PepsiCo, Coca-Cola or will lead the price increase tide, cost increases beverage companies are under pressure

Financial Associated Press (Beijing, reporter Li Danyu) news, raw material prices are rising is plaguing major beverage companies.

On October 27, Dongguan Securities Research Report showed that Jinhe Industrial's sucralose products were quoted at 452,000 yuan / ton, up 6.5% from last week's price, up 41.25% month-on-month, and up 115.24% year-on-year. In the context of PepsiCo, Coca-Cola, Yuanqi Forest, etc. have increased their weight in sugar-free beverages, cost pressure is transmitted to the market terminal.

After Coca-Cola and PepsiCo announced the adjustment of the prices of some products, yuanqi forest staff told the new consumption daily reporter that the price of erythritol also rose several times during the year, and the company has been trying to control this impact.

According to an industry analyst, driven by factors such as rising raw materials, tight supply chains, and high labor costs, the price increase in the beverage industry is inevitable.

Food and beverage prices have risen

In April, Coca-Cola took the lead in adjusting prices, but it has not yet affected retail products. COFCO Coca-Cola Beverage (Beijing) Co., Ltd. said in the explanatory letter that the scope of the price adjustment is limited to three canned products of Customers in Beijing Catering Channel, which is a marketing strategy formulated by the company for individual products in specific sales channels.

However, Zhu Danpeng, an expert in the food and beverage industry, believes that this is a test of Coca-Cola's future price increases. "The catering channel is less sensitive to product prices, and Coca-Cola can better control the market feedback after the price increase from the catering channel, and use this to determine the final price adjustment strategy in the retail market."

Subsequently, Budweiser Asia Pacific, China Resources Beer, Nestlé, PepsiCo, etc. have also issued price increase notices. Among them, Nestlé also said that it is expected that input costs will rise by about 4% this year, so the company needs to raise prices as soon as possible, and it is expected that the price will increase by about 2% to offset the 4% increase in cost inflation. For PepsiCo, it is expected to increase the price of some products in the first quarter of 2022.

At present, the terminal prices of most beverage products that have announced price increases are still relatively stable. According to the person in charge of purchasing in a large supermarket, the price increase of Nestlé's products has not yet been transmitted to the terminal, and it is more obvious that the products of Dali Group have fluctuated in price.

Previously, Dali dealers posted a "price increase letter" on the Internet showing that Dali Group will adjust the price of some products of the three series of food products under Dali Food according to the rise and fall of operating costs.

Industry or "shuffle"

Rising raw material prices constitute the main factors in this round of beverage price increases, among which the rising price of sweeteners, supply chain pressure, and rising packaging costs have directly led to a surge in cost pressure on beverage companies.

For the domestic beverage market, after the rapid rollout of the "0 sugar" concept, brands such as Yuanqi Forest, Coca-Cola, and Heytea have launched related products, and the pressure of rising prices such as sucralose and erythritol has also begun to reflect.

Among them, the main raw material of Yuanqi Forest includes erythritol. In April this year, the quotation of individual major manufacturers of erythritol has reached 36,000 yuan / ton, and has recently declined, about 25,000 yuan / ton, but still up more than 50% from before the Spring Festival.

According to the announcement of Sanyuan Biological, the main supplier of erythritol, Yuanqi Forest became the company's largest customer in the first half of 2021, and Companies such as Nongfu Spring, Coca-Cola, Heytea, Jinmalang, Dali Group, and Unification are its important customers.

Ling Feiyu said that Sanyuan Bio is one of the largest producers of erythritol in China, but it is also affected by the rise in raw materials, and gross profit continues to decline. Although the domestic sugar-free beverage market is developing rapidly, the overall volume is still not comparable to overseas markets. "As sugar-free beverages become the main category promoted by major brands, it is expected that the price of erythritol will have room to rise in the future."

On October 27, the price of the flavoring sucralose was also raised. Dongguan Securities said in the research report that the price of some products of the industry leader Jinhe Industry has been raised, on the one hand, due to upstream cost support, on the other hand, the product supply is tight and the demand is better.

In addition to the rise in the price of sweeteners, international brands such as PepsiCo and Nestlé have also been affected by factors such as tight supply chains this round of price increases. "Factors such as the high price of shipping and the shortage of truck drivers have led to many international brands failing to cope with the rapid recovery of consumption, and product production is facing difficulties." Retail industry analyst Ling Feiyu told the New Consumption Daily reporter.

PepsiCo also said that in addition to raw material shortages, factors such as labor shortages, reduced availability of air or other commercial transportation, port closures or border restrictions have also adversely affected the supply chain, which may further affect PepsiCo's ability to produce and sell products.

"Under the influence of multiple factors such as marketing expenses, power outages, epidemics, and supply chains, it is inevitable that beverage companies will increase prices. For the head enterprise, the right to speak is larger, and the price increase can solve some problems, but for small and medium-sized enterprises, following the price increase may cause early clearance. Behind the entire price increase is the accelerated reshuffle of the beverage industry. Zhu Danpeng said.