Brands Like Coca-Cola And Chipotle Are Profiting Despite Inflation
Americans have been seeing larger totals on their grocery bills lately. Inflation has caused the general cost of living to rise significantly. NextAdvisor reports that the consumer price index rose 8.2% over the last 12 months to reach a nearly 40-year high.
For many Americans, these price hikes are an unprecedented challenge to their fiscal security. The New York Times is now stating that while supply chain and production costs have been on the rise, they aren't the only forces to blame. Large food supply companies like Chipotle Mexican Grill, Coca-Cola, Conagra Brands, and PepsiCo have reported record profits recently thanks to the resiliency of consumer spending. Not only have these companies and others raised their prices to account for their increased expenses, but they've increased prices beyond those numbers as well.
PepsiCo's prices for drinks and chips were up by 17% compared to the same time last year. Chipotle also shared that it expects prices to rise by 15% before the year is over compared to the previous year. Despite these high prices, consumers are still willing to spend the money for these goods, and Chipotle reported almost a 26% raise in profits compared to the same period a year earlier.
This isn't the first report of this kind of behavior either. Back in April 2022, The Guardian reported that companies like Albertson's, Amazon, and Wendy's were seeing massive profits despite raising prices.
Different strategies to justify higher prices
These companies are able to continue raising prices due to not only resilient consumer spending, but also the forces that are unique to each brand, which may be shaping their path forward. PepsiCo doesn't worry about increased prices thanks to brand loyalty, per Food Navigator-USA. PepsiCo CEO Ramon Laguarta said that its customers continue to seek "small moments of pleasure" from their products, and are apparently willing to pay what was formerly considered a premium price for it.
Meanwhile, Coca-Cola plans to keep raising its prices, but will also earn those mark-ups in the future. In a conversation with CNBC, Coca-Cola CEO James Quincey shared plans to raise the bar for the company's products to justify having a higher price tag. The New York Times reports that analysts are keeping a close eye on rising prices, though. This is to understand when consumers will finally say that enough is enough, and drastically change their shopping habits due to these prices.