Pepsi warns that prices may continue to rise
The firm’s financial director has made clear that, with ingredients and transportation costs on the rise, the price of the drink may increase further.
PepsiCo has admitted that it may decide to further increase its prices in the coming months. The beverage giant is facing cost increases for ingredients and for transportation, due to the global factors pushing up prices across the board, and may have to pass on this expense to the consumer.
Disruptions in the global supply chain caused by the pandemic and the increasing cost of raw materials have forced Pepsi, like other food and drink manufacturers, to raise the prices of its products. Some producers have refused to push up prices, fearing that it could bring about a drop in demand, but PepsiCo appears likely to continue to raise prices to account for inflation.
In recent months the cost of the brand’s products has been increased but it does not seem to have affected the appeal. PepsiCo’s chief financial officer, Hugh Johnston, told Reuters that the company has not experienced any kind of drop in demand after upping prices for its soft drinks.
“In a world where we’re seeing things like vegetable oil, grains and packaging prices rising dramatically, I’d be surprised if there weren’t more [price increases] over the course of the next year”, Johnston explained.
The privileges of a duopoly
PepsiCo has reached such prominence in the minds of consumers that it would likely take fairly severe price rises for a significant proportion of buyers to turn away from the brand. CFRA Research analyst Arun Sundaram believes their freedom to increase prices without affecting demand stems from the lack of competition in the market.
Arun explains: “It is really a duopoly between Pepsi and Coca-Cola, so they have a huge amount of pricing power”.
Earlier this week PepsiCo revised its revenue forecast for fiscal year 2022, upping predictions from 8% to 10%. Data from Refinitiv found that the company’s net revenue for the second quarter of this year rose by 5.2% to $20.23 billion, exceeding earlier estimates of $19.51 billion. This came despite a $1.4 billion charge on the company as a result of the withdrawal from the Russian market after the country invaded Ukraine.