Why Is Coca-Cola Cheaper Than Water? The High Cost of Low Prices (2024)

The Coca-Cola Company: Nonmarket Strategies, Global Expansion, Environmental Controversy, and the Plastic Predicament

Have You Asked Yourself Why Coca Cola Is So Cheap?

The Coca-Cola Company, a symbol of corporate might, has achieved global supremacy not only through its market tactics but also through its adept use of nonmarket strategies. These strategies span a wide range, from political to social and legal maneuvers outside the traditional business competition. While Coca-Cola's role in World War II and its influence on public health narratives through funded research showcase its strategic brilliance, its environmental footprint, particularly in water-stressed areas like India and the global plastic waste crisis, complicates its standing.

Global Expansion During World War II

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The company's resource allocation during World War II to provide American soldiers with Coca-Cola was both a morale booster and a strategic expansion. Setting up bottling plants around the globe for American troops laid a foundation for Coca-Cola's enduring international market presence and is a testament to its nonmarket strategy ingenuity.

Health Concerns and Scientific Research

Coca-Cola has managed health concerns surrounding its products through strategic scientific research funding. The aim has been to shape public and policy dialogues on nutrition, playing down the links between sugary drinks and obesity, and steering the focus toward physical inactivity.

Water Resource Controversy in India

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The company has faced severe backlash in India where it has been accused of exacerbating water scarcity through its high-volume extraction practices. This has led to community protests and calls for corporate accountability, pushing Coca-Cola to reevaluate its water usage and conservation policies.

The Plastic Bottle Problem

The environmental impact of Coca-Cola extends beyond water usage to include its contribution to global plastic pollution. As one of the world's largest producers of plastic waste, including PET bottles, Coca-Cola faces scrutiny over its packaging choices. These bottles contribute significantly to landfill waste and ocean pollution, with far-reaching impacts on ecosystems and marine life. In response, Coca-Cola has initiated efforts to increase recycling and develop more sustainable packaging solutions, but these actions are often met with skepticism regarding their scale and sincerity.

Regulatory Engagement and Public Relations

Coca-Cola's extensive lobbying and regulatory interactions aim to create favorable conditions for its operations. The company's public relations campaigns attempt to portray a socially responsible brand image, even in the face of environmental critiques regarding both water usage and plastic waste production.

So Why Coca Cola Is Cheaper than Water?

The pricing of Coca-Cola compared to bottled water can seem counterintuitive at first glance. In essence, while it might seem odd that a complex product like Coca-Cola can be cheaper than water, a combination of large-scale production efficiencies, ingredient costs, brand positioning, and market forces contribute to this pricing phenomenon. There are several economic and marketing factors at play that can make Coca-Cola cheaper:

• Economies of Scale: Coca-Cola is produced on a massive scale with a highly efficient, global distribution system. The sheer volume of product manufactured and sold allows the company to reduce the cost per unit. Bottled water companies, especially smaller or local ones, might not operate at the same scale and therefore cannot reduce their costs as effectively.
• Subsidized Ingredients: The ingredients in Coca-Cola, such as sugar or high-fructose corn syrup, can be heavily subsidized by governments, making them cheaper than one might expect. This lowers the production costs compared to bottled water, which does not benefit from such subsidies.
• Competition and Positioning: There is often more competition in the bottled water market compared to the soda market, where Coca-Cola has a dominant presence. Additionally, some bottled waters are marketed as premium products, which can drive up their price.
• Water Source and Treatment: Bottled water often requires sourcing from specific springs or aquifers, and there may be additional treatments to ensure purity, all of which add to the cost. In contrast, Coca-Cola can use local municipal water supplies, which are cheaper, as the water's taste is significantly altered by the other ingredients and flavorings.
• Market Demand and Perception: Coca-Cola has positioned itself as a beverage with intrinsic value due to its flavor and brand identity, while consumers often perceive water as a basic necessity that should be inexpensive or even free. This perception allows Coca-Cola to be priced competitively, and sometimes even cheaper, without affecting consumer demand.
• Packaging and Branding: The cost of packaging for water may sometimes be higher per unit than for Coca-Cola, especially if the water is marketed as a premium product with high-quality materials. Coca-Cola's packaging costs are reduced due to standardization and volume.
• Taxes and Legislation: Some regions impose taxes on sugary drinks to discourage consumption due to health concerns. However, if these taxes are not present or are lower than expected, it may result in non-alcoholic beverages like Coca-Cola being cheaper. On the other hand, the absence of such taxes on bottled water doesn't influence its price to the same extent.
• Product Life Cycle: Coca-Cola has been around for over a century and is at a mature stage in its product life cycle, enjoying brand loyalty and repeat purchases, which allows for pricing strategies that can undercut competitors, including bottled water.

It is important to consider the sources and treatment of water. Coca-Cola utilizes local municipal and underground water sources in developing countries, often justifying this practice with promises of job creation and community development. However, this rationale can sometimes serve as a veneer for the company's water usage practices.

Be Mindful of What You Consume

Coca-Cola's intricate web of nonmarket strategies has facilitated its brand growth and global market navigation. The company's historical wartime expansion and subsequent research initiatives have informed its public health stance. Nonetheless, pressing environmental concerns—be it water resource management in India or the pervasive issue of plastic pollution—present ongoing challenges. Coca-Cola's narrative illustrates the critical need for corporations to pursue profits responsibly, ensuring environmental stewardship and ethical practices align. As public consciousness and regulatory standards progress, it is incumbent upon industry giants like Coca-Cola to earnestly integrate environmental sustainability into their core operational ethos.