US: The Coca-Cola Co targets annual price hikes - analyst
The Coca-Cola Co has been hit by cost increases in the US
The Coca-Cola Co looks set to carry out yearly price hikes in the US to offset destabilising cost increases, an analyst has said.
Profits from the company's takeover of most of its North American bottling operations in 2010 are being lost to double-digit commodity inflation, Bernstein Research said in a note. A decision last year to pursue only low-single-digit increases was disappointing, the note added.
“Coca-Cola will, in our view, need to maintain its intensity on brand support, innovation, and productivity, while also ensuring steady realisation of net year-over-year price increases, whether through list price hikes, trade spend optimisation, and/or improved brand/package/channel mix,” Bernstein said.
Recent 3-4% increases in pricing levels are encouraging, the note said, adding: “Indications (are) that Coca-Cola plans to take prices higher every year, regardless of which way commodities swing.”
The note also said Japan, which represents 9% of Coca-Cola's global sales but only 4% of volumes, was back on track after margin falls three years ago and last year's tsunami.
The note said: “Coca-Cola bottlers today in Japan are roughly as healthy as they were back in 2005, a significant reversal from 2009. Although perhaps too early to declare Japan 'fixed', we do see these developments as positive.”
In July, Coca-Cola announced it was streamlining operations by consolidating from five global units into three and today revealed the executives that will head up the changes.
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