PepsiCo may increase product prices to overcome supply-chain challenges

• The price rise is mainly due to high product demand coupled with distribution challenges.
• The escalating demands are backed by the lifting of COVID-19 restrictions in several geographies

Leading food and beverage company, PepsiCo, Inc. has reportedly decided to increase product prices again from early next year, to deal with supply-chain disruptions including an acute shortage of truck drivers.

Confirming the news, Hugh Johnston, Chief Financial Officer of PepsiCo stated that the company has been facing a massive shortage of Gatorade bottles and cans in the past few months. This is because demand for the beverage has soared at theatres and restaurants after the easing of months-long pandemic-induced restrictions.

He added that the hike in prices will allow the firm to completely absorb the impact of commodity inflation. Also, the supply-chain disruptions are expected to be minimized by the end of this year, said Johnston.

Notably, PepsiCo has already increased the prices in its snacks and soda segments, emulating the strategy set by the broader packaged food market to deal with surging rates of raw materials.

If reports are to be believed, PepsiCo’s U.K. business is also facing inadequacy of truck drivers owing to immigration rules imposed after Brexit, along with a year-long loss of dedicated driver training and testing procedures.

But the company does not expect any product shortage in supermarkets and stated that it will be in a better position by the end of the fourth quarter.

As per reliable sources, PepsiCo recorded a 9% increase in the third quarter organic revenue, out of which 5% came from the selling of higher-cost products. The prices increased up to 10%, accreditable to higher expenditure on marketing and distribution.

Also, the company’s net revenue rose by 11.6%, accumulating USD 20.19 billion in the September quarter. However, PepsiCo shares saw only a marginal increase in premarket trading.

Source credits-

https://finance.yahoo.com/news/1-pepsico-raises-annual-revenue-100940934.html