Why is coca-cola so expensive in Germany?

Matt asks this question and the answers in his comments section cite sugar policy and the VAT.  (Matt's comment, at #62, is the best of the lot.)  USA Coke also competes with free tap water, which is a no-no in Deutschland.  Here is a German site, GuteFrage.net, which asks "Wieso ist Coca-Cola so teuer?" but the answers do not impress.  Here is further German language discussion but again Armen Alchian it ain't.  This German Yahoo post considers the marginal cost of production.

I am more inclined to cite the elasticity of demand.  Here in the US of A people will drink three or four cokes in a row, maybe more.  Or they will buy many cans of coke for the whole family along with hot dogs, Twinkies, Hellmann's mayonnaise, and other utility-maximizing commodities.  But those high-volume strategies require a fairly low price.  I haven't lived in Germany for over twenty years, but my impression at the time was that you would drink one coke at a main meal with your food and that was it.  (You also didn't get very much in the Glas, but that's another story.)  They're weren't aiming for volume sales by lowering the price, so instead they would focus on the upper left part of the demand curve.

I don't know if Matt is referring to restaurants or vending machines.  In restaurants drink prices are arguably a proxy for enjoying the amenities, the table and the service of the wait staff.  If the wait staff have higher wages and benefits, due to European labor market regulation, the drink price might be reflecting that higher marginal cost, even if the MC of the drink itself is low relative to price.

People, can you help out on this one?


My experiences in Amsterdam, Paris, and Rome, this summer found that it was most expensive at restaurants (3-4 Euro). It was slightly cheaper, but not by much, at fruit and drink stands. It was also not much cheaper in grocery stores, even bigger ones. A 20 oz bottle that you would buy for $1.29 at a grocery store in America was still well over $2-3 Euro in equivalent Dutch and Parisian grocery stores.

One interesting fact was that it was cheapest (about 2.50 Euro for a 20 oz drink) in fast food style restaurants (including the Subway right across the river from the Notre Dame). The fact that these American-style eateries had the closest thing to American style soda prices seems related. These fast food places were also the only place in Europe I could get a drink that had ice in it...

Europeans want to pay more for Coke than Americans, just like Americans want to pay more for the same health care outcome as Europeans get.

Wrong question: I just think that Coca-Cola is not more expensive in Germany than in the US or Canada. Just checked on Google. A random supermarket in Germany sells Coca-Cola for USD 1.13 per liter. I don't really think that you can get a liter for much less here, although I don't really know since I never by bottles.
Probably some visitors to Germany also do not realize that there is some deposit on bottles AND cans. I haven't lived in Germany for some time, so I don't know what the deposit is right now, but the last time I was there I think it was Euro 0.25 per 0.333 liter can.

Of course, it's the elasticity of demand and a little bit of culture. I cannot say a lot about Germany cause I've never been there. But I can tell you that Coca-Cola is much more expensive in Russia, Ukraine, Israel, and Turkey. Moreover, Coca-Cola never goes on sale there. Even Red Bull goes on sale with 18% discount. But it never happens to Coca-Cola. Here is a link to the largest grocery store in Ukraine:
Coca-cola does not have many substitutes in Russia & Ukraine because a tap water is disgusting and other beverages don't even taste like Coca-Cola. Btw, I've noticed that Diet Coke is much sweeter overseas than in USA. Moreover, it's never called as DIET Coke. It's called LIGHT Coke. It's another cultural thing. Finally, Coca-Cola sells more than just a beverage. It also sells a piece of American culture. The same is true for McDonald's, right?

I was shocked by how expensive soft drinks and candy bars are when I moved to Australia. If you walk into a 7-Eleven and buy a Mars bar and a Coke, it will be a good $5 or even $6.

Costs of production are certainly not the cause because warm 2-liter bottles in supermarkets often sell for much less than cold single-serve sizes in the same supermarket. (And I am skeptical that the cost of chilling bottles could add that much to the price.) Australia is also the second largest sugar exporter in the world, and has no sugar tariffs, so that cannot be a reason.

A key piece of information would be the wholesale price. If a convenience store is selling a 600ml coke for $3, are they buying it for 40 cents or $2? This would point to whether the high prices are due to the major producers not competing on price (attempting to gain market share via advertising, for example), or whether somehow, none of the tens of thousands of retailers ever chooses to compete on price, or treat soft drinks as a loss-leader. The latter is hard to believe, but I suppose it's possible that a "normal" price for soft drinks has been set and retailers have not found benefit to undercutting this price.

Also, for those who think raising taxes on junk food will reduce obesity, I think Australia, which has much higher prices on such foods but similar obesity rates, provides evidence that this may not be very effective.

"Just checked on Google. A random supermarket in Germany sells Coca-Cola for USD 1.13 per liter."
In my local Food Lion, a two-liter of coke goes for $1.19 and is often on-sale for $0.99. Of course, just five years ago that same two-liter went for $0.99 regularly and on sale for $0.79, go figure.

Is there no provision for an email feed from your blog? I would appreciate one. Thank you.

I am with Tyler and elasticity of demand. Germans, as well as most Europeans, rarely go beyond a bottle, or a glass of coca-cola. There are so many interesting suggestions why is that, but in my opinion it's mostly cultural. Coca-cola has always been a treat for children, whose parents rarely allow them more than a glass. Also, carbonated, sugary drinks are known with being bad for you, which explains why most parents put "quota" on how much soda to be consumed. My opinion is that attitude continues in adulthood.
Another way to explain the higher prices of coca-cola is the relatively low price of alternatives. Beer, juice, even coffee are very close substitutes.
This post made me think about my personal behavior - I, too, rarely consume coca-cola even when I am in the US. My reasons are perhaps more cultural and less economical. I will be very interested to see the consumption of coca-cola not in the society as whole, but the consumtion in different social groups.

I'd say you're right about elasticity, but I have a different hunch about the reason for it:

Germans don't like cold drinks. Coke is meant to served ice cold, and I can see it just not selling well in Germany.



One thing I'm surprised no one has mentioned is the different way Germans/Europeans/others drink Coke to the Amis. In the States, if you order a Coke at a restaurant, it's always a fountain drink. In Germany, it'll be poured out of a glass bottle.

The difference in marginal cost between a fountain drink and a bottle seems to me a big part of the explanation.

My preferred question is, excepting fast food, why fountain drinks are never served in German/European restaurants.

> My preferred question is, excepting fast food, why fountain drinks are never served in German/European restaurants.

Because they taste like c***. Especially if made from highly chlorinated tap water. Which is BTW a nogo in both Switzerland and most of Germany - the tap water is by FAR better than in most places in the world, including the US. I would BTW not consider Virginia tap water to be drinkable, at all. I make a point to always order bottles when in the US.

I believe it's very much a willingness to pay and what people are use to. I presently live in Paris and at a big supermarket you can buy a can of coke for 60cents or a 1 Liter bottle for a little over a Euro, 6 packs are roughly comparable too, but ANYWHERE else in the city a coke will cost at least 1.50 to 2.50 euros for a can/small bottle in a market to 3-5 Euros in a restaurant... I've seen cokes for 7 or 8 euros at ski resorts. french fries will also go for 10 euros so that's another story. totally ridiculous.

Maybe the french a posting the same thing when they see wine prices in the US?

Another note in Norway last week a can, bottle, or large bottle were the same price 25kr or roughly 4USD. Why is a 12oz can and a 20oz bottle the same price?

I dunno know the answer but I think the willingness to pay is just generally higher outside of the US... relatively prices for coke are also high in south america for example...

Could this have anything to do with market power? In the US, Pepsi is a very strong competitor to Coke. I hear that this is much less true internationally.

There is likely an issue with licensing. Coke will license distribution rights to a monopoly in Germany and then the monopoly will attempt to extract the surplus. This happens all the time for things like shoes, etc. For example, in denmark I have a hard time figuring out why the trendy Katmick winter boots for my kids cost 150 dollars here and 25 dollars in the US.

Similar question, why is sparkling water so expensive in the US ?

Partly it has to be a brand question (in both cases), since generic cola in Germany (at an Aldi Discount Store) goes for below 50cents for the 1.5L bottle.

Sparkling water is even cheaper there, while in the US the only sparkling water I could find was either Perrier/San Pellegrino, or maybe Poland Springs, but in all cases easily above a 1$ a liter.

Maybe their still mixing cocaine in germany with coca cola....

Interestingly the cheapest coke I have ever bought was in rural East Africa, many hundreds of kilometers of logistical nightmare away from Coke's local bottler in Nairobi, all for the measly price of 25/= Kenya Shillings. So, for 34 U.S. cents you get a luke warm, 250 ml glass bottle of double the sugar content, cane sugar to boot, which after gracing your lovely lips will more than 90% of the time, likely begin a full round trip back to the bottler. Every possible ingredient, save for labor, costs more in Kenya than in Europe. Energy, manufacturing and transportation costs are much higher, let alone intangible business costs. There must have been more than 20 roadblocks on the way to this rural town on the Uganda border, each manned by entrepreneurial micro-taxing local police authorities. So count me in with those that consider the pricing difference between the U.S. and Europe, to be driven by the power of branding and expectations, versus actual production costs.

Hello, Professor Cowen,

I'd see the question as part of the larger one as to why many products cost more in Europe than in the U.S. I have lived in the U.S. as well as my home country, Britain. Most grocery items are cheaper in the U.S. (as are cars, electronics, clothes and more).

24 cans of coke, 12 oz, are on offer through 9/29 at Safeway, Seattle 98112 for $6.99. I'd know to allow for additonal sales tax at the checkout.

24 cans of coke, 330 ml (smaller can), are available at Tesco, UK's leading grocery mulitple, generally regarded as competitive, through its online service for GBP 7.85 - about $12.50. This is inclusive of tax, presently at 15%, after a 2.5% reduction through the end of December 09 as part of the stimulus to the economy.

No wonder we drink less of the stuff - it costs us way more.

Many grocery items are subject to a hidden tarrif as a result of the EU's Common Agricutural Policy. I'm not saying CAP applies to coke, though.

I believe part of the difference is founded on land and property price differentials. In England, a root of the high price of retail square-footage is to do with restrictive zoning laws (Town and Country Planning Acts) since 1945. Other European countries have legislation favouring "family run" outlets.

I've always thought it was strange that Europeans seem to drink much less with meals than Americans (I don't mean alcohol). That is, while Americans drink 3+ glasses with their food, Europeans will often drink just 1 (and a smaller one, typically). Do Americans just like drinking more? Is it cultural? There must be some minimum amount of drinking necessary for for health reasons.

He meant that free tap-water is a no-no in European restaurants

This of course is not true. Unless by "European" you mean "German" in which case it might be true, I'm not sure.

Just want to say that the Matt in comments 61 & 62 of the linked post is likely not Yglesias; in the rare instance he puts somthing in the comments section of his own blog it's normally 'mygleisas' for the username.

I just discussed this question with my wife over lunch at a Berlin restaurant. We came up with the same explanation that you propose. Germans quite simply don't drink that much (nor do people in Switzerland, where we lived before and where, believe me, a coke is even more expensive). Lowering the price in order to achieve volume sales will not lead to an increase in sales. There seem to be cultural reasons for this. Climate may be a factor, too. Most parts of the US are in much hotter climes than Europe (if not all of the year). It is useful to remember that New York has the same latitude as Naples.

IIRC coke was about the same price in japan as US, anyone remember?

@nyongesa -- IIRC, when i was in kenya 20 years ago the price of manufactured food staples (bread, blue band butter, etc) was set by the government and the same may have been true for soft drinks. in any case the price was the same everywhere i went, from nairobi to turkana to bungoma to chepterit to kisii, whether in a city or near a paved road or not, in small and large restaurants -- so i imagine that the government set the price. there may have been some thinking, if there was any thinking, that this would provide a ready source of non-contaminated water. it certainly was handy when i traveled around the country.

In some European countries it is definitely true. Drinks often serve the same function as popcorn in movie theaters, as optional-luxury-with-extra-high-profit-margin to differentiate between customers with large and small budgets, and free tap water is seen the way movie theaters see bringing your own food.

In France, free tap water at restaurant meals is absolutely standard (as is cheap house wine). There are also plenty of American restaurants that make money off of overpriced drinks (although in NYC free tap water has become trendy again because of environmental concerns).

People seem to be bursting at the seams to compare and contrast America/Europe, but I haven't seen anything more insightful than Talladega Nights.

Wow, I actually know enough German to translate the Yahoo page. Here goes (up to the end of the best answer):

Why does a half-liter Coca-cola bottle cost 90 cents and a one-liter bottle a full Euro?

The half-liter bottle costs almost the same as the one-liter bottle, so why buy the half-liter bottle???

Best Answer: (Chosen by question asker.)

Because a one-liter bottle requires less material than two half-liter bottles. Then you have to include other costs like storage.

And don't forget the marketing strategy! ;)

Who's going to want to carry (schlep) around a big one-liter bottle when they're on the go and thirsty?

I think that elasticity of demand is certainly a leading factor -- I remember hearing one time how much coke costs. Sugar could be 10x as expensive and it would add pennies to the cost of production -- I'm sure Coca Cola has a bank of people whose job it is to figure out ideal pricing for a commodity that is sold many times over its cost of production.

Another possible explanation is national laws, which you hint at: I remember a German friend telling me that they passed a law in the 1990's (I believe) requiring any place that sold alcohol to have a lower-priced non-alcoholic beverage. He commented at the time that it had the net effect of raising prices on the cheapest non-alcoholic beverage to slightly less than beer or wine.

In the US, Coke competes with water and iced tea; in Germany, Coke is priced to compete with beer.

Maybe it's a tax on stupid

If you're in Germany and drinking Coke instead of beer, wine, or mineralwasser, you arguably deserve to be fleeced. If not a literal tax by the government, an effective "tax" would be enforced by buyers and sellers not feeling any great impetus to offer or seek lower prices for what everyone thinks of as at best a slightly disreputable and foolish eccentricity. Add to that, higher unit costs if you can't spread distribution costs over a huge volume, because there aren't that many stupid people in Germany (well, not stupid about preferring Coke to German beer, anyway), a higher VAT and deposits, etc, and you could get a hefty difference in prices.

just popped into small convenience store on corner of kurfurstenstrasse and keithstrasse central berlin. 1 liter coke is 2.20 euros, 0.5 liter is 1.40 euros. Would Manhattan be cheaper? And remember coke is not THE mass-market drink in Germany, just one of many.

Some stylized facts about Europeans and coke:
1. ordering Coke at a restaurant is considered simply bad taste, like being a teenager and not having reached adulthood,esp. in France.
2. Europe has normally good tap water, but it is also unacceptable to order it at a restaurant.
3. the average price of a Coke in an anverage German restaurant (not a luxus one) is about 2,5 euros for a small glass(0.3 l) , 3,5 for a big glass (0.5 l). that's also the average price for other soft drinks.
4. Restaurants are normally heavily taxed, they must translate their taxes on the price.
5. In Germany the most sold soft drink is apple juice with soda (Apfelsaftschorle). It beats by far Coke and even beer in most bars. The producers of apple juice soda are atomized, but the prices the same as coke. So there is competition
6. Clearly, europeans pay a premium for drinking "American Way of life" when we drink Coke.
7. Europeans in general don't think "Big is beautiful". Buying huge amounts of food, drinks or anything is simply considered a waste, uneducated, irrational.

Still, if they weren't willing to pay the [higher] prices, Coke would be priced lower or not be available at all.

Why would any economist think otherwise?

Another way to approach the question. Why are alcoholic beverages at restaurants so much more expensive relative to coke in the US? Again, this seems like a matter of demand, but I'm surprised no one has brought up taxes and regulation. I'd speculate, without knowing for sure, there are regulations in place in Europe that tilt things to the direction of limited wine and beer there, and toward unlimited pop here.

Aside: in Europe, you're pretty much substituting between beer, wine, or coke, so it's not like coke is that much worse for you. Calorie wise, they're all about the same. If you get diet coke/lite, then the coke is zero calories and quite a bit better for the average person.

Regarding the drinking of water, I do not know how it got going, but I remember (am older than most
reading here) when I was a kid that it was recommended in the US for health reasons that one should
drink at least 8 glasses of water a day! That has been scaled back considerably, but I suspect that
a habit of drinking lots of water got ingrained into a lot of people here that has persisted. I know
that I drink several glasses of water with most meals, even when I am consuming other beverages as well.

Regarding the Coke vs Pepsi business, I think this has relaxed, but for quite some time there were
countries that imported (or produced locally) one but not the other. Thus, in the old Soviet days,
it was Pepsi that was available and not Coke, which reflected the old Pepsi for Stoly barter deal that
Nixon cut in 1971 with Brezhnev at a summit to please his big campaign contributor, Donald Kendall
(then CEO of Pepsi). Talk about rent seeking. However, I think with MacDonald's now in Russia,
and in prominent locations such as Pushkin Square in Moscow, Coke is available.

Also, it used to be the case [sic, :-)] that Coke was in Israel while Pepsi was in the Arab world
(pronounced "Bebsi," as there is no letter "p" in the Arabic alhpabet).

When I got to Munich in 1971, a half-liter (ein Halbes) cost 28 cents at ä Bierstube on or near Marienplatz. The popular soft drink, called Spätze, consisting of lime and soda, cost a bit more, with the result that a teenager would generally economize by ordering a beer.

Kids in those days could drink alcohol in public at age 14. The German government eventually raised the drinking age and required every establishment to offer a soft drink at a price below that of a beer.

The world has definitely become a more unfriendly place, especially for kids. Rearing a kid in Germany or Amerika today must surely constitute child abuse.

...drink three or four cokes in a row...

WTF? Are you guys like, for real? Seriously though I can't think of any Irish person I know who would be able to stomach 3 or 4 standard ( ? 330ml, dunno what that is in American Imperial) cokes _in a row_. I thought I had a handle on how much you folks like your fizzy sweet things but I find that throw away really shocking.

I think this points to the main reason though - even if Coke was almost free here I don't think there would be much demand for people buying three or four at a time, or that there would be much take up even if there were free refills of the uber-buckets that are dished out in McDonalds et al. I suspect that the price of the convenience versions are relatively high simply because there is insufficient demand for higher volumes per consumer.

Someone told me that it was the fact in Euro, they have to use cane sugar, instead of HFCS (High fructose corn syrup)

In Ukraine, at least, going to have a coke is comparable to going to Starbucks here. It is something you might do as a social event with friends, dressing a bit nicer than usual.

I guess its a combination of some of the reasons named before.
1. Higher labor cost for waiters.
2. Coke being regarded as much more upmarket than in the US.
3. Elasticity of demand.
AND 4.: There is no free water in restaurants in Germany, so Coke only competes with other expensive drinks on the menu, eg apple juice, beer etc.

Being from Australia, I can tell you that the Coca-Cola bottling licensee keeps the wholesale price rather higher than you'd expect. Small retailers are usually unable to purchase a 375ml can for less than AUD$0.89, regardless of purchase volume. Major retail chains, such as Coles or Woolworths, get it cheaper and then use it as a "loss leader". For instance, it is not uncommon to see it discounted to slightly less than 50 cents/can, albeit in cartons of 30 cans.

Small fast food places sell Coke at AUD$2.00/can, reflecting their usual 100-120% markup.

Pepsi is not really a serious competitor, given it enjoys only 10-12% penetration in the Australian market. It retails at a 25-40% discount to Coca-Cola, in most places. Pepsi has a much higher percentage of the total market in South Africa than anywhere else I've heard about.

By comparison, I have seen other major local soft drink manufacturers' product sold for as little as 19 cents per can in supermarkets and they usually retail at around $1.00 per can.

Sugar content has nothing to do with it. All soft drinks in Australia use either cane sugar or aspartame as sweetenres. I don't know of any manufacturer using HFCS, as it would need to be imported.

Post-mix (syrup /water mixing machine) drinks are perceived to be considerably cheaper in Australia, largely because of their inferior flavour. Free refills are available at Sizzler, Pizza Hut and Hungry Jack's (Burger King).

I hope that info makes sense.

This does not have much to do with the issue but I still think there are some interesting facts around.
What about the coca name?
can you imagine another coca drink in the market?
just to let you know, I am from Peru and a few years ago a peruvian firm was trying to export an energy drink containing a coca leaf extract (just like coca cola did at the beginning) into Mexico. The drink was pretty good and the firm had a serious offer to place the product in the market. This is what happened when they were just about to close the deal, Coca cola moved its influences in order to prohibit the selling of another drink with a similar name or promoting itself with something they have registered (the coca name). What I do not understand is how can it be possible to register a common name? So no Peruvian or Bolivian drink will ever be able to be sold in the international market because this guys have legal rights over something that it not even theirs!!!! coca has been there for centuries and it is a product traditionally used in the Andean region. So my answer is pretty easy, they do it because they can, because we let them do it, because of the power they have, not only in the market, in our minds also. So drink more water, but not the bottled one, it will be good for you and for the world!

The question about difference in price of Coca-Cola is very interesting to me. I am not sure about Germany, but Coca-Cola is more expensive in Russia and Belarus. Or at least was last time i was there. I think we have perfect example of elasticity of demand, plus substitution effect. Modest price change of Coca-Cola is not going to have the same effect in USA and Belarus, because of income variance. I guess one could bring cultural difference to the equation. One glass of Coca-Cola or any drink per meal was allowed, when I was growing up.It was considered to be a treat. That is also a reason, I think, why stores in Belarus do not have so much success with 12 packs. Individual sale thrives, as opposite to USA, where 12 and 24 packs are common sizes.
I would definitely consider price of substitute products e.g. juices, indigenous beverages etc., which are relatively cheap. In addition of being comparable to Coke from the price standpoint of view they are also better for person's health.
I do not see a reason for the price of Coca-Cola to go down. From my understanding, since demand for Coke is elastic, if you reduce the price of it, it will result in decreasing of total revenue.

Given a particular amount of supermarket shelf space for a given vendor, the degree to which a single product (i.e. 2 liter Coke) is priced down to fill a portion of the shelf space will depend on the alternate products sold by the same vendor. In the US, the company Coke will have a large number of products in multiple package sizes, all with distinct consumer demands. It seems unlikely that the vendor of Coke in Germany will have as many varieties of drinks and package sizes. Working from its product portfolio, the vendor will effectively tend to fill up his allocated shelf space one item at a time, with the next most profitable (dynamically determined) item first.

When I went to Germany and saw the Coca Cola prices I was really shocked. In a random grocery 1 liter of Coke was 2 EUR and 1,5 liter was 2,50 EUR. These prices are almost 3 times more expensive compared with the Coke prices in my home country Turkey. In Turkey in a random supermarket 1 liter Coke is 0,70 EUR and 2,5 liters of Coke is 1,25 EUR. So in Turkey probably Coke is sold at the cheapest price in the world.

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