PepsiCo: "Consumers will allow us to raise prices"

As costs for raw material, wages and transportation have risen significantly, food and drinks giant PepsiCo says it is forced to raise its prices next year. Consumers will accept to pay more for brands such as Pepsi, Lay’s and Quaker, the multinational thinks.

Strong brands and innovative power

Pepsico will increase prices for snacks and soft drinks in the fourth quarter of this year and the first quarter of next year, Chief Financial Officer Hugh Johnston told Bloomberg in an interview. The manufacturer is counting on its strong brands and innovative power to create further growth despite these higher prices.

“Consumer balance sheet are generally pretty healthy these days”, the CFO thinks, meaning they can handle a certain level of price hikes. “We are still a relatively low priced, relatively convenient purchase. It will hit durables long before it hits us.”

PepsiCo is by no means the only food manufacturer to announce price increases: Coca-Cola and Procter & Gamble, for example, have already done so. Rising costs for raw materials, wages and transport are the main reasons.

Bottlenecks in supply chain

Now that people are working outside the home more often, PepsiCo sees consumer behaviour gradually normalising. Outdoor consumption is increasing strongly and is approaching the level of 2019. There is, however, one new habit that is persisting: people are eating breakfast at home more often, which benefits the sale of oatmeal as a healthy option.

PepsiCo had a great quarter with a 9 % organic growth. That figure could have been even better if the manufacturer had not faced some bottlenecks in the supply chain: at times there was a shortage of PET bottles and aluminium for soft drink cans. For the full financial year, the producer now expects a growth of 8 %.