Why PepsiCo Is Not Worried About Raising Its Prices
PepsiCo began production of its iconic Pepsi soda as far back as 1898 (via PepsiCo). Today, it produces drinks like Gatorade and Mountain Dew, along with a variety of snack foods. After merging with Frito-Lay Inc. in 1965, the company began producing Lay's potato chips, Doritos, Cheetos, Ruffles, and more. According to Taste of Home, three of the five most popular chips in America are owned by PepsiCo — Tostitos, Lay's, and Sun Chips.
Many people have seen an increase in their grocery bills over the last year. The cost of groceries has risen nearly 13% over the last year, according to CNN, and it doesn't look like it will stop any time soon. The cost of beverages raised 0.6% in September alone. As inflation continues to affect food costs, PepsiCo may be following in the footsteps of its competitor and raising its product prices in order to keep up with higher production costs.
Brand loyalty will protect the company
PepsiCo is relying on brand loyalty, and has no qualms over losing business due to higher prices, according to Food Navigator-USA. The company has already raised prices in previous quarters, and because consumers have adapted to those higher prices, the company isn't concerned about another round of cost increases.
Due to the variety of products offered by PepsiCo, the company has reportedly faced supply chain issues with its packaging and ingredients. Rather than discontinue underperforming products, the company has decided to continue offering a wide variety to consumers and rely on cost increases to offset the supply chain issues and raised production costs.
PepsiCo's CEO, Ramon Laguarta, noted during an earnings call that while the company doesn't yet have any solid plans to immediately increase prices, consumers should brace themselves for potential price hikes as the economic climate remains unpredictable, per Food Navigator-USA. So long as consumers continue to enjoy PepsiCo's products, the company will continue producing them, even if it means charging a little extra.