From a can of Red Bull to a luxury piece, an acquisition, a university degree, or even healthcare, price and value are ultimately rarely the same thing.
There is one thought that keeps repeating in my head whenever I look at a product: how much does this actually cost, and how much of the price represents value?
At first glance, it sounds like simply linear accounting:
materials + labour + logistics + margin = price.
Then accounting makes even “cost” slightly more interesting, with inventory valuation methods such as FIFO or weighted average under IFRS, before negotiated margins and the rest of the value chain enter the equation.
Then add negotiated margins, overhead, distribution, and everything else happening between production and purchase.
Except business is rarely that linear.
1. A can is never just a can
Take Red Bull.
I originally stumbled across the often-repeated idea that a can might cost, say, €0.10 or only a few cents to produce physically, before eventually being sold to consumers for at least 10 times that amount – The power of FMCG rights? 😉
The exact manufacturing cost per can is not publicly disclosed, so I would treat the 10-cent figure as a thought experiment rather than audited fact.
The verified numbers are already fascinating enough.
In 2025, Red Bull sold 13.969 billion cans worldwide and generated €12.196 billion in group turnover. Even more interestingly, Red Bull describes its own beginnings not merely around developing the formula. Between 1984 and 1987, Dietrich Mateschitz worked on the formula, brand positioning, packaging and marketing concept together.
In other words, the product was never merely caffeine, sugar, water and aluminium.
The brand architecture was being built alongside the drink itself.
That is where cost versus value becomes incredibly captivating.
Between the manufacturing factory and the end consumer opening the can sit packaging, logistics, distribution, retail margins, salaries, marketing, sponsorships, advertising, research, overhead, investment and ultimately profit.
Those things are often described as “extra costs.” Yet many of them are precisely what create the commercial value that allows a product to sell.
Without distribution, nobody finds it.
Without marketing, perhaps nobody wants it.
Without people, systems and operations, perhaps there is no scalable business at all.
So it becomes slightly chicken-and-egg:
Does marketing increase the price and perceived value of the product, or does marketing create part of the value that makes the price possible?
Probably both.
Popular culture almost caricatured this through the advertising executives of Mad Men. Seth Godin later captured another side of the idea beautifully with Purple Cow: in an overcrowded marketplace, being merely good may not be enough; a product needs something remarkable – something worth talking about.
And this leads to another increasingly popular idea:
Dispatch the middlemen?
Direct-to-consumer models can certainly remove layers of distribution and sometimes improve economics. Environmentally, however, fewer intermediaries do not automatically mean lower impact.
Sometimes the middleman is friction.
Sometimes the middleman is infrastructure.
Sometimes an intermediary consolidates transportation, provides specialised knowledge, absorbs risk or gives a company access to a market it could not efficiently reach alone.
The more useful question is therefore not simply:
“Can we remove this cost?”
nevertheless:
“Does this activity create enough value to justify its cost?”
2. Mass market sells efficiency. Luxury sells something harder to calculate.
For mass-market products, reducing unnecessary cost makes intuitive sense.
Scale matters. Manufacturing efficiency matters. Distribution efficiency matters.
If millions of people need essentially the same useful product, producing it consistently, safely and affordably is an extraordinary business achievement in itself.
Luxury operates according to slightly different mathematics.
Of course, quality matters.
Materials matter.
Craftsmanship matters.
But a €5,000 piece is not simply a €50 item manufactured 100 times better.
Part of what consumers buy is intangible:
heritage, rarity, design, identity, craftsmanship, culture, service, experience and perhaps even belonging.
Research on brand heritage supports this distinction: heritage can influence perceived quality and willingness to pay a premium. Functional utility therefore becomes only one component of value alongside emotional, social, symbolic and experiential value.
This is where marketing becomes far more interesting than simply “advertising.”
At its best, marketing does not invent value out of nothing. It identifies, communicates and amplifies value already embedded in the product, craftsmanship, history or experience.
It helps sell the story around what people want to buy, not merely the object being exchanged.
Perhaps that is part of the price of art and culture too.
Some things are, philosophically speaking, priceless. Business nevertheless needs to put a price on them.
Luxury therefore becomes an attempt to translate something partly intangible into something financially measurable.
Take LVMH, an obvious French example.
In 2025, the Group generated €80.8 billion in revenue with a reported gross margin of approximately 66% of revenue. That certainly does not mean 66% becomes pure profit. Employees, boutiques, marketing, development, administration, investment and numerous operating expenses still follow. Its recurring operating margin was 22%.
But the numbers demonstrate why looking only at raw production cost tells us remarkably little about the economics of luxury.
Distribution itself is part of the value creation.
The boutique, then, is not merely where the product happens to sit.
The boutique experience is part of the product.
3. France, Germany and two distinctive ways of creating value
This distinction somehow makes me think of France and Germany.
Obviously, reducing entire countries to business stereotypes is dangerous territory. Germany makes luxury products; France manufactures industrial goods.
Still, if we deliberately exaggerate the contrast for a moment, they represent two fascinating traditions of value creation.
Germany has historically built enormous strength around engineering, industrial manufacturing, machinery, automobiles and export-led production. The OECD still characterises the German economy through its historically strong export-led industrial model.
France, comparatively, has an unusually visible global strength in luxury, beauty, fashion, culture and high-value branded products, alongside its own major industrial sectors. Manufacturing represented 11.2% of French value added at the end of 2025, according to the OECD.
If I simplify almost irresponsibly:
One model became exceptionally good at manufacturing things.
The other became particularly good at making certain things desirable.
But here is where my neat comparison starts destroying itself, which actually makes it more interesting.
Take L’Oréal.
It is French, yet its strategy is hardly “luxury only.”
In 2025, L’Oréal generated €44.05 billion in sales, distributed across Consumer Products, Luxe, Dermatological Beauty and Professional Products. Consumer Products represented 37% of sales and Luxe another 35%.
The company is effectively playing across the value spectrum.
Rather than choosing purely between accessibility and premiumisation, the portfolio allows different brands, channels and consumers to coexist.
Compare that with Germany’s Beiersdorf, where NIVEA, Eucerin and other brands again demonstrate that national stereotypes quickly collapse once we actually open the corporate portfolio.
And then there is Unilever.
Traditionally associated with enormous mass-market consumer brands, Unilever has also developed the premium end of Beauty & Wellbeing. Its current portfolio combines global-scale brands such as Dove and Vaseline with Prestige Beauty brands including Dermalogica, Hourglass, K18 and Paula’s Choice. Its 2025 strategy specifically highlights science-led premium innovation alongside brand investment.
So perhaps the interesting competition is no longer simply:
mass versus luxury.
It is:
Who can wisely move between scale, premiumisation, science, desirability and accessibility without confusing the customer?
And the right amount of competition matters.
This thought goes all the way back to Adam Smith. His work strongly favoured free competition and criticised monopoly privileges that allowed sellers to restrict supply and command prices above competitive levels.
Competition, at its healthiest, keeps businesses moving.
Too little, and incumbents can become comfortable.
Too much without room for sustainable margins, and businesses may struggle to invest.
The interesting equilibrium sits somewhere between the two.
Which conveniently brings me back to one of my favourite business rabbit holes.
4. M&A: sometimes buying value is faster than building it
I previously wrote about mergers and acquisitions, and this question of cost versus value adds another layer.
Organic growth means building.
You develop the product.
Build the team.
Enter the market.
Acquire customers.
Develop capabilities.
Earn brand recognition.
M&A allows a company, at least theoretically, to buy some of that accumulated capability in one strategic move.
That could mean:
high technology.
A brand.
Distribution.
Talent.
Intellectual property.
A customer base.
A geographic market.
Or simply capabilities that would take years to develop internally.
This is why I find M&A one of the more sophisticated areas where business strategy and finance collide.
Not necessarily the “highest form” of strategy — because there probably should not be a beauty pageant for corporate strategy.
But certainly one of the most interesting.
Interestingly, L’Oréal itself described 2025 as a landmark year for acquisitions, including investments in Jacquemus Beauty, Medik8 and Color Wow.
The logic is understandable.
Sometimes building the missing capability organically is preferable.
Sometimes partnering makes more sense.
Sometimes buying it is faster.
Yet acquisition price and acquisition value are not identical.
So even here, the same equation appears again:
Price is what you pay. Value depends on what you can actually do with what you bought.
Buying a company for €1 billion does not automatically make it worth €1 billion to you.
Integration matters.
Synergies matter.
People matter.
Execution matters.
Value still has to be created after the transaction.
5. And then healthcare and education break the equation completely
This is where the thought gets slightly random again, but reasonably so.
Healthcare and education are perhaps two of the most important systems supporting human development.
Yet they reveal just how unreliable price can be as a signal of value.
Take higher education.
Students in the United States can pay substantial tuition fees for university. In Nordic systems such as Denmark, Finland, Norway and Sweden, public tertiary education generally charges no tuition to national and EU/EEA students.
That obviously does not mean Scandinavian education has zero cost.
Quite the opposite.
Someone still pays.
Professors still receive salaries.
Buildings still need electricity.
Laboratories still require equipment.
Research still requires investment.
The cost has simply moved.
Nordic tertiary education is predominantly publicly funded, reflecting a different social choice about who pays, when they pay and how access should be distributed. The OECD notes that low- or no-tuition systems with generous public support are often financed through greater public expenditure and, ultimately, taxation.
That feels close to a broader societal principle I have always found interesting:
The strength of the whole system is somehow connected to the strength of its weakest link.
Not because education becomes “free.”
Because society has collectively decided where the invoice should go.
The same logic applies to healthcare.
Calling healthcare “free” in France is convenient conversational shorthand, but economically it is never free.
Doctors still need salaries.
Hospitals still require technology.
Medicines still need research, manufacturing, logistics and regulation.
The difference is that much of the cost is collectively financed rather than appearing as the full market price at the exact moment a patient needs treatment.
And this is where I would separate price, cost and value completely.
A €50,000 degree is not automatically ten times better than a €5,000 degree.
A medical treatment that costs the patient €20 is not necessarily worse than one for which another patient receives a €20,000 bill.
Price partly reflects the financing model, competitive structure, regulation, taxation, supply, demand and institutional choices surrounding the product or service.
Not simply its intrinsic quality.
Perhaps the really fascinating question therefore becomes:
Who pays for value – the individual, the company, the taxpayer, or everyone somewhere along the chain?
So, what are we really paying for?
Perhaps that is the connected dot behind all of this.
A price can contain:
materials + labour + logistics + technology + distribution + marketing + brand + culture + scarcity + experience + risk + regulation + taxation + profit + reinvestment + recyclability + perception.
Sometimes we pay primarily for the physical product from the farm or factory.
Sometimes convenience.
Sometimes craftsmanship.
Sometimes innovation.
Sometimes trust.
Sometimes a century of brand heritage.
Sometimes an entire ecosystem that makes the product available.
And sometimes we do not pay much at the point of consumption at all because society has decided that the value is important enough to finance collectively.
So when somebody says:
“But it only costs X to make.”
My increasingly annoying business-school instinct is to ask:
Cost to whom?
At which point of the value chain?
Who absorbed the costs before it reached me?
And compared with what value?
Because perhaps the most interesting part of a product is not simply what went into making it.
It is everything that made someone decide it was worth having.
References
Baumert, T., & de Obesso, M. M. (2021). Brand antiquity and value perception: Are customers willing to pay higher prices for older brands? Journal of Business Research, 123, 241–254.
Beiersdorf AG. (2026). Annual report 2025.
Godin, S. (2003). Purple cow: Transform your business by being remarkable. Portfolio.
IFRS Foundation. (n.d.). IAS 2 Inventories.
L’Oréal. (2026). Annual report 2025.
LVMH. (n.d.). Key figures. Retrieved August 23, 2026.
Organisation for Economic Co-operation and Development. (2025). Education at a glance 2025: OECD indicators. OECD Publishing.
Organisation for Economic Co-operation and Development. (2025). OECD economic surveys: Germany 2025. OECD Publishing.
Organisation for Economic Co-operation and Development. (2026). OECD economic surveys: France 2026. OECD Publishing.
Organisation for Economic Co-operation and Development. (n.d.). Competition and market dynamism. Retrieved August 23, 2026.
Organisation for Economic Co-operation and Development. (2025). Country health profile 2025: France.
Red Bull GmbH. (n.d.). Red Bull company: Company facts. Retrieved August 23, 2026.
Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations.
Unilever PLC. (2026). Annual report and accounts 2025.
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