PRICING STRATEGY

Rising production costs are forcing big brands to increase prices

By our News Team | 2022

Market forces have pushed some of the world’s biggest companies into charging their customers more. But for how long in this tenable?

Consumer goods companies around the world have been steadily increasing their prices to customers as their own costs rise. And, while they seem to have got away with it for the moment, the head of Coca-Cola has warned that there may soon be public push-back.

Coca-Cola CEO James Quincey warned during a call with investment analysts last week that the tide could be turning on consumers’ willingness to pay higher prices, CNN and other media outlets reported.

So far, businesses have been able to comfortably raise prices because of special circumstances, Quincey said. And consumers were less likely to blink at price increases on individual items when costs were going up across the board.

Pricing strategy

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But he emphasised that the circumstances were temporary. 

“Eventually, it moves to another phase where there’s inflation and a squeeze on the income,” Quincey said. “It’s easier to do pricing in a stimulus environment where everyone else is going up. It’s much harder when there’s a real squeeze on income.”

However, Quincey’s comments don’t mean that Coca-Cola is shying away from price increases. “The company raised prices last year, and may do so again this year if needed,” CNN reported.

PepsiCo, arch-rival to Coca-Cola, is another that will be raising prices. In its own call with analysts last week, the company’s Chief Financial Officer, Hugh Johnston, confirmed that price rises could be “pretty healthy” in 2022 because of the rising cost of production.

According to Forbes business magazine, cereal-makes Kellogg and coffee brand Starbucks are among other big names planning price hikes in 2022.

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