SH is fond of bringing up the fact that market concentration is not new to industries in his argument of industry concentration. He often cites market concentration in the cola industry as an example. Market power and domination leads to less choice by consumers and more profits for corporations. The Wednesday, Jan. 11th 2006 fron page article on "U.S. Thirst for Mexican Cola Poses Sticky Problem for Coke" is a poignet example of this phenomena.
The article points out that Mexican Americans willingly spend more money on the version of coca cola that is "bootlegged" into this country by distributors in Mexico to as far away places as Atlanta Georgia and Chicago, Ill. The article states that the sales of higher priced "Mexican coke" far exceeds that of the American version of the product in some latin american stores even though the price is 25% higher. Retailers also use the product to lure customers in the store to help win over customer base to the store for the purchase of other products. Mexico has the highest per capita consumption of coke in the world. A graph on the front page clearly shows that demand for higher priced "Mexican" coke is on the increase and in 2004 is estimated at close to $100 million dollars per year. Sales of U.S. produced and sold coke is on the decline.
What has the response been from coke? "Coke is sending lawyers to harass people instead of catering to customer demand," said Danny Ginsburg, founder of Real Soda in Real Bottles, a Los Angeles company that sells hard-to-find drinks. Mr. Martin said the company doesn't consider its legal maneuevers to be harassment.
The reason Mexican bootleg higher costing coke has so much appeal to Mexican Americans is that it is still being made from cane sugar. The U.S. Coke companies have been using corn syrup as a sweetener since '80s to reduce the cost of the product. "New forumulas" of coke have been one of the kickers of profitabilty for Coke, but have obviously limited the choice of American consumers to below what Coke offers in Mexico. That strategy, by a market that is dominated by few players, is an example of how market concentration is allowed to squeeze profits at the expense of higher quality products that are demanded by consumers even if it is their own product.
Most of us can relate to the taste of an "old" coke. Today's coke "aint the same thing" and it "aint the real thing". The biggest problem is that Coke has the strangle hold on the market in the U.S. and will not allow the U.S. market access to this higher quality (because it has real sugar) drink. It has to be bootlegged into the U.S. and Coke lawyers have to harass the reactions of consumers for their own profitabilty.
Now you could claim that the price of sugar in an average coke in the U.S. is higher because of sugar price supports and that this is the reason Coke does not offer real sugar in the U.S. market any more. You would be correct in saying part of that statement, but in the next post I will show the difference in the cost of the sugar or sweetener ingredient in an average coke and the Mexican market. You be the judge.
The fact is that large and dominant industries use their power and might to increase their profitabilty at the expense of consumers. When these dominant industries have as much power as they do, consumers do not even get a choice, let alone "the right choice". SH's example of the cola market is a pertinent example.
Everyone should read the Wall Street Journal and do the thinking on their own. The WSJ has all credit for the quotes in this post from their story.
The article points out that Mexican Americans willingly spend more money on the version of coca cola that is "bootlegged" into this country by distributors in Mexico to as far away places as Atlanta Georgia and Chicago, Ill. The article states that the sales of higher priced "Mexican coke" far exceeds that of the American version of the product in some latin american stores even though the price is 25% higher. Retailers also use the product to lure customers in the store to help win over customer base to the store for the purchase of other products. Mexico has the highest per capita consumption of coke in the world. A graph on the front page clearly shows that demand for higher priced "Mexican" coke is on the increase and in 2004 is estimated at close to $100 million dollars per year. Sales of U.S. produced and sold coke is on the decline.
What has the response been from coke? "Coke is sending lawyers to harass people instead of catering to customer demand," said Danny Ginsburg, founder of Real Soda in Real Bottles, a Los Angeles company that sells hard-to-find drinks. Mr. Martin said the company doesn't consider its legal maneuevers to be harassment.
The reason Mexican bootleg higher costing coke has so much appeal to Mexican Americans is that it is still being made from cane sugar. The U.S. Coke companies have been using corn syrup as a sweetener since '80s to reduce the cost of the product. "New forumulas" of coke have been one of the kickers of profitabilty for Coke, but have obviously limited the choice of American consumers to below what Coke offers in Mexico. That strategy, by a market that is dominated by few players, is an example of how market concentration is allowed to squeeze profits at the expense of higher quality products that are demanded by consumers even if it is their own product.
Most of us can relate to the taste of an "old" coke. Today's coke "aint the same thing" and it "aint the real thing". The biggest problem is that Coke has the strangle hold on the market in the U.S. and will not allow the U.S. market access to this higher quality (because it has real sugar) drink. It has to be bootlegged into the U.S. and Coke lawyers have to harass the reactions of consumers for their own profitabilty.
Now you could claim that the price of sugar in an average coke in the U.S. is higher because of sugar price supports and that this is the reason Coke does not offer real sugar in the U.S. market any more. You would be correct in saying part of that statement, but in the next post I will show the difference in the cost of the sugar or sweetener ingredient in an average coke and the Mexican market. You be the judge.
The fact is that large and dominant industries use their power and might to increase their profitabilty at the expense of consumers. When these dominant industries have as much power as they do, consumers do not even get a choice, let alone "the right choice". SH's example of the cola market is a pertinent example.
Everyone should read the Wall Street Journal and do the thinking on their own. The WSJ has all credit for the quotes in this post from their story.
