Question: In a recent earnings call a teleconference call to shareholders
In a recent “earnings call,” a teleconference call to shareholders in which the CEO reports and discusses quarterly earnings per share, Coca-Cola’s CEO Muhtar Kent bragged about “winning” market share from rival beverage company PepsiCo. However, rising sugar costs in 2011 are forcing Coke to raise soft drink prices by 3 to 4 percent, and this could undermine Coke’s market share gains if Pepsi does not also raise its soft drink prices. The Wall Street Journal (April 27, 2011) reports that, in an effort to continue “winning the market share battle,” Kent plans to maintain relatively low prices in soft drinks by raising prices disproportionately higher in other categories such as fruit juices and sport drinks. The WSJ raises the concern that “winning market share may come at too great a financial cost.” Discuss some reasons why Coke’s pricing tactics to win market share could in fact reduce Coke’s profit and earnings per share.
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