
Fast Food Surprises
August 8, 2024
August 2024 Friday’s e-links: China’s Slowdown
August 9, 2024For very different reasons, two sodas (pops?) were in the news recently.
The front page of the Wall Street Journal told us that each of the Vice Presidential candidates prefers Diet Mountain Dew. Its low calorie high caffeine profile was cited by J.D. Vance while we were just told that Tim Walz is never without it.
As for Coke, the Seine is the reason for its current fame. Unproven, it is possible that swimmers can quash the bacterial onslaught of the River by drinking a Coke after a race.
Seemingly different, the reasons for their headlines are really about taste.
Soda Preferences
A report from research firm Mintel informs us of the many marketing attributes sodas could have. They include taste, caffeine, and wellness. They could be an alcohol replacement and boost nutrition.
Below, we can see the flavors we prefer. It explains why we will have Dr Pepper Hot Take, Mountain Dew’s Laguna Lemonade, and Coca-Cola Spiced:
Our taste preferences create the connection between the Coke and “Diet Dew” stories. Appreciating its universal taste appeal, athletes certainly are happy to chug a Coke. Similarly, a large swathe of the population likes the Dew citrus flavor.
Our Bottom Line: Oligopoly
Whenever we hear about soda, as economists, we should think oligopoly.
With just three or four but usually no more than eight competitors. oligopolies are very large firms that enjoy pricing power. Combining Coke’s Coca-Cola, Diet Coke, and Sprite, we wind up with a 35% market share. Then, descending, Pepsi and Dr. Pepper are at slightly more than 8%. In revenue, just from supermarkets and convenience stores, we are already topping $100 billion:
Along a competitive market continuum (below), we place oligopolies close to monopoly. Moving to the right along the scale, firms increasingly take advantage of economies of scale. Typically also, they compete through product differentiation:
And that returns us to taste, Diet Dew, and Coke.
My sources and more: Reading about Diet Mountain Dew and Coke, I decided it was time to look at soda competition. From there, more targeted research from Mintel had the detail.