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April 16, 2021

PepsiCo CEO hails “rational” pricing as COVID knocks out promotions

PepsiCo's CEO believes his company should be able to charge more for US beverages this year, because rivals stung by cost increases lack the will to fight on price.

PepsiCo’s CEO believes his company should be able to charge more for US beverages this year, because rivals stung by cost increases lack the will to fight on price.

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Speaking to analysts yesterday, Ramon Laguarta said soft drinks brand owners in North America are continuing to count the cost of COVID-related commodity increases. In the US last year, for example, aluminium shortages led to a rise in the cost of beer and soda cans.

According to Laguarta, these higher costs should keep activations that cut into pricing, such as promotions, down to a lower-than-usual level.

“There is probably going to be very little incentive for anybody to break what is a very rational [pricing] environment as we see today,” Laguarta explained.

The CEO also noted that retailers have become “more capable and knowledgeable” on consumer insights, and on applying those insights to promotional offers and pricing elasticity. He hopes that retailers will use more of these levers to “provide good value to the consumer rather than just driving prices down”.

Earlier in the post-results conference call, Laguarta described North American beverage pricing as currently “very rational”, meaning there are fewer promotional offers on products. According to the CEO, promotional offers in the US were at a lower level in the most recent Q1 compared to the same quarter last year.

“There is probably a high likelihood that the market will remain as rational for the next quarters, and that’s what we’re trying to do ourselves,” Laguarta said. “I expect the rest of the industry would follow a similar position.”

PepsiCo CFO Hugh Johnston said the situation should allow for a better business environment for the company, one that is “primarily around innovation and brand building and execution”.

In PepsiCo’s Q1 results yesterday, North American beverage sales climbed by 2%. The group’s beverage volumes globally were also up by 2%.

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What is the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry?

While wanting to protect the country from being overwhelmed by Omicron, China’s adherence to a Zero-COVID policy is resulting in a significant economic downturn. COVID outbreaks in Shanghai, Beijing and many other Chinese cities will impact 2022’s economic growth as consumers and businesses experience rolling lockdowns, leading to a slowdown in domestic and international supply chains. China’s Zero-COVID policy is having a demonstrable impact on consumer-facing industries. Access GlobalData’s new whitepaper, China in 2022: the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry, to examine the current situation in Shanghai and other cities in China, to better understand the worst-affected industry sectors, foodservice in particular, and to explore potential growth opportunities as China recovers. The white paper covers:
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  • What is the effect of lockdowns on foodservice?
  • What is the effect of lockdowns on Chinese ports?
  • Spotlight on Shanghai: what is the situation there?
  • How have Chinese consumers reacted?
  • How might the Chinese government react?
  • What are the potential growth opportunities?
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Enter your details here to receive your free Whitepaper.

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