4 Reasons for the Price Increase of Pepsi

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.