "White Label" groceries from the 80's while you're at it. http://historysdumpster.blogspot.com/2012/08/generic-product...

The biggest crock is the increase in price of sparkling waters. Literally just carbonated water with a squirt of flavor, somehow more expensive than soda nowadays.

This doesn't surprise me much. Most of the cost of these things is the cost of packaging and trucking them around - the cost of the sugar syrup in Coke isn't adding much cost versus the sparkling water. The soda maker might have a more efficient distribution network that allows a lower cost per unit. That, and the customer who's buying sparkling water (instead of buying soda, or just plain bottled tap water) probably is willing to pay more.

That's probably because the people drinking La Croix aren't too price-sensitive. However, if you actually care about buying them with little margin, Costco has em for $0.30/can and Trader Joe's for $0.40.

Prices around here have stayed the same or gone up a bit, but the sales have dried up. You could almost always get Coke on sale at the grocery store for half the "list price" now that's much rarer.

A 20oz bottle is easily 2.29 now compared to roughly 1.79 not long ago.

This price has everything to do with what consumers will pay for convenience and almost nothing to do with manufacturing costs, which are a tiny fraction of that. (Shipping and delivery are probably more, both for energy and labor.)

Sellers do not determine the market price for anything. Buyers do by what they will pay. Sellers can specify a price, but any transaction actually happening is only determined by the buyer. (Setting the price can be intended to apply psychological manipulation to the buyer, which often works.)

If you are complaining about the prices of anything, your complaint is not with the seller, it is with other buyers who have proven they are willing to pay it.

I remember when it was $1 for almost 7 years, then went to $1.49. It hurt because now you had to feed 2 bills into machines that could barely take 1 reliably, and were always out of change.

How that didn't drive the price back down to $1 or up to $2 I'll never understand. It had to have increased labor on the parts of the vendors and decreased demand for the vendors at the same time. That's about the time I started just stocking a 6 pack or 2 liter (depending on which was cheaper per oz) in the fridge for the week, too, which drops the unit price.it also decreased the total volume of soft drinks that I bought.

I don't know how soft drinks can continue to increase in prices under that dynamic. My guess is that the majority of people just buy it and don't notice anything that costs less than $10 anymore, so convenience stores can get away with movie theater prices as long as they don't cross that trivial threshold. People will pay for convenience under $10.

As someone who use to drink a lot of coke and quit.. this is very true here (Ontario, Canada) as well.

I remember buying 2L bottles for $0.99 on a regular basis (they often had sales). I don't drink it anymore (one month and counting) but i do check the prices weekly out of habit and never see it below $2.29/2L now?

I actually just checked and it has gone up in price once again, now $2.49/2L

Crazy.

"Food at home" is up 12% year over year. Table A in the link is good reading.

What is inflation if not the capitalists raising prices?

Reply on news.ycombinator.com