Coca-Cola Pricing Strategies
Coca-Cola is a behemoth of an organisation with over 3,500 products expanding to over 200 countries. The success of Coke is in part because of its successful pricing strategies. Coca-Cola's strategies include stabilising prices, unveiling customised products to new markets and engaging in price discrimination.
The primary ingredients of Coca-Cola's most popular beverage, Coke, include corn syrup and sugar. One of its pricing strategies is hedging corn, which can be a volatile commodity. When droughts occur, farming regulations change or the dollar grows weaker, the price of any commodity can swing wildly. These fluctuations create instability for businesses reliant on the commodity as a main input for their productions. By locking in the price of this commodity, the business removes the uncertainty of changing prices due to market forces. Coca-Cola hedges corn syrup by establishing a price in advance, thereby keeping the value of the commodity stable. Michael Czinkota, author of "Fundamentals of International Business," explains how Coca-Cola hedges foreign currency as well --- in 2000, its strategy yielded £56 million in additional revenue.
Coca-Cola changes the price of its products depending on the season. Soda goes on sale during Thanksgiving, Super Bowl Sunday, Fourth of July and other holidays. This is in part because competitors lower prices during this time as a way to get customers to purchase their products. Additionally, grocery stores lower the price of soda during these times because of its high profit margin. By getting consumers in the store to purchase Coke at a discount, the store hopes they will buy other items on the shelves. Thus, a common pricing strategy of Coke is capitalising on the increased consumer demand during these occasions by lowering prices.
Coca-Cola has taken risks with its pricing strategy by unveiling its beverage in countries at a steep discount. As of 2011, Coke prices and distributes its beverages at deep discounts to third-world countries from Nepal to Somalia. William Pride, author of "Business," explains how Coke is willing to invest --- and sometimes lose --- millions of dollars to study and tap into emerging markets. Pride explains such diligence is the reason Coke owns 50 per cent of the market share for carbonated beverages in India.
Coca-Cola products are priced based on expectations of a consumer's socioeconomic status. Though the cost of producing a 100 per cent fruit Odwalla beverage is higher than the cost of producing a can of Coke, the significantly higher markup for the fruit smoothie is also based on the belief that health-conscious consumers have greater income and are therefore willing to pay more. Other Coke products with high markups include its coconut water and Godiva chocolate beverage.