4 Reasons for the Price Increase of Pepsi

the Price Increase of Pepsi

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Recently, Pepsi has been increasing in price. Why is Pepsi so expensive now? Understanding the answer to this question is not as straightforward as you might think. This blog post will discuss 11 reasons the price of Pepsi has increased over the years and how it can affect supply chain management. Following KFC’s “no chicken to fry,” PepsiCo is also facing a price increase. Recently, with the third-quarter earnings release, the beverage giant Pepsi also issued a price increase warning.
the Price Increase of Pepsi


Several food companies announced price increases.

Recently PepsiCo said that it may raise prices early next year.

“Over the past few months, Pepsi has had to struggle to address shortages of cans and beverage bottles.” In an interview with foreign media, Pepsi’s chief financial officer Johnston (Hugh Johnston) said that the shortage of raw materials was highlighted by a surge in demand for Pepsi beverages in restaurants and theatres after restrictions caused by the outbreak were lifted.

In fact, in recent weeks, Pepsi has raised the prices of sodas and snacks due to rising raw material prices that have squeezed the packaged food industry’s original profit margins.

The issue of rising raw material prices was also reflected in Pepsi’s latest financial results for the third quarter of 2021. For the quarter ended September 4, Pepsi achieved revenue of $20.189 billion, up 11.6% year-over-year and 5.06% year-over-year, above market expectations. At the same time, costs rose by more than 10% due to increased distribution and marketing spending.

PepsiCo’s Q3 2021 earnings report

In the earnings report, PepsiCo noted that in addition to raw material shortages, labour shortages, reduced availability of air or other commercial transportation, port closures, or border restrictions have also adversely affected the supply chain, any of which could impact PepsiCo’s ability to produce and sell its products.

Beverage bottle shortages, truck driver shortages …… various challenges from the supply chain continue to grow. 5, PepsiCo said it may raise prices again early next year.

“Prices are also likely to increase in the first quarter of 2022 as the impact of commodity inflation is fully absorbed and locked in.” PepsiCo Chief Financial Officer Johnston said in a media interview.

And before that, Pepsi’s old rival Coca-Cola has issued a price increase notice.

On April 19, Coca-Cola CEO James Kunjie said that because of rising raw material prices, the company will next respond to the impact of rising costs by raising beverage prices.

In addition to the two major cola brands, this year, the food industry, several companies have also announced price increases, the reason directly refers to the rise in the cost of raw materials, etc. August 16, Daley Food Group issued a notice of price increases for some of the three major series of food products, the group will be based on the rise and fall in operating costs, the Daley Food’s three major series of food products price increases.

And in May and July this year, Budweiser Asia Pacific and China Resources Brewery, two major beer giants, also issued price increase notices one after another. Budweiser Asia Pacific mentioned that many of the company’s brands have increased prices, including Budweiser and nationwide core and affordable brands, with specific price increases varying from brand to brand. China Resources Breweries mentioned that the company expects further increases in raw material prices in the second half of the year and does not rule out a nationwide price increase in the second half of the year or at the end.

In addition, the international food giant Nestle plans to raise prices across the board in the second half of this year. Nestle said that input costs are expected to rise by about 4% this year, so the company needs to raise prices as soon as possible. Prices are expected to increase by about 2% to offset the 4% cost inflation increase.


Supply chain tensions affect many companies.

In fact, PepsiCo is not the only one facing supply chain shortages.

In late September, media reports said that the United States KFC noted that due to the lack of supply of boneless chicken, it decided to temporarily cancel the advertising campaign for the product. Wingstop, a fast food restaurant famous for its “fried chicken wings,” recently had to develop a new chicken leg product as a substitute because of a significant shortage of chicken wings.

In addition, McDonald’s, Starbucks and other well-known fast-food chains are facing shortages of raw materials.

In terms of transportation and the high price of shipping, the impact of Brexit, a significant shortage of truck drivers also makes many companies’ transportation costs added to the problem.

Write a paragraph about the above sentence, do not repeat it.


How long will the supply chain tension last?

Johnston said that the early purchase of bulk commodities and raw materials through forwarding contracts can only provide a short-term cushion and will not allow PepsiCo to escape the impact of inflation. Most supply chain of  disruptions to pepsi management are expected to ease by the end of 2021.

And other companies may be affected for longer. According to the BBC, Nike products will continue to experience difficulties in production and shipping until next spring, which including the Pepsi production process.

In this regard, Chinese food industry analyst Zhu Danpeng said, “As the world’s leading beverage brand, Coca-Cola or Pepsi price adjustment will certainly lead the entire industry to also follow the trend of price increases, this round of price increases or will accelerate the industry reshuffle.”


What is Pepsi's new strategy?

PepsiCo sets a new goal to source 100% renewable electricity worldwide, across direct operations by 2030 and entire global operations by 2040, after it announced that its snacks and beverages will be produced using renewable energy in the United States by the end of 2021.

PepsiCo’s Pepsi, Gatorade and Tropicana brands will now be made using 100 percent renewable electricity as part of the company’s commitment to using more than one billion kilowatt-hours (kWh) per year globally by 2025 across all Pepsi factory operations.

The company is forecasting a three percent increase for its snacks business this year. It invests more than $100 million into launching new products such as Quaker Oats oatmeal and Naked Juice smoothies.

PepsiCo will also be closing three snack plants in the U.S., which will impact about 600 workers. Still, Pepsi expects to save $500 million annually by 2021 due to reduced costs and investments in new products.

PepsiCo is also investing $16 million in a new innovation center at its headquarters in pindyck, New York, focusing on enhancing consumer experience with Pepsi’s brands through emerging technologies such as virtual reality (VR) and augmented reality (AR) and textiles. Pepsi’s portfolio, which is led by Pepsi and Mountain Dew Gatorade, will also include the North American Coffee Partnership with Starbucks in early 2018 and a global expansion of its water business plan, including moving into China for the first time through a joint partnership with Alibaba Group Holding Ltd.

The company participates in the Pepsi Refresh Project, a $20 million grant program that awards community-inspired projects with no strings attached. Pfizer also supports PC’s public service corporate responsibility program.

PepsiCo built on its commitment to replenish 100 percent of Pepsi factory water afforded by communities within its North American operations through Pepsi’s power drinking-water replenishment program, which has now reached nearly 600 of the company’s snack plants.

PepsiCo is also making investments to reduce greenhouse gas emissions in Pepsi factories worldwide and supporting new research on pgrant pwtr genotyping to identify Pepsi factory water users in need of replenishment.

Pepsi also announced a goal to increase its use of new grant pwtr technologies by 2025 globally across all Pepsi factory operations, which will help the company meet or exceed this commitment.

PepsiCo’s efforts are part of the company’s purposeful partnerships with local governments, non-governmental organizations and community groups worldwide throughout its value chain that focuses on environmental grants pwtr and drinkable water bottling business plan.

PepsiCo plans to launch a cost-control plan in the United States, including plant closures as well as layoffs. In addition, PepsiCo has been developing many sources of revenue that are not related to beverages and snacks by expanding into e-commerce or launching home delivery services.




Where can I find more information about these Information if needed?

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John Lau.

John Lau.

John Lau, a project manager holding an engineering bachelor's degree, became fascinated with optimizing beverage production equipment during his university days. As an overseas project manager, he firmly believes that educating clients on achieving efficient workflows through customized equipment design is one of the most impactful aspects of his job.

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