Tuesday, 25 August 2009
Tight Fist Tip #21: Avoid The Soda Upsell
While the ultimate liquid sin still has to be purchasing bottled water, drinking coke and other carbonated beverages can't come too far behind. Sure we know a Coca-Cola habit is going to keep you poor, but with the added bonus of making you a fat drug addict with rotten teeth, how could you resist?
But ok, soda (and other sugared beverages) are just one of many unhealthy, unnecessary products that you could waste your money on. So why pick on them specifically?
Well, the really disgusting thing about soda is how it is so ridiulously cheap to produce, and therefore such an incredible profit driver for restaurants. Now, as an economist I have been trained that trying to assess a product's value by looking at its production cost is silly and meaningless, but I'm going to do it anyway. Let's take a look at how selling a fountain soda works out for a fast food place. They have a machine that takes water, carbon dioxide, and syrup and turns it into soda. Water is virtually free, a single CO2 tank is cheap and lasts weeks, so what about that secret-formula Coca Cola syrup? Well according to a recent book reported on by Newsweek, basically nothing! (Ok, it is $.000052 per coke.) And sold at $1.50, who could resist such a bargain? While I know there are probably some distribution costs, etc, the raw fact of that matter is that the input cost of a soda for a restaurant is basically zero.
There are some other great anecdotes at this guy's blog, but the main point is that selling sodas are the main profit driver at many restaurants. My favorite quote, which I totally agree with: "McDonalds is the most elaborate Coca Cola sales operation on the planet, and exists pretty much to sell coke." (Taken from an obviously-reliable poster called 'TheBlueberryPirate')
But as sick as this situation is, it actually creates amazing opportunities for Tight Fists everywhere. Since sodas are such an amazing profit driver for fast food restaurants, they frequently offer steep discounts on food in the hope that this will get customers in the door to buy Cokes. Yes, the 99 cent menus and Sub of the Days are basically Coke promotions, and potentially are loss-making in themselves. But of course, you would have to be A TOTAL MORON to fall for this trick. The Tight Fisters are smart enough to see through the old bait and switch, and instead drink crisp, cool, free water.
So next time you go into McDonald's, order two 99 cent double cheeseburgers and a water. Then sit back and imagine the CEO trashing his office out of rage since you saw through his evil plan. The Tight Fist wins again!