David Rosenthal: disagreement

Transcript context

…All right. While we’re there, let’s do branding because I think this is so interesting. Normally, brand power is measured by the amount. If you provide someone with two identical things, how much more are they willing to pay you? And that delta, the Tiffany over the generic piece of jewelry is how you quantify their brand power. Coke doesn’t sell things in general that are more expensive. Pricing power isn’t really a thing that’s exercised in this industry, if it exists at all. Coke clearly has branding power, but rather than taking price they keep price low and use their latent brand power in other ways. The funny thing is when they sell a Coke, they’re selling a billboard. There’s this flywheel element too where they want to sell as much Coke as possible, not just to keep their manufacturing costs low because It’s a economies of scale thing, but also because one more Coca-Cola floating around in the world just reinforces the brand. I would say, not that I disagree with anything you’re saying, this just reinforces for me, this business is all about scale economies. It’s all the pursuit of scale. I think this is the best interplay we’ve ever seen between branding power and scale economies where the way that they’ve built a lot of the brand that they have is through their scale economies, and they go back and forth. I’ll tell you, you can’t measure their brand power through how much more expensive it is than Pepsi because that doesn’t exist. You can sure measure it, though, with the outcry against New Coke.…

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