Successful companies frequently rely heavily on just one product for the majority of their sales and profit. That’s true for some of the most iconic brands, including Coke, Marlboro and the Apple iPhone. Because each product represents such an outsized share of their respective company’s revenue, the products’ tremendous margins are the foundation of the company’s profit.
These products are the most profitable for several reasons. Nearly all of them are the market leader in their sector and are mass produced at an unprecedented scale. As a result, the companies can apply significant pressure up and down their supply chain, ensuring they can manufacture the product at the lowest cost, and sell it to customers at the highest possible price. Apple sold 37.4 million iPhones in its most recently reported quarter. Very few smartphone or consumer electronics devices can match that volume, which gives Apple notable leverage in negotiations for components and with carriers.
The most profitable products tend to rely on the power of their brand, which can command a premium price and sell extraordinary numbers of units. In fact, some of these products, including the iPhone, Coke and Marlboro, are part of the world’s most valuable brands as measured by brand consultancies like Interbrand and BrandZ. All three companies are the market leader, despite the presence of competing products that sell for much less.
Another important factor that contributes to product profitability is good management. A company that spends too much on research and development, marketing, or management can smother a product’s margins. Of course, controlling expenses is a balancing act. A product that is not well marketed is a product that will probably not do well for long.
Product profitability is among the most difficult financial measurement to analyze from the financial information released by many of America’s public companies. It is also among the most difficult to find information on. Public companies tend to guard data on product profits, and rightly so. This information is the equivalent of a trade secret that corporations do not want their competitors to have, even if the figures can be estimated.
Based on data provided by Capital IQ, 24/7 Wall St. reviewed the S&P 500 companies that produce consumer products. We only considered corporations that have a single product save as the company’s flagship brand, or where the product represented the largest single contributor of revenue. To account for the opaque nature of product profitability, 24/7 Wall St. only considered products of publicly traded companies that disclosed significant details about their operations. We excluded companies with an operating margin of less than 15%, as well as companies that did not break out revenue by division or product. In order to estimate product operating margin, in the cases when the product’s margin or revenue was not provided, we used the company or division’s operating margin as a proxy. If is was clear that the brand power of the product and high volume of sales allows the company to sell the product at a premium, we awarded the product a higher operating profit. Market share valued listed are worldwide, unless otherwise noted. We treated company products of the same type and brand as one. For example, for our purposes, Coca-Cola includes Coca-Cola, Diet Coke, and Cherry Coke.
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