News, Coca-Cola to hike prices after profit drops (buy, company, cost)

[70Ford]

Coca-Cola to hike prices after profit drops - Earnings - MSNBC.com

Chief Executive John Brock said in a statement that to deal with higher commodity costs and declining U.S. soda sales, the company will raise U.S. prices after Labor Day.

[Mircea]

Originally Posted by 70Ford

Coca-Cola to hike prices after profit drops - Earnings - MSNBC.com

Chief Executive John Brock said in a statement that to deal with higher commodity costs and declining U.S. soda sales, the company will raise U.S. prices after Labor Day.

That's a perfect example of what Cost Inflation does. The price hikes won't increase profit margins, they'll only restore lost profit margins. Maybe. The issue with price increases is that Price Elasticity comes into play. Raising prices neither guarantees an increase in revenues, nor an increase in profits. There's lots of substitutes for Coca-Cola and people who can't afford it, or are looking to cut their spending, will buy the substitutes.

[sean98125]

Hmmm, to counteract declining sales they are raising prices.

[M3 Mitch]

Probably more than 20 years ago, I quit drinking soda, period. You either get a handful of corn syrup, a handful of raw sugar, or a dose of synthetic chemical sweetners in each can/bottle, the sugar and phosphoric acid are perfect to start a cavity in your teeth. So they can raise the price to $10/can for all I care, or give it away free - either way they can keep it.

Perrier, O'Douls or similar if I can't afford the alcohol, but in the evenings or if not driving, I'll have a good beer instead. Or tea.

[goodbyehollywood]

They will price themselves into obsolesence. Soda isn't a necessity and people have a psychological price point, after which they will simply substitute something else. Sales are down, because that first point was probably around $1.50. When sodas hit that price point last year, sales started declining. When it hits $1.99 or $2, a lot of loyal users will stop drinking it.

Fast food sales are already feeling the switchover. People have traded down from the combo meals to a sandwich, fries and water. To compensate, the chains have marked up their fries. So Coke will continue to lose at all points of purchase. Wonder how long they'll keep paying those dividends?

[Oildog]

I think slowly Americans are weening themselves away from sodas. Maybe toward Gatoradee and waters. But with a can more than a dollar thats a tough sell.