Rising commodity costs have become a concern for many firms including PepsiCo and The Coca-Cola Co

Rising commodity costs have become a concern for many firms including PepsiCo and The Coca-Cola Co

PepsiCo and The Coca-Cola Co have confirmed to just-drinks that they will increase soft drink prices in the US in the second half of the year.

Earlier this week, PepsiCo told Beverage Digest that it plans to raise drinks prices in the country by an average of 3% to 5% between mid-July and Labor Day on 5 September. Likewise, in April, Coca-Cola informed investors on its first-quarter earnings call that it will raise prices 3% to 4% during the second half of the year, for a total increase of 2% to 3% for the full year.

A spokesperson for PepsiCo confirmed the pricing plans to just-drinks yesterday (14 June), but declined to comment further, "for competitive reasons". The increase will put PepsiCo's prices 5% to 7% higher than they were a year ago by the end of the summer.

Rising raw materials costs are a major concern for many soft drinks companies in 2011, with both PepsiCo and Coca-Cola having warned of increases at a global level.

Both firms plan to get the pricing boost from a mix of raising prices, fewer deals and shifting the mix of products sold to higher-priced items, as they look to offset the increasing costs of ingredients, Beverage Digest reported.

On Coca-Cola's first-quarter earnings call in April, CEO Muhtar Kent told analysts that the company will be looking at "every opportunity in North America to see if we can generate a higher price than the overall 1% to 2% and more like, maybe, 3% to 4%, as we look into the balance of the year".

Kent said the company was confident that its brand strength would allow it to generate the higher price increases.

Coca-Cola's CFO, Gary Fayard, reiterated this on the same conference call. "We're now saying that we're going to probably be going for more pricing than that this year, and a lot of that is just strictly the environment that we're in," he said.

Earlier this month, Coca-Cola closed one of its distribution and sales centres in the US as a result of "the pricing environment ... and the high cost of commodities".