Friday, April 25, 2014

Coke or Pepsi?

Coke or Pepsi?

The long standing battle over which sweet carbonated cola beverage is the better is fought over a completely useless set of opinions. Indeed, which cola drink tastes better should not be the criterion for selection but which costs less. The simple fact is that whether by coincidence or by design, the price difference is negligible. The calorie content and the amount of caramel colorant differences are negligible also. The only difference that I have been able to discern is that I prefer one over the other. Maybe it’s the color of the can, or the celebrity endorser who makes the difference. At the end of the day, the only positive advantage of the media campaigns is that they both companies spend billions of dollars to edge ahead of each other. Now there is the real thing, a choice of any generation: spend lots of money to get people to spend a lot more. Force that dollar around another loop in the network of commerce.

Is there a true benefit to the contest? For the CEOs of the beverage giants and the stockholders there is a payoff for inching ahead in the cola war. Stock prices and quarterly dividends are connected to the point spread between the contenders.

If one company decided to suspend advertising, the two heavyweights would settle into some equilibrium where both could stop spending all the billions of dollars on ads and apply the funds to the bottom line for consumer price reduction, investor dividends and a huge bonus for the CEO and other top Execs. But would that benefit the economy?

The CEOs don’t need the bonuses and the investors would only use the dividends to but more stock and drive the market prices higher without creating any MMFF (Mining, Manufacturing, Farming and Fraud) wealth.

The consumer would not benefit substantially because he would spend his surplus funds on consumer goods or more cola. The downside would be the massive loss to glossy paper publications, television networks and the NFL. In short, the cola war sustains a high level of commerce that benefits an economy that doesn’t care how or why the money moves, as long as it stays in motion. Advertising Execs have needs too. They have husbands, wives and children too. They must be clothed, fed and sheltered too.

The economy needs its “fix” to appease its addiction. Every time the economy slows down, Alan Greenspan and the Fed would try to speed it up with an interest rate cut, only to reverse it again as the speed picks up. The health of the economy is measured by the speed of money movement. We want it to be fast enough to keep everyone interested but not so fast as to fuel inflation.
Author's Note: The book cover images in the side margins of this blog are my own publications of eBooks available at both Amazon and B&N. Please take a moment and go to the sites and read about them. Then if you like it, buy one or two.

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