The price of raw materials rises, will the coke market change?

Faced with the pressure of rising raw material prices, Coca Cola announced plans to raise prices. On April 20, the topic of “Coca Cola will increase its price” aroused heated discussion. The reason is that on April 19 local time, Coca Cola CEO James Quincy said that the company intends to increase the price of its products.

In the view of industry insiders, the corporate strategies of Coca Cola and Pepsi Cola are different, and Pepsi Cola will probably not follow up the price increase immediately. However, under the pressure of cost, Pepsi can not rule out the possibility of price increase. If the two major Cola giants raise the price of their products, the cola market will usher in new changes, and domestic drinks will have new development space.

Pepsi’s silence

The news of price increase came, but it has not yet been settled. As for the related issues such as which products are involved in the price increase and when the prices of products in China will rise, the relevant person in charge of Coca Cola told Beijing Business Daily that there is no more background information for the time being.

Coca Cola’s price increase is not without trace. In a recent earnings call (the first quarter of 2021), Coca Cola said: “at present, the rise of commodity prices continues, and we are paying close attention to the upward pressure on the supply chain. The company will continue to implement the revenue growth management plan and provide consumers with product choices in different price ranges by designing a reasonable multi price packaging combination. “

It is worth mentioning that this is Coca Cola’s announcement of price increase again after three years. In 2018, Coca Cola announced a price increase due to a 10% tariff on aluminum imposed by former US President trump during his administration, which led to a rise in the production cost of beverage cans.

While Coca Cola plans to raise its price, does Pepsi, another Cola giant, also plan to raise its price? In this regard, the Beijing Business Daily reporter contacted and interviewed Pepsi’s relevant person in charge, but as of press, the other side did not reply.

Beijing Business Daily reporter saw in a convenience store in Fengtai District that at present, Coca Cola and Pepsi have the same price: the price of 500 ml bottled Coca Cola is 3.8 yuan, and that of Pepsi with the same specifications is 3.8 yuan. Some consumers said that bottled Cola has changed from 600ml / bottle to 500ml / bottle. Although the selling price has not changed, the actual price of the product has increased in disguise due to less content.

Development strategy of “one left and one right”

For Coca Cola, there are different voices in the market. Zhu danpeng, an analyst of China’s food industry, believes that Coca Cola and Pepsi have different development strategies and different profit sources.

Although both companies are well known by consumers for their Cola products, in fact, Coca Cola mainly “develops horizontally” in the beverage field and determines the development strategy of “all category beverage company”; Pepsi Cola focuses on the diversified development mode of “food + beverage”.

Shen Meng, director of Xiangsong capital, said that the corporate strategies of Coca Cola and Pepsi Cola are different. After the CEO of Coca Cola says that he wants to raise the price, Pepsi Cola probably won’t follow up the plan immediately. However, from the current point of view, commodity prices continue to rise, and most enterprises will face the pressure brought by rising costs. In this case, we can not rule out the possibility that Pepsi Cola will raise its product prices later.

However, there are also views that Coca Cola and Pepsi do not rely on retail bottled coke for profit, but mainly rely on counter businesses such as McDonald’s and KFC’s beverage machines to make money. At present, McDonald’s is one of the important sales channels of Coca Cola, while Pepsi’s Yum restaurants, including KFC, is its important sales channel. As far as China is concerned, KFC has far more stores than McDonald’s, so Pepsi Cola can offset the price difference of bottled coke to a certain extent with the money it makes in KFC, which is also regarded by the industry as one of the reasons why Pepsi Cola has not announced the price increase at present.

Domestic soda meets the opportunity

Although Coca Cola and Pepsi Cola have always been recognized as old rivals, they have formed a duopoly pattern in the cola market by relying on the strategy of “small profit but quick turnover”.

Under years of high-pressure competition between the two sides, many enterprises with coke business either closed down or only sold in some areas, making it difficult for them to gain further share in the coke market.

Fenhuang cola, which invited Jackie Chan to speak for it and broadcast advertisements on major TV stations across the country, finally went bankrupt in 2001. Laoshan cola, the originator of domestic cola, was forced to stop production for a time, and now it is mainly sold in Qingdao. Tianfu Cola, which was born in Chongqing, is now only sold offline in parts of Southwest China. Yinlu cola and extraordinary cola, which are backed by Wahaha, are now on sale It’s hard to find a trace.

Zhu danpeng believes that the price rise of Coca Cola can give more room for the development of domestic soft drinks such as Laoshan cola.

Bao Yuezhong, a new retail expert of FMCG, said in an interview with Beijing Business Daily that at present, the whole industry is facing rising costs. Not only Coca Cola and Pepsi Cola are facing cost pressure and need to raise prices, but for small-scale enterprises such as Laoshan cola, the pressure will not be lower than that of large-scale enterprises.

Shen Meng also agreed: “Coca Cola and Pepsi Cola are better than domestic Cola in brand and sales, so it is very likely that domestic Cola will also increase its price.”

Although the price of domestic coke has not yet been decided, it has become an indisputable fact that domestic soft drinks continue to rise. Recently, Xi’an Bingfeng Beverage Co., Ltd. has signed a listing guidance agreement with Huachuang securities to be listed on the small and medium-sized board of Shenzhen Stock Exchange; Beijing’s old brand soda “Arctic Ocean” is also seeking its listing. In addition to being active in the capital market, the appearance of Yuanqi forest has activated the soda market again.

According to the data, affected by the epidemic situation, the domestic beverage industry will encounter a cold winter in 2020, and the domestic annual beverage output will increase by 7% from 2019 to 2020, with a decline of 7.7%. However, the carbonated beverage, which has been impacted by the trend of healthy consumption, will go against the market in recent years.

Industry insiders believe that with the sustained and stable growth of the national economy, the continuous improvement of residents’ consumption level and the upgrading of consumption structure, the market may be giving new development space for domestic soda.

Beijing Business Daily reporter Qian Yu Baiyang

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