CallawayGolf
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- Nov 13, 2009
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I suspect a profit is being made on the glass of wine sold, but probably not nearly so much as one would expect when one sees a FA opening a bottle and pouring some of the contents into a glass. Plus there are still supply & demand principles at work here. If you lower the sell price do you actually sell more wine and make a bigger profit? If you raise the price do you sell less wine but make more of a profit on it anyway? I don't know the answer to that but I'll bet someone in marketing or dining and cabin knows what the market will bear and what it will not. My SWAG analysis tells me that the airline could lose big time on selling this product, but making a material profit (something to write home about) on the sale of alcohol is probably not in the cards with a price elasticity model in play.Interesting posts Callaway. Thanks for helping make my point regarding business models.
As most here know I have a friend who is a General Manager at Wendy's. Last time I spoke to her I asked her, "You know those Biggie Size Cokes? How much does it cost without burden rate"?
Her reply was. "I'm not sure off the top of my head but our cost for the Cup, Lid & Straw exceed the cost of the pour. All In you're talking about 15 cents tops" Keep in mind the Coke in question sells for $1.79.
So if US Airways adds such a high burden rate to its drinks that the fully loaded cost is $8.00 then I'd argue that US Airways has a flawed business model. Done correctly each Gin & Tonic sold should have a 50% profit margin minimum. If not then somebody is doing something wrong.
I suspect Wendy's considers the profit made on drink sales to be substantial. The airlines, not so much.