Amorim, the world's biggest producer of cork stoppers, has benefitted from economies of scale. As the firm increased production, margins expanded. But, the firm didn't hike prices. Instead, costs came down.
Over the last 20 years, the firm has consistently sold more corks, with volume reaching 5.8bn in 2021.
As the firm sold more corks, its profitability improved. Higher production and sales levels, but with similar fixed costs and the ability to negotiate harder on marginal ones, helped the company's profit margins expand.
But margin expansion wasn't caused by above-inflation price hikes. The firm provides a commodity product with substitutes, like screwcaps, readily available. As a result, unit prices have been flat after adjusting for inflation. Lower costs must be the driving force behind wider margins.
The profit margin per cork expanded as Amorim's production costs declined. The firm's profit margins and cost of sales have had a strong inverse relationship.