Diet Coke is 99% Water (And That Is Now a Good Thing)

Back in the day, when people noted that Diet Coke was 99% water, it was an insult. The point was that water was free, and Diet Coke was just free water plus a little bit of artificial this and that — so you would have to be a fool to pay so much for it.

Of course, times have changed. Bottled water now generates an estimated $50 billion in sales each year, with that number growing rapidly. According to this CBS News report, which puts soda revenues at $68 billion a year and stagnant, bottled water is now as big a business as soda.

All of which explains the new print ad I saw for Diet Coke, which was simply a picture of a can of Diet Coke and the words “99 Percent Water.” The implication is that if Diet Coke and water are almost the same thing, but Diet Coke tastes better, you might as well drink Diet Coke. Which is a pretty sensible point of view, as long as the 1% that is not water isn’t hurting you.

Still, imagine if an ad agency in the 1980s proposed such a slogan for Diet Coke. They would have been laughed out of the building, and for good reason. What consumers are willing to pay for a good depends on at least two things (although this is not the way economists usually talk about how demand is determined). The first is how much utility or enjoyment they get from the good. The second is how much it costs to make the good — consumers don’t like big markups, even if they enjoy consuming the good.

So, in a world where free water is the benchmark, if you make Diet Coke, you want to hide the fact that it is mostly water with a few cheap extras mixed in. On the other hand, when water is priced the same as soda, that part of the equation falls away. The emphasis can instead move to the fact that a lot of people strongly prefer the flavor of Diet Coke to that of water.

I don’t know whether this ad campaign will work, but it definitely shows cultural — not to mention economic — insight.

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  1. Enough Wealth says:

    I’m glad that diet coke is 99% water for two reasons:
    1. It’s just about all I drink, so it’s good to know I’m getting the recommended 8 glasses of water a day by drinking coke ;)
    2. Currently I can buy 1.5L bottles of coke on special for 99c each. By comparison the cheapest “no name” bottled water costs 77c for 1L, so diet coke is cheaper than bottled water!

    Regards
    http://enoughwealth.com

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  2. Enough Wealth says:

    I’m glad that diet coke is 99% water for two reasons:
    1. It’s just about all I drink, so it’s good to know I’m getting the recommended 8 glasses of water a day by drinking coke ;)
    2. Currently I can buy 1.5L bottles of coke on special for 99c each. By comparison the cheapest “no name” bottled water costs 77c for 1L, so diet coke is cheaper than bottled water!

    Regards
    http://enoughwealth.com

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  3. econ2econ says:

    Substitution effects, natch.

    I think for the vast majority of people, bottled water isn’t so much of a status thing (except for those who buy specific brands), it’s about convenience. Water quenches thirst better than other drinks and doesn’t have additives or calories, yet until the invention of bottled water, it wasn’t terribly convenient to carry water around, get it from vending machines, or get it cold and tasting fresh (instead of like rusty pipes). I think a lot of people are also like myself, in that they refill empty water bottles with filtered water from their homes or offices. And have you ever drank the sulfur water in Florida???

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  4. econ2econ says:

    Substitution effects, natch.

    I think for the vast majority of people, bottled water isn’t so much of a status thing (except for those who buy specific brands), it’s about convenience. Water quenches thirst better than other drinks and doesn’t have additives or calories, yet until the invention of bottled water, it wasn’t terribly convenient to carry water around, get it from vending machines, or get it cold and tasting fresh (instead of like rusty pipes). I think a lot of people are also like myself, in that they refill empty water bottles with filtered water from their homes or offices. And have you ever drank the sulfur water in Florida???

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  5. Zoe says:

    Perhaps it’s a response to the recent bad press bottled water has been getting, i.e., you don’t have to feel guilty about drinking diet cola. (Not yet, anyway.)

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  6. Zoe says:

    Perhaps it’s a response to the recent bad press bottled water has been getting, i.e., you don’t have to feel guilty about drinking diet cola. (Not yet, anyway.)

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  7. Erratica says:

    I have never understood the craze behind diet drinks, yet 25 years after being introduced Diet Coke still makes sense to millions. The reason I have so much difficulty digesting the fact that diet drinks are so popular is because I am a huge fan of the original coke and the satisfaction gained by consuming a can of the product comes solely from the taste. If one is addicted to the drink it is simply because you crave the taste. If I were offered another product that were completely dissimilar in taste I would not get as much satisfaction from consuming it and would give it up… This clearly isn’t a case of substitution as the two products are dissimilar except in terms of colour. In fact, diet Coke isn’t a variation of the original Coke formula but instead a whole separate formulated drink!

    Nevertheless, in response to this post, it’s odd that this campaign has started shortly after Pepsi Co. decided to come clean about its bottled water line – Aquafina being nothing but glorified tap water. I believe this campaign is Cokes preemptive marketing gimmick to draw attention away from its bottled water products and towards its primary product lines. It might also be that Coke wants to remind its patrons that the diet product IS in fact 99% water (i.e., tap water) and if they liked the diet product with just 1% flavouring, their water can’t be that much worse! Once they see sales pick up they go the way Pepsi Co. did and announce that their water is pretty much the same – TAP WATER!

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  8. Erratica says:

    I have never understood the craze behind diet drinks, yet 25 years after being introduced Diet Coke still makes sense to millions. The reason I have so much difficulty digesting the fact that diet drinks are so popular is because I am a huge fan of the original coke and the satisfaction gained by consuming a can of the product comes solely from the taste. If one is addicted to the drink it is simply because you crave the taste. If I were offered another product that were completely dissimilar in taste I would not get as much satisfaction from consuming it and would give it up… This clearly isn’t a case of substitution as the two products are dissimilar except in terms of colour. In fact, diet Coke isn’t a variation of the original Coke formula but instead a whole separate formulated drink!

    Nevertheless, in response to this post, it’s odd that this campaign has started shortly after Pepsi Co. decided to come clean about its bottled water line – Aquafina being nothing but glorified tap water. I believe this campaign is Cokes preemptive marketing gimmick to draw attention away from its bottled water products and towards its primary product lines. It might also be that Coke wants to remind its patrons that the diet product IS in fact 99% water (i.e., tap water) and if they liked the diet product with just 1% flavouring, their water can’t be that much worse! Once they see sales pick up they go the way Pepsi Co. did and announce that their water is pretty much the same – TAP WATER!

    Thumb up 0 Thumb down 0