Article - Glass Bottles Lend Pop to Soda Makers by: Paul Ziobro

SUMMARY: Soda sold in glass bottles, a package generally phased out decades ago, is providing a rare spot of growth in a declining soft-drink industry. Today, glass bottles account for just 2% of the $21.2 billion in soft-drink sales, but glass bottles serve a strategic purpose. They appeal to key demographic groups like millennials, baby-boomers and Hispanics. Above all, soda in glass bottles sells for a steep premium compared with other packages, providing a boost to profits.

APPLICATION: The real strategy question, here, is: what does it all mean? Why, exactly, are soda makers able to charge a premium for glass bottles and what is the strategy lesson involved? Is the issue a scarcity factor, like for certain luxury goods? Are certain consumer groups less stingy when comparing prices? Or should soda makers simply view the facts as facts and not try to draw any general lessons?

Requirements

1. Do you drink a lot of carbonated soda? Do you like to drink carbonated soda in glass bottles? Why or why not?

2. What is the appeal of glass bottles? Who do they appeal to? Why?

3. Why is the premium higher for glass bottles, in your view? Why can soda makers charge more for them? What is the general principle at work?

4. Can you think of analogies in other product markets? Why are some small segments more profitable than the large segments? Can these small segments be grown a lot more or are they doomed to remain comparatively small? Can glass bottle save the soda industry, in your view?

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