Soft Drink Profit ?

[JPope]

Reading the local paper @ lunch, and an article states that ISU (Iowa State University) has cut a deal with Pepsi, 7 Up, Dr. Pepper, in lieu of Coke. Article states that ISU will receive 83. 75 cents from each $1. 25 bottle of Dr Pepper and 7 Up. ISU will receive 69. 75 cents from each $1. 25 bottle of Pepsi.

Also says that ISU will receive 50 cents from sale of non-carbonated Pepsi beverages, but does not elaborate more on this?



Is there that much profit in soft drinks, that the vender can give away that much money for the right to be exclusive vender on campus? Is this the same profit in other drinks say beer, wine, hard liquor? I know from previous experience that soft drink companies will give high schools, lighted score boards, etc. for rights to tell on school grounds?

 

[ARedetzke]

The profits are not the same for beer, I can tell you that. Of course there are a lot more taxes involve in that too, in Kansas, 44% of the cost of every beer is taxes. I would assume it varies a little state to state, but I think the numbers would be similar. As for pop, I have heard people say that the cup you get a fountain drink in probably costs more than the pop you filled it with. I would guess they can make that for next to nothing, especially on the scale they operate on. It's not like it has to be brewed, you just mix it up, add some carbonation, and you're done.

 

[RustyJC]

Wonder what the profit is on a bottle of water?



Rusty

 

[Todd G]

Way back when a large drink at McDonald's cost 85 cents the Coke cost 2 cents and the cup 3 cents. When I worked at a bottled water company, the 5 gallon bottles cost 20 cents to fill. We charged $8. 00/each for home delivery.

 

[McDowra]

years ago I owned a Dragstrip. Cokes in the concession stand cost me 7 cents for the Coke, cup and ice.

 

[BarryG]

The fountain drinks are definitely less expensive than the canned or bottled stuff. Aside from the additional cost of the can or bottle you have to consider the additional cost of manufacture(way cheaper filling a 5gal bladder box than 53 12oz cans), delivery, servicing the account etc. Nonetheless they are still making a killing on them. The idea behind it is to get the people used to buying that brand. They have a somewhat captive audience and people develop habits pretty easily. If you are at school and for the last several years you have been buying Pepsi you more than likely will buy Pepsi when you are still in school but not at the school and once out of school you will continue to buy Pepsi as well. They now have a customer for life so to speak. Add up how much Pepsi you could sell to an individual and then to their family after they get married and have kids etc. It will more than make up for it. Actually a great marketing idea to promote brand loyalty. If they are actualy selling to the school at their true cost it doesnt cost them anything even if they take a few cent loss per can, as a manufacturer that few cents is being targeted to a consumer that is using your product and more than likely will continue to use your product. Much better advertsing value and effective campaign than a tv commercial that while may reach more people only a very very few of them are going to switch brands due to the commercial. As oppossed to having a customer drink your stuff for 4 years and always want it in the future becasue it is their brand of choice that was essentially forced upon them without them realizing it.

 

[sarj]

BarryG said it right. It's strictly an investment in future market share. That is why it's a crime what school boards are doing with kids in our schools at younger ages with soft drinks and junk food. It's a small wonder child obesity is on the rise.

 

[E7mack96]

WHen I was a major account rep at a beverage co, the bag-in-a-box sold to the end user for $27. 50.



THis box was 5 gals of syrup. it was mixed with carbonated water at a 5:1 ratio (5 parts water to 1 part syrup) this yields 30 gals of pop.



30 gals of pop at 128 oz per gallon is 3840 oz.



3840 oz divided by 12 oz cups is 320 pops



27. 50 / 320 is 8. 5 cents per pop.



Cups were 3 cents each in cases of 2500



lids were 1. 5 cents each.



straws were around 1 cent each



so you have roughly 14 cents in a pop that sell for 89 cents.



If the customer takes ice in their pop, then the cost drops for the syrup.

 

[Hohn]

Soft drinks are the Ultimate business model imho-



- high profit margin

- multiple repeat sales

- cheap enough to where anyone can afford it



Think about it-- you buy a Coke, it doesn't mean you couldn' want or need another one. You can't say that about many things. THen consider the profit margin!



Someone once asked Warren Buffet what he would do if someone gave him $200 million and said "go beat Coke". Buffet's reply?



"Keep the money-- it can't be done"





Justin

 

[Headshot zod]

There's a section about schools, fast food and money in the movie "Super Size Me"

 

[Mike Ellis]

My family has been in/around the beverage business for decades, my Dad was formerly the plant manager of the Kimbells plant (later Winn Dixie) here in Ft. Worth where they canned/bottled soda. Most of my uncles on both sides of the family worked in the same business, it was great growing up and getting go to work with Dad and seeing how they made soda. They mix up a pretty good sized batch - think in terms of a stainless steel vat that you could easily lower your truck into and the profit margin is indeed huge



I don't buy the soda pop / fat kid argument though, because when we were kids in the 60's we guzzled soda just like they do today. In elementary school we had "Coke'n'Candy" breaks every day, in our part of Texas this meant a Dr. Pepper machine that dispensed soda in paper cups (any type of sodey water being termed a "coke" to us). We loved the paper cups, after you drank your Dr. Pepper you could put the cup on the floor bottom-side up, and if you stomped it right you could make an ear-splitting pop :-laf :-laf The drinks were only a dime so the kids guzzled a lot. Interestingly enough, we didn't have many fat kids either - maybe one or two per grade.



The difference? NO VIDEO GAMES, everybody was outside playing or goofing around instead of sitting on the couch twiddling buttons and scarfing up pretzels, soda and candy all afternoon. Our parents weren't as paranoid as the current Baby Boomer brand, they actually let us get out of the house without ID tags, helmets, and body armor.



If we want the kids to get back into shape, the solution is pretty easy

- Put up the video games and make 'em go outside and play

- No bushel of before-dinner snacks, family eats at the table and that's it

- Let 'em play baseball, football, tackle-the-man-with-the-ball etc without parental involvement. Also teach 'em that a skinned knee isn't grounds for a lawsuit :-laf :-laf