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Why Is Soda So Expensive in Europe?

By Matthew Yglesias  

"Why Is Soda So Expensive in Europe?"

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I’m one of those “drinks a ton of Diet Coke” people, and thus every time I come to Europe I find myself dismayed at the cost of soda over here. Does anyone have a good explanation of why it’s so much more expensive than in the US? I thought Google might have an answer, but a quick search didn’t seem to reveal anything. Of course VAT and higher low-end labor costs make a lot of things more expensive in Europe than in the United States, but the scale of the difference here is huge. And very similar items like bottled water don’t exhibit the same price differential, and coffee generally seems to be cheaper here than at home.

I take it that with brand name soda actual production and distribution costs are a minor factor in setting prices. Could it just be that the structure of the market demand is totally different and in the U.S. cheap soda leads to high sales whereas they think the price-elasticity is lower here so the profit maximizing equilibrium just involves higher prices and lower volume? But why would that be? The expensive soda and inadequately chilled beverages are definitely an aspect of the European social model that I would not want to see imported to the land of the free.

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