PepsiCo, Coca-Cola raise prices to boost profits

Both companies' earnings top estimates. Surprisingly, though, soda sales aren't the main reason.

By Jonathan Berr Apr 18, 2013 12:45PM
Cans of Coca-Cola; Cans of Pepsi (© George Frey/Bloomberg via Getty Images; Joe Raedle/Getty Images)PepsiCo (PEP) posted better-than-expected quarterly earnings Thursday, and Coca-Cola (KO) did the same thing Wednesday. The common elements in both reports are higher prices and sluggish soda sales.

The beverage giants have been able to boost profits while maintaining and in some cases increasing prices for their products, which underscores the resiliency of U.S. consumers amid uncertain economic times. Still, their core soda businesses continued to stagnate as Americans consumed less carbonated beverages.

PepsiCo was able to offset declines in American soda volume with price hikes, and it saw gains in premium-price snack products such as Sabra hummus and Stacy's Pita Chips. CEO Indra Nooyi has also been ratcheting up spending in recent quarters to take business from Coca-Cola and other rivals.

Revenue at PepsiCo America's Beverages business was $4.42 billion, little changed from a year earlier. And the company reiterated its 2013 earnings guidance.

Coke raised prices by 3% in North America on its carbonated beverages as volumes fell.  Speaking on the Coca-Cola's earnings conference call, Steve Cahillane, the head of Coca-Cola Americas, indicated that the Atlanta-based company won't cut prices in response to declining commodities costs.

"We have seen a rational pricing environment in the United States over the course of a good period of time right now. We would expect that to continue," he said. "We have worked hard to earn the price that we take in the marketplace."

At Coca-Cola, worldwide sparkling beverage volume, which includes its soda brands, grew 3% in the quarter, while "still" beverages such as sports drinks and bottled water posted a 6% gain and ready-to-drink volume gained double digits.
 
In the future, "cola" will continue to become less relevant in the cola wars.

Jonathan Berr owns a small stake in Coca-Cola. Follow him on Twitter @jdberr.

More on moneyNOW
Tags: KOPEP
35Comments
Apr 18, 2013 1:55PM
avatar
I would like someone to give me another reason to raise prices other than to make bigger profits?
Apr 18, 2013 2:12PM
Apr 18, 2013 2:59PM
avatar
What they need to do is make people who already don't drink it (me) want to drink it. A higher price tag isn't exactly going to convince me.
Apr 18, 2013 3:30PM
avatar

crazy idea Coca-Cola, make the product we used to know and loved before you started making this sweetened-water substitute, the product that had a distinct cola taste. I don't know if it's the high-fructose corn syrup or what but your product is inferior. did you learn nothing from the '85 'new coke' experience? 

Apr 18, 2013 3:32PM
avatar
The American way.Rape the little guy.
Apr 18, 2013 4:47PM
avatar
I've already been bombarded by all the chemical reasons not to drink Diet Pepsi anymore - raise the prices and you can consider it Pepsi Gone!
Apr 18, 2013 5:01PM
avatar

Lower prices - I buy more when it is on sale not when the price goes up!

Apr 18, 2013 5:20PM
avatar
So let me get this straight, sales are down, so they've raised the price.  Is that about the jest of it?  It doesn't take very many brain cells to figure out what that's going to do to them, and if they're really that stupid, it's very deserved.
Apr 18, 2013 1:21PM
avatar
So...national pricing environment??? being in place...don't you mean it's a way to control how to give it away on a national level?
Apr 18, 2013 4:55PM
avatar

too expensive- not good for you anyhow -need to go back to tea and juices- tea bags still cheap.

only buy off brand when on sale if you have to- let them price themselves out of the market, not like you need coke to live

 

Apr 18, 2013 1:11PM
avatar
They are profiting because they find ways to use cheaper and cheaper kinds of sugar! Otherwise, they still do mergers to make the numbers for the bank in order to stay in business. That is not new either. Even Britney Spears couldn't sell Coca-Cola!
Apr 18, 2013 4:06PM
avatar

From an article in Business Insider. Coca Cola spent 2.9 billion in advertising in 2010. Compare that to 1.6 billion for Microsoft and 691 million for Apple.

There's where your profits went *ssholes. 

As a smoker I know the value of addicting your users.

Apr 18, 2013 6:30PM
avatar
Why dont COKE understand that the reason their profits are down is because they keep raising the prices.!!! The cost has gone up 30 cents in less than a year!!!
Apr 18, 2013 7:19PM
avatar
I really think the people at these cola property really need to wake up. I go to a super market and see their prices for there products cost for 2 liter bottles about 2.50 or more for the bottle. I go to a (( cent store and get a # liter bottle for  less then a dollar. So why should I buy theirs. All cola's taste the same and the bottles for the other soda's taste's are the same price. So wake up people I stop paying their price a long time ago. it' call pricing your self out of Business.
Apr 18, 2013 5:06PM
avatar
I drank 1 2 liter pepsi a day BUT I NEVER PAID MORE THAN A BUCK A BOTTLE.most of the time i found sales at 88 to 98 cents per and would buy 30 day supply.now those sales are rare in az.so AT A 1.95$ A 2 LITER  NEVERMORE! BOTH CO.PRICE FIX BETWEEN STORES WITH ONE ON SALE ONE WEEK THE OTHER THE NEXT WEEK FOR THE PAST 10 YEARS.I BOUGHT A SODA STREAM.
Apr 18, 2013 4:43PM
avatar
If people are dumb enough to keep drinking something that is proven to be bad for their health they are also dumb enough to pay more for it without question.
Apr 18, 2013 4:22PM
Apr 18, 2013 9:53PM
avatar
will not buy it too expencive have switched to ice teas and its better for you

Apr 18, 2013 5:17PM
avatar
Am I missing something?  Soda sales are down so you raise the price of soda to raise your profits.  All on the waistlines of the public.  I like soda and it is my right to purchase any size I wish.  Blame it all on His honor Michael Bloomberg, NYC mayor who wants to ban mega-sodas. Guess PepsiCo and Coke don't donate enough to the mayors campaign fund.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The stock market finished a down week on a cautious note with small caps leading the retreat. The Russell 2000 lost 0.5%, widening its weekly decline to 2.6%, while the S&P 500 shed 0.3%. The benchmark index ended the week lower by 2.7%.

This morning, the market was provided a basis to rebound with the July employment report, which was just right for the policy doves (209K versus Briefing.com consensus 220K). It showed payroll growth that was weaker than expected, ... More

MSN MONEY'S