Business
People Think Coca-Cola Only Makes Money From Coca-Cola Beverages, but Half of Its Business Comes From Somewhere You Might Not Expect
Coca-Cola (KO 0.20%) has some of the greatest brand prestige in the world. That’s one reason why Warren Buffett has said that he will never sell its stock, and it’s the reason the company can charge premium prices for drinks that are similar to those sold by its competitors.
But if you think Coca-Cola makes most of its business from selling Coke-branded beverages, you’d be mistaken.
Much more than Coke
Coca-Cola’s core brand is the Coca-Cola in the red-labeled bottles or cans that you’re certainly familiar with. It offers various takes on that trademark brand, such as Diet Coke and Cherry Coke, and it often comes up with new and limited-time flavors. These Coke products account for a large percentage of the company’s total volume — but not a majority.
People Think Coca-Cola Only Makes Money From Coca-Cola Beverages, but Half of Its Business Comes From Somewhere You Might Not Expect
So where does the majority of its business come from? Coca-Cola actually owns about 200 brands. It had owned about double that amount before the pandemic, but in recent years, it restructured and cut out a raft of underperforming brands that were eating up resources while accounting for low sales volumes.
Unlike rival PepsiCo, which has categories besides beverages, Coca-Cola deals strictly with drinks. However, Coca-Cola has several beverage categories: trademark Coca-Cola; other sparkling drinks; water, sports, coffee, and tea; and juice, value-added dairy, and plant-based drinks. It also has an “emerging beverages” category.
It would be easy for consumers to overlook that Coca-Cola owns so many of the brands that are going into their shopping carts. Among the other carbonated beverage brands in its portfolio are Fanta, Sprite, and Fresca. Vitamin Water and Powerade are some of its water and sports drink brands, and its juice and dairy names include Minute Maid and Fairlife. Among these brands, 26 are powerhouses in their own rights, each bringing in more than $1 billion in revenue annually.
A cola by any other name
The company doesn’t break down those categories’ sales by revenue, but by unit volume. Management explains in its filings that although total revenue isn’t directly based on unit volume, it’s an important indicator because it provides a clearer picture of consumer demand. In other words, total revenue is partially determined by pricing and partially by volume. The volume piece is the one that tells you what customers are buying.
In total, trademark Coca-Cola accounted for 46% of unit volume in 2022, and only 44% in the U.S.
Taken together, the other brands account for the majority of total unit volume. As strong as the Coke brand is, the company still relies on drinks like Fresca and Dasani to support its high sales volume and maintain its position as the top global beverage company.
But don’t underestimate the importance of pricing power. Coca-Cola reported an 8% year-over-year sales increase in 2023’s third quarter, but its unit case volume was only up 2%. Many companies reported similar revenue increases in the same period as they raised prices to compensate for rising costs.
Trademark Coca-Cola likely accounted for a high percentage of the revenue increase. Since the company can charge premium prices for this brand, it could still account for half or more of total revenue.
Why this is good for business
Coca-Cola puts a lot of effort into maintaining its trademark brand power, but it needs these other brands to keep its dominant position in the beverage market. In some regions, Coca-Cola enjoys extremely high brand recognition and accounts for more of the volume mix. In Latin America, for example, it’s 57%. However, it only accounts for 33% in the Asia Pacific region.
Some of its newer brands are generating its highest growth. For example, Fairlife volumes increased by double-digit percentages annually for the past eight years. Coca-Cola identifies acquisition targets that will diversify its portfolio of brands and allow it to reach more customers in regions where people are looking for different kinds of beverages. The company can usually absorb new brands with high efficiency by leveraging its vast, unmatched distribution network. That brings in more sales with strong margins.
It’s a robust business cycle. Sales of its core trademark Coca-Cola drinks bring in tons of reliable cash, and the company uses that cash to purchase higher-growth brands whose sales trickle down to strengthen the bottom line. It also uses a large portion of its cash to reward shareholders with its storied dividend, creating shareholder satisfaction and confidence. It’s no wonder Warren Buffett is such a huge fan.
Big companies often get highlighted for the huge compensations that they offer and the perks one gets while working for them. Meta’s average package is a whopping $379,000, according to a recent SEC filing. The company, which employs around 67,000 people, said that its median employee made over $379,000 in the year 2023.
The average pay for a tech position falls between $35,000 to $120,000 depending on the role, but Meta’s pay is significantly higher than that. However, giants like Google and Amazon offer packages that go well above $300,000 for similar positions.
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Also, higher-level software engineers and researchers in Meta make more in base pay than product designers and user experience professionals in the company.
What Mark Zuckerberg said on working at Meta?
CEO Mark Zuckerberg said earlier this year that working at Meta is not easy even if it offers such lucrative packages. He said that the year 2024 will be the “year of efficiency” in the company as he expects employees to maximize output and productivity.
How much does Mark Zuckerberg earn?
In the year 2023, Mark Zuckerberg noted a total compensation of $24.4 million in ‘other compensation,’ and a base salary of $1. According to Fortune, this covered his costs related to his private jet. His wealth has increased by over $47 billion this year alone, despite receiving a nominal salary of $1 since 2013.
As per reports, the company’s net profit in the January to March period rose to $12.4 billion with total revenue up by 27 percent, at $36.5 billion.
The company wrote in a filing, “We believe that Mr. Zuckerberg’s role puts him in a unique position: he is synonymous with Meta and, as a result, negative sentiment regarding our company is directly associated with, and often transferred to, Mr. Zuckerberg. Mr. Zuckerberg is one of the most-recognized executives in the world, in large part as a result of the size of our user base and our continued exposure to global media, legislative, and regulatory attention.”
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