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Comment by leetcrew | Hacker News Reader

this is kind of disingenuous. the "bill of materials" for a bottle of soda may be measured in cents, but most of the $1.75 you pay at the store is the cost of getting it there and storing it. it's not a phenomenally profitable business.

but besides that, people actually enjoy drinking soda. I certainly do from time to time, and I don't find the price unfair.

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Uhhh, yes, soda is phenomenally profitable, especially considering all the accounting loopholes to make expenses appear far higher than reality (not that this is unique to any given corp).

> CocaCola revenue for the twelve months ending March 31, 2023 was $43.493B

> CocaCola net income for the twelve months ending March 31, 2023 was $9.868B

> CocaCola net profit margin as of March 31, 2023 is 22.69%.

https://www.macrotrends.net/stocks/charts/KO/cocacola/revenu...

(note I also specifically argue that soda is nearly free to produce, not nearly free to store, or transport, or market, etc.)

> CocaCola net profit margin as of March 31, 2023 is 22.69%.

Which means that it costs them $1 to produce every $1.23 of soda that you purchase. This is a long-shot from being "nearly free" as you claimed earlier, and materially different from "asking for money in exchange for nothing".

I’d like to know what it costs if you remove advertising and any other cost that doesn’t directly contribute to getting sugar water into the bottle.

It doesn't actually though. Like someone else mentioned, they spend an untold amount of money on advertising. Like $4 billion in 2022, aka 10% of their revenue. https://www.statista.com/statistics/286526/coca-cola-adverti...

That's not a cost to produce their product, or even ship it, or store it. That's strictly just "buying more customers", which has no bearing on my initial claim - that soda is extremely cheap to produce.

Well if you want to ignore things like advertising and other administrative expenses (which are necessary when running a global beverage company), you will still find that their Costs of Goods Sold is 40% of their revenue: https://investors.coca-colacompany.com/filings-reports/all-s...

Again, materially different from asking for money in exchange for nothing.

> Which means that it costs them $1 to produce every $1.23 of soda that you purchase.

That's not correct. The $1.23 you pay at the store includes wholeseller/distributor and retailer margins. The wholesale price of that soda is maybe a quarter of the retail price. So for Coca Cola the bottle the production cost and shipment to a distributor was less than 20% of the retail price.

So why do fountain drinks also cost $1.50? Fountain drinks are shipped as concentrated syrup in boxes, costing much less to store and ship.

the concentrated syrup is indeed much cheaper to get to the retail location, and typically the retailer does make a large margin on fountain drinks. at a restaurant, this typically offsets the very tight margins on their other offerings, similar to alcohol.

tangent: I've been to some restaurants that charge $5+ for a fountain drink, presumably to mitigate the lost profit on alcohol. it would be interesting to know why the business model is that way, instead of just pricing a moderate profit into both food and drink.

In regards to your tangent, it's because drinks are not the attraction, so people are relatively price-insensitive to (or price-unaware of) them. People think "I want a burger", price-compare burgers, and choose the place with the $5 burger over the place with the $7 burger. They don't notice that their side and their drink are each $1 more at the $5-burger place, and that both meals cost the same at both restaurants. Instead they think "geeze, I'm glad we went here. Who'd pay $7 for a burger? That place is a ripoff."

That's only compounded by the tendency for drinks and sides to be impulse-purchases - easy up-sells that no one walked in intending to consume. And, if choosing the $5 burger has maybe embedded the idea that your place is "cheap", then so much the better, as that makes them likely to spend a little more than they would have at the other place: "I saved $2 on the burger, so I can afford an extra side!"

Tl;dr: Commodity restaurants are trapped in an equilibrium where food has to be a loss-leader for sales of drinks and fries.

The sugar lobby makes it far cheaper than it should be. Kind of funny seeing Americans subsidize their own diet destruction.

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