One of the most competitive aisles in the supermarket is the drinks aisle although looking at the aisle two companies dominate – Coke and Pepsi. The two companies Coca-Cola and Pepsi are billion dollar companies which advertising budgets to match and because they are so big, people try to invent new drinks every year. If you examine the industry, none of the giants can sit back and relax for they will lose market share to the latest trend. Both Coke and Pepsi are essentially sugar and water plus extra, although for people who buy one or the other, there is a difference. When one of the ingredients is sugar and issues with growing people’s weight, the companies have to come up with semi solutions.
In an article by Reuters, Coca-Cola has come up with Coca-Cola Zero Sugar and reduced the size of its cans. You can enjoy your can of Coke, it a smaller can and be healthier. It is also healthier for Coke because the margins on the smaller cans are greater than the large cans. It should be noted, many years ago when John Sculley was President of Pepsi, he tried larger bottles of pop, at the time Coke had one size and only one size (similar to Ford and the Model T in black). Consumers loved the larger sizes and we have had large sizes since the 1980s. Coca-Cola had to match Pepsi, did not change the formula just the bottle size and the company was competitive once again.
Linking to dividend paying stocks, while it looks like companies have advantages when the consumer is the driving force for the product, it means the company has to remain connected to the consumer and over time consumer tastes change a bit. The bit is the large profit and you can measure if consumers still like the product by watching the grocery aisle when you shop.
There are more questions than answers, till the next time – to raising questions.