Economies of Scope

Economies of scale earn companies advantages by producing a lot of something. They're big, so they get to do things cheaper (on a unit basis anyway). Like when a manufacturer of, um...personal adult massage tools buys 14 million tons of plastic, they get it cheaper than a competitor who derives less scale benefit from being smaller in buying only two million tons of plastic at a time.

If economies of scale provide advantages from being bigger, economies of scope (not the mouthwash going on sale) provide advantages from being wide. You aren't producing a lot of one product. You're producing a lot of products. Doing so, allows you to earn more on each product than you would if you were producing any one of them individually.

So Coke doesn't just make Coke. It makes Diet Coke and Cherry Coke and all the other Coca-Cola brands. It also has Fanta and Sprite. It has Minute Maid juices and Powerade sports drinks and Vitamin Water and a whole bunch of other beverage products. It owns Gatorade.

Coke can make all of these products in the same factory, using similar ingredients (water, sugar, high fructose corn syrup, dyes, etc.) and using the same bottling facilities.

Also, these different brands share the same upper management organization. They share marketing and distribution networks. Each brand is cheaper to produce for Coke as a large company than if the conglomerate broke up and each brand had to survive as a stand-alone company.