PepsiCo, Coca-Cola raise prices to boost profits
Both companies' earnings top estimates. Surprisingly, though, soda sales aren't the main reason.
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.
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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?
Lower prices - I buy more when it is on sale not when the price goes up!
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
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.
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