Retailers slash soda prices as I.C. competition bubbles

A price war over fountain soda is bubbling in downtown Iowa City. The Den, at 123 E. Washington St., has long lured customers by offering cheap soda from fountains installed at the far end of the store, past racks of University of Iowa T-shirts, blankets, helmet-shaped snack bowls and shot glasses. But the retailer has slashed soda prices in recent weeks to compete with a new cross-street rival, the In-Zone.

“Part of retail is that you're watching the competition,” said Dan Maloney, Den manager. Former Den manager Dave Hill opened the In-Zone, at 116 E. Washington St., in December and is going after the Den's core business of inexpensive soda, cigarettes and shirts. Both stores also sell smoking paraphernalia. The cost of a 21-ounce soda at The Den fell from 50 cents to a quarter in recent weeks. The In-Zone's Pepsi products cost 25 cents for 24 ounces.

Sara Benscoter, a MidWestOne Bank employee who frequents The Den, said she goes for the soda but has been known to buy Hawkeye trinkets. She and co-worker Lori Johnson say they plan to check out the In-Zone this week. “We heard there was a price war going on,” Benscoter said.

Retailers traditionally have used loss leaders like fountain soda to get customers into their stores, said Helen Jensen, an Iowa State University economics professor who specializes in food and nutrition policy.

“Historically, it's been a pretty inexpensive drink to make,” Jensen said of the mix of sweetened syrup and carbonated water.

However, with increasing uses for corn - think ethanol - the cost of high-fructose corn syrup has doubled since 2000, Jensen said. Corn, used as high-fructose corn syrup, makes up only about 5 percent of the cost of soda now, but higher costs can shrink profit margins on soda, she said.