Coca-Cola, Pepsico, and Unilever are among many familiar brands that have raised prices sharply this year while posting comfortable profits, according to a Wall Street Journal report.
Unilever has jacked its retail prices by an average of 8 percent, while the rate is 15 percent at PepsiCo.
The higher prices allowed the companies to book strong sales in terms of dollars, even if they sold fewer items compared to the same period the previous year.
As a result, the companies have raised the sales projections for the year, lifting their share prices higher.
“We’ve been able to raise prices and consumers stay within our brands,” Ramon Laguarta, PepsiCo’s CEO, boasted in a call with analysts.
Food companies are in a special category related to inflation.
The U.S. Federal Reserve has raised interest rates to tame inflation and that reduces spending in most areas—but less so in food. People have to eat but do not necessarily have to buy the newest smartphone or take another yoga class.
Also, food is more sensitive than most categories to price shocks due to poor growing seasons, labor shortages, and other external surprises.
Another factor: food habits are hard to break, especially in stressful times. A pick-me-up soda pop in the afternoon, meat for dinner, a bag of chips in front of the TV in the evening—consumers often will sacrifice other purchases to keep those comforting habits.
U.S. food prices have risen 5.7 percent this year, while inflation has been halved from 6.4 percent in January to 3 percent in June.
At the same time, Coca-Cola banked $2.5 billion in profits in its most recent quarter, a 33-percent leap from a year earlier.
“In a world with a wide spectrum of market dynamics from inflation to currency devaluation to shifting consumer needs, our business is proving to be very resilient,” CEO James Quincey said in a recent analysts’ call.
Unilever grew its profits by 20 percent to $5 billion in 2023’s first six months, the company said. The company’s ice cream brands added an average of 12 percent to their prices this year and sales slipped 6 percent in the second quarter.
PepsiCo grew its revenue 10 percent and doubled its profits to $2.7 billion, year on year, in 2023’s second quarter.
The companies have blamed higher labor costs, among other factors, for their need to raise prices.
TRENDPOST: Companies will not acknowledge that many have raised their prices simply because consumers were willing to pay more for them, a phenomenon known as “greedflation:” companies raise their prices, pocket steady profits, and blame inflation when they could accept smaller profits and narrower margins by keeping prices lower to help consumers.
Corporations will continue to prioritize pleasing stockholders and market analysts as long as consumers are willing to fork over more and more money for their favorite brands.