Coca-Cola, or co*ke, is one of the most popular drinks on the planet,enjoyed by people from all walks of life and nationalities.
Warren Buffett, the world’s most famous investor, has beenknown to down five cans of Classic and Vanilla co*ke a day. He evenjokedthat he was “one-quarter co*ke”, sinceco*ke sucha large partof his daily diet. Incidentally, hiscompany Berkshire Hathaway is Coca-Cola’s largest shareholder, owning 9% of the company.
United States President Donald Trump is a big fan of Diet co*ke, reportedlydowning up to 12 cans per day. Within the first 100 days of his Presidency, he even installed a red button on his Oval Office deskthatsummons a butler to serve him a glass of Diet co*ke.
Over the years, the Coca-Cola company added various flavours to their offerings. Today, youcan buyCoca-Cola Light, Coca-Cola No Sugar (formerly known as Coca-Cola Zero), Coca-Cola Max, Coca-Cola Vanilla.
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Coca-Cola Light: Consistently Priced At A Premium
Interestingly, you willnotice that Coca-Cola Light is consistently priced higher compared toregular Coca-co*ke and other Coca-Cola variants.
For example, here are prices onNTUC FairPrice Online:
We observe the same price hike for Coca-Cola Light onSheng Siong Supermarket’sonline store:
The same is true for Cold Storageas well:
This leads to the natural question: What is so special about co*ke Light that theCoca-Cola company specificallycharges morefor it?The answer is a fascinating combinationof economics, human psychology and branding.
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It Is Not The Cost Of Production
Coca-Cola statesthat co*ke Light and co*ke Zero use the same sweeteners but have a different flavour base. With generally similar ingredients, anycost difference isnegligible.
Almost all of the Coca-Coladrinks sold in Singapore are made and bottled locallyusing similar bottling and packaging, so bottling and distribution costs should be similar as well.
As for research and development, these costs are usually amortised across the entire company, and it does not explain why newer flavours like Cola-Cola Vanilla or Coca-Cola Max are not similarly priced higher as well.
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What Explains The Price Discrepancy Then?
Branding And Marketing
co*ke Light is marketed as a drink delivering the same great taste of co*ke while being sugar-free, which is betterfor health.As a premium product offering unique benefits,pricing co*ke Lighthigher is logical.
For marketing, Coca-Cola typically runsglobalmarketing campaigns that focuses on brand-building, which benefits co*ke products across the board.
On the other hand, since co*ke Light targetsthe health conscious crowd in particular,specific marketing messages need to be crafted and transmitted to the desired market segment. This could entail product endorsem*nts, ad placements and campaign messages that are unique to co*ke Light.
It is not hard to see why per-unit marketing costs for co*ke Light would be higher than Classic co*ke or the other co*ke variants.
Price Elastic Consumers
Something is only worth what someone else is willing to pay for it. The fact that co*ke Light prices itself above regular co*ke means that there is indeed a segment of consumers who are willing to pay the price premium.
For those who are health conscious, they do not have much alternatives toco*ke Light. So this means that co*ke Light has aloyal following that are less price conscious and will not stop buying co*ke Light, even if it costs up around 10% more than other co*ke variations.
Classic co*ke has plenty of competition, since virtually any soda in the supermarket aisle is competing for a spot in a shopper’s basket.co*ke Light on the other hand, faces less competition in theniche ‘healthy’ soft drink market it has carved out.
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The (co*ke) Light At The End Of The Tunnel
In light of the above factors, it is easy to see the logic ofwhy Coca-Cola charges more for co*ke Light. This pricing strategy has seemed to work for Coca-Cola so far.
In the UK, the introduction of a sugar tax in April might change things for co*ke Light lovers. A two-litre bottle co*ke Classic saw its price jump by 48 pence ($0.86), while co*ke Light and co*ke Zero were exempt from the tax. This ‘sugar tax’ means that one day, co*ke Light,Diet co*ke and co*ke Sugar Free mightbecheaper alternatives to co*ke Classic.
Closer to home, Singapore policymakers are monitoring closely at the effectiveness of these ideas, as wecontinue to ramp up the “war on diabetes”. co*ke Light’s days of being priced at a premium compared to co*ke flavours might soon cometo an end.
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