CLSA believe beverage firms will have to permanently switch to a higher price model

CLSA believe beverage firms will have to permanently switch to a higher price model

The Coca-Cola Co has the “upper-hand” over rival PepsiCo as the firms are forced to re-think their price mix to combat regulatory pressures on the CSD sector in the US, according to an analyst.

The soft drinks industry was successful in fighting off a ban on large sugary drinks in New York City this week. But, companies are facing an increasing battle as the debate around obesity, and the part beverage firms have to play, intensifies in the US.

CLSA analyst Caroline Levy said in a note today (14 March) that firms must follow brewers in switching to a higher price model. 

“We believe the current regulatory environment, (with) government going after sugared drinks, requires beverage companies to permanently shift focus to higher price/mix,” the note said. 

Levy said that Coca-Cola has the “upper-hand” over PepsiCo due to its its “superior brand-building activities over the past five years and longer in most countries”. 

She added: “Coca Cola should be very focused on awarding territory to operators with this expertise. PepsiCo’s challenge will be a lack of options for refranchising, unless perhaps it can link up with another system, like beer.”