Coca-Cola takes advantage of Pepsi in the price battle

Inflation affects consumption habits at very deep layers of consumer preferences. If you belong to Coca-Cola or Pepsi, you will remain loyal. For brand, flavour, and unit prices for products such as soft drinksProduction costs are low, so demand has remained somewhat inelastic to prices so far, but things are changing.

The two companies raised their prices over the past two years to reflect increased costs and be able to maintain profit margins, but the results were mixed. Number of units sold by beverage sector PepsiCo In the United States decreased 8% In November and 7% in October and December, instead Coca-Cola prices rise by 3% in December from 1% in October Reuters reflectswho cites data from YipitData.

These same data reflect that both Coca-Cola and PepsiCo had little or no consumer reaction to high prices, but that long periods of high inflation levels prompted customers to prioritize their spending.

PepsiCo drinks contain: Average price increase 6.2% in the US during the fourth quarter, while Coca-Cola shares also rose 4.5% according to YipitData.

Influencing calculations and forecasts.

What these data indicated was reflected in the annual accounts of these companies that were submitted last week.

PepsiCo revealed a Global sales decrease 0.5% In the fourth quarter of last year, to $27.85 billion, the first decline in 14 quarters. Analysts had expected an increase of 1.4%. It also forecasts a strong slowdown in organic revenue growth for 2024: it expects a 4% increase, compared to the 9.5% it achieved in 2023. The company itself recognizes that this decline in demand responds to price increases applied to offset costs.

coca colawhich Yesterday it published its annual accounts, with He earned $10,714 million In 2023, 12% more. In the fourth quarter, its sales volume increased by 2% and average selling prices increased by 9%. However, its stated forecast for the current year also indicates weak demand resulting from the increase in product prices: it expects an increase in organic income of between 6% and 7%, compared to last year's growth of 12%.

What about other “leniency” companies?

This trend is observed in other food products with low unit prices and whose consumption is not necessary, such as snacks or sweets. Which also hindered the rise in prices, but the inflation rope became very tight. One well-known example this week is an example Hersheychocolate manufacturing company, It released its results this weekwith net sales declining by 0.1% for the fourth quarter, as well as lower global sales expectations this year, with an increase ranging between 2% to 3%, compared to 7% in 2023.

“Consumers spend less during off-season periods, a A trend that is likely to continue Throughout 2024,” said Arun Sundaram of CFRA Research, quoted in Reuters.

Another example is that Mondelez, the manufacturer of Cadbury and Toblerone. they Global organic product sales fell 0.4% in the fourth quarter This has an impact of up to 5.5% in the case of its sales in North America, and it may extend to other regions starting from the second quarter of this year, as inflation is still high in Europe.

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