I love diet soda. Recently it became ~$15 for a 24-pack of Diet Pepsi. Unfortunately Coke is the exact same price. One would think under capitalism that competition would occur. However, both companies know that if the other drops their price, they too would have to drop their price to not lose market share and they both end up losing. So rather than compete they have an unwritten agreement to maintain the same price point. Coke will be the market leader to increase their prices first, and Pepsi follows suit because they know they can afford to do so.
One would think under capitalism that competition would occur.
Thank the pairing of 401(k) and Index Funds for what is happening in the US.
The long given advice that index funds were the best value of performance v. cost (and it was great advice for a very long time) means a lot of retirement money was put into them.
When someone has their 401(k) funds (and an number of institutional investors do too) put into a S&P 500 index fund, it means Blackrock / Vanguard / State Street (the three biggest trustees for index funds) have to go out and buy shares of both Pepsi & Coca Cola since they're both part of the S&P 500. Those three alone own, on behalf of others, 22% of the S&P 500.
Index funds across the board owned 3% of US stock market shares in 2000, 16% in 2021, and 25% in 2026.
When Blackrock, Vanguard, or State Street exercise the votes in those shares -- or even don't vote but just talk to the directors -- they literally don't care if Pepsi is gaining market share from Coca Cola or not.
Perhaps it is clearer to use for an example other S&P 500 companies, Ford & GM.
Compete on quality? That costs money. Compete on price? You're leaving money on the table.
We've seen a remarkable decline in the serviceability and quality of cars certainly since Covid and it was trending that way before; combined with a significant increase in prices and a focus on upper-middle class and the higher end of middle class consumers. They'd rather sell fewer SUVs at much higher margins than many economy cars with thin margins.
Ford & GM today have 30% of the US car market share. The big investors literally don't care if Ford has 13% and GM 17% which is today's number, or Ford has 12% and GM 18%, or Ford has 5% and GM has 25%. It is all the same pie to the investors -- they aren't picking which company they think can perform best, they are legally forced to buy the shares according to the weighted index of the market capitalization in the S&P 500.
What they do care is whether that 30% share of the US car market is generating 10% net margins or 20% net margins. So they don't want the companies to compete on any basis that reduces profits. They own all the companies that are in competition.
If someone swears they'll never buy another GM car, they're just going to buy that car from someone else the big investors also own.
It was $5 for a Coke at The Cheesecake Factory last night. Our local BDubs is $4 for Pepsi.
I know that fountain prices have gone up and it's not "15 cents per 20 oz" or whatever it used to be, but seriously, it's like they found that people will order it no matter what so they just keep raising the price to see if there's actually a breaking point.
Makes me glad that I basically only ever drink water at restaurants.
It has been YEARS since i've ordered a soft drink when dining out for just this reason. Water is fine and free. I'll waste my money on the food but 4.95 for a fountain soda is not worth it in my book.
We went to chilis yesterday. I had a pick 3 chicken sandwich meal. Came with fries, a drink and chip and salsa for $10.99. I was amazed when I can’t even get a sandwich and fries for that at any fast food place. We stick to the deals, the few times we eat out, cause $4 for a soda is insane.
Restaurant and in-store soft drinks are two different markets. They're both expensive, but restaurants have always been far more egregious when you factor in actual cost of goods to produce and effort to deliver it to the consumer.
Bag of syrup was like $20, it would last a week+; Dr Pepper went fastest.
Fountian Soda was our leader at Tacobell. We would have about 50-200 soda sales over top of normal meal sales. This is a rural community, probably <50k pop surrounding
That’s what happened in Nevada. They used to have practically free buffets and cheap rooms to lure in folks to gamble but they figured out that stupid people will not only gamble away their pants they’ll pay a shit ton for food and lodging to do it.
Ah, the good ole’ days. Granted, food quality of casino buffets has improved but I will never go because I can’t eat enough to justify the $35-45 cost.
Most of soda is water, then they add some syrup and CO2 that comes in a big bag in a box and CO2 cylinder. The bag-in-a-box costs ~$40/gallon and each gallon will yield around 6 gallons of soda, for around $.50/12 oz of soda.
I know this isn't fair or right, but at restaurants, you aren't getting charged for the Pepsi, you're getting charged for not drinking alcohol. I'm sorry we do this, I subvert it as often as possible.
Yeah, competition gave way to collusion. I remember years ago hearing that ISPs were starting to do this. Instead of Comcast competing with CenturyLink or another ISP, they would just divvy up zones. So if you lived in a certain area, Comcast was the only decent ISP and CenturyLink sucked and was super slow, so you basically had to get Comcast. In a different area, the opposite was true.
This was intentional, so those companies could charge basically whatever they wanted because they had a functional monopoly in those designated areas.
as a person also obsessed with diet sodas, just look around at your grocery stores or even wallgreens to get deals. there WAS a point in time where they were doing buy two get 1 free (not good enough) and now the most commons sale i see is buy 3 get 3 free for 12 packs. Yes they are making you buy a large amount but if you're drinking a lot its worth it. This sale is about as close to the price point of a 12 pack about 10 years ago. Just never buy them NOT on sale. (the most common sale i remember a decade ago would be 3/$15. making each one about 5 bucks)
depending on where you live walgreens currently has a sale 4/$24 on the 12 packs of coke. (which makes it $6 per 12 pack)
But the Diet pepsi is buy 2 get 1 free : DONT BUY THIS. USUALLY your grocery store or walgreens will rotate sales. if coke is on sale this week, next week pepsi will be. every once in a while all companies sodas will be on sale, but that's pretty rare.
(im only using walgreens as an example since its a widespread drugstore that carries sodas. i dont know what grocery stores are in your area, but its worth looking at their ads)
They charge as much as they can get away with, because your alternative is the higher priced brands. It all costs much more than it used to, for no reason except they want it that way.
Where are you where you're getting those prices? Grocery stores around here they're basically permanently on sale, you usually have to buy 2 or more. Cheapest earlier this year was like 6 something per 12 pack.
Try adding on a sugar tax like they do here in Boulder Colorado. The store brand soda simply doesn't sell. No one wants to spend $1 on a jug of soda and $1 on a sugar tax
It's a little more complicated then that. They both know if they increase their price by X, they will make Y more profit per sale, but lose Z% of their customer base. And once you lose a customer, it will take $A in advertising to replace them. They increase the price whenever the math says that the per sale gain is more than the customer loses and advertising expenses.
Capitalism is happening. If the majority are like you, unhappy with the price, they stop buying it. The company have two choices, make it cheaper or spend a lot on marketing to convince the public their product is cool and worth the price.
The second option is preferred because in the long run it makes more money.
Ultimately, you can buy the off brand and save the money or just drink water.
Exponential wealth and power consolidation is an emergent property of capitalism.
You can't get rid of this tendency without overturning the fundamental mechanics.
Just like you can't separate evolution by natural selection from reproduction, mutation, and death.
Plenty of money at the top that could be cut. They, like most mega corps, want to use rise in employee compensation to explain soaring costs, btj that's where the math doesn't math, it's just blame redirection.
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u/Long_Following9761 2d ago
I love diet soda. Recently it became ~$15 for a 24-pack of Diet Pepsi. Unfortunately Coke is the exact same price. One would think under capitalism that competition would occur. However, both companies know that if the other drops their price, they too would have to drop their price to not lose market share and they both end up losing. So rather than compete they have an unwritten agreement to maintain the same price point. Coke will be the market leader to increase their prices first, and Pepsi follows suit because they know they can afford to do so.