US: PepsiCo, The Coca-Cola Co confirm price hikes
Rising commodity costs have become a concern for many firms including PepsiCo and The Coca-Cola Co
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".
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