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Pepsi warns of price increases amid greater demand — and supply woes

By
Reuters
Published Oct. 5, 2021
Updated Oct. 5, 2021, 2:04 p.m. ET

PepsiCo said on Tuesday it would likely raise prices again early next year, as it looks to overcome ever increasing supply-chain challenges that include everything from a shortage of Gatorade bottles to a lack of truck drivers.

Chief Financial Officer Hugh Johnston told Reuters that PepsiCo had to “scramble” to overcome a shortage of cans and bottles for sports drink Gatorade bottles in the last few months as demand for its beverages jumped at restaurants and theaters following the lifting of pandemic-induced restrictions.

PepsiCo has already raised prices of its sodas and snacks in recent weeks, echoing the strategy of broader packaged foods industry as rising raw material prices pinch profit margins.

“I do expect there will probably be some price increases in the first quarter of next year as well, as we fully absorb and lock down the impact of commodity inflation,” Johnston said, adding that he expects most supply-chain disruptions to moderate by the end of 2021.

Pepsi bottles on a shelf
With restaurants and cinemas reopening, demand for soda is bubbling over. Getty Images

PepsiCo’s UK business has also been hit by a shortage of truck drivers in post-Brexit Britain due to immigration rules and a loss of about a year of driver testing and training.

However, Johnston said he does not expect a shortage of PepsiCo products in supermarkets, saying the company should be in better shape by the end of the fourth quarter.

The company, which made a deal to collaborate with Beyond Meat on new snacks and beverages, said it was expecting fiscal 2021 organic revenue to rise about 8 percent, compared with its prior forecast of a 6 percent increase.

A worker unloads a truckload of bottled soda
The trucker shortage has also contributed to the pent-up demand for PepsiCo products. Alamy Stock Photo

PepsiCo’s third-quarter organic revenue rose 9 percent, 5 percentage points of which came from selling higher-priced products. Costs were up over 10 percent, driven by higher expenditure on distribution and marketing.

Net revenue rose 11.6 percent to $20.19 billion in the quarter ended Sept. 4, above analysts’ estimates of $19.39 billion, according to IBES data from Refinitiv.

PepsiCo shares were trading up just under 1 percent, at $151.60, in the early afternoon.