The US Bureau of Labor Statistics announced during the week that inflation reached 7.5% annually, a maximum in years. The companies have passed the cost on to the population, and in view of this, the executive director of Coca-Cola, James Quincey, warns that the willingness of consumers to pay higher prices will not last forever, CNN published.
Consumer goods companies have been steadily raising prices as their own production costs rise and, so far, buyers seem to be accepting the increases, the Coca Cola CEO said.
Executives at McDonald’s, Chipotle and elsewhere have revealed that the increases have not driven customers away, on the contrary, sales have grown.
But from Quincey’s point of view, that could be over soon. Until now, companies have been able to raise prices without any problem due to special circumstances, assured the manager.
The argument is based on the fact that customers have been able to pay the increases better because the government injected money from stimulus to the economy during the pandemic.
But those circumstances are temporary, said the CEO of the soft drink: “Eventually, it goes to another phase in which there is inflation and a reduction in income.”
Quincey explained that it is easier to set prices in a stimulus environment where everyone else is rising, but that “ it is much more difficult when there is a real reduction in income”.
The manager’s comments do not mean that Coca-Cola is avoiding changing prices, since the company did it last year and could repeat it this year if necessary.
PepsiCo is also treading carefully when it comes to further hikes: “We have built multiple scenarios around elasticity,” CEO Hugh Johnston said during a call with analysts. “We have plans to react to any of them… we are going to have to be very agile this year in the way we plan.”
CNN recalls that in 2022 Americans can expect much less federal aid, compared to the first two years of the pandemic, just when inflation is registering maximum rates not seen since 1982.
And although wages are increasing, most are modest compared to the higher prices consumers are facing.
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