How does the money I spend on products end up in the pockets of corporations?

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Say I buy a 2 dollar bottle of Coke from a grocery store. I go up to the cashier, I give them the money, they put it in the till, and I walk away. I have given money to the store, who presumably will then use that 2 dollars to fill out their employees paychecks, pay for things in the store like water, electricity, heating, janitorial staff for cleaning, etc, etc.

After all of that, how will Coke ever see my 2 dollars? It would seem to be that the money would have diluted beyond all recognition by that point.

In: Economics

Different than how you describe, at least in most cases. Usually, the grocery store actually already bought that bottle of coke at a reduced price, say $1.50. That $1.50 is already in Coke’s pocket. The store then sells it to you for $2, so they make back their money and then their profit. All the costs in the store come out of the store’s revenue of $0.50.

The store will have contracts with various vendors, coca-cola being a major one, as they own lots of different soft drink brands. Coca cola gets a cut of the profits and multiplied globally in every store around the world, it adds up to many, many millions of dollars.

The store uses that money to also buy more Coke from Coke Inc. They don’t get the soda for free.

You are looking at the chain of money backward. Coke mass produced the product at a cost of 50 cents a bottle. Then sold it to your grocery store for $1 a bottle. The grocery store sold it to you for $2. In all of the steps the difference between cost and sale is gross profit . Out of each step profit margin is where the cost of labor is paid. So net profit occurs in the difference. If coke makes a profit after labor and production. Of a dime. The grocery store sees roughly the same margin. These numbers are not exact but for example sake

Where do you think the store got the bottle of Coke from in the first place? The store already bought the bottle of Coke. The store sells it to you for more than they paid for it, which pays them back and earns them a profit. They they use that money to buy more bottle of Coke to sell to make more money.

Many retail establishments actually operate on a credit basis. They bring in various products from a distributor and are generally given credit terms, some times net 14 days or net 30 days before they begin to accrue interest. Could be longer depending on the industry. You buying the coke puts the money into the pocket of the business who can then pay their distributor who probably then pays the company that manufactured that item

Two people have already asked this, but I’m genuinely curious and would like to know what your answer is: Where did you think the store got the bottle of Coke from?

Since others have already responded, I just want to add, depending on the company, it may look after the small shop owner and replace items that have gone bad at no added cost. Bimbo (Mexican bread company, owner of Oroweat and other big brands) is famous for doing so (at least in Mexico).

So that Coke you spent $2 on cost the store $1, paid to Coca-Cola when it was delivered. The other $1 goes to cover the items you mentioned. When the store has paid salaries, rent, utilities, advertising, etc. and in the end about 5 cents of profit is left.

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Think of yourself as a farmer, you grew some tomatos and want to sell it for 10 cents a tomato but you also don’t want to have to deal with the hassle of setting up your own shop, hiring staff, etc so you sell it to a grocery store, that grocery store has payed you for your tomatos already and whether I go to buy it from the shop or not you have your money.


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