Coke resists price rises

06 June 2011

ATLANTA: Coca-Cola, the soft drinks giant, is reluctant to increase prices in the US, given its goal of offering customers "moments of pleasure" in what remains a challenging financial climate.

Speaking at a conference held by Sanford Bernstein, Muhtar Kent, Coca-Cola's chief executive, suggested the beverage sector was much better placed than big-ticket categories from home appliances to real estate.

However, he also warned the residual caution observable among American shoppers meant they were unlikely to react favourably should Coca-Cola radically deviate from its existing tactics.

"We are selling moments of pleasure at a sensitive time," said Kent. "These pricepoints have worked for us."

More specifically, such a model has helped the Atlanta-based operator maintain volume sales in an environment characterised by prolonged economic stress.

Elsewhere, Kent refuted claims the owner of Sprite, Fanta and Dansai was acting as a "spoiler" for the entire soft drinks industry thanks to its current approach.

Rather, he argued the company has expressed consistent views concerning the likelihood of surging input costs for raw materials, and the need to proceed carefully in passing these on to shoppers.

"Globally we have proved over periods of inflation that we are able to manage our business because of our multiple channels and packages," said Kent.

"Every time there's been a period of inflation we come out of it stronger."

"As to the spoiler strategy, I don't think we meet the criteria."

Across the second half of 2011, Coca-Cola expects to raise prices by between 3% and 4% annually, so that the cost of buying its products would have risen by a total in the 2% to 3% range for the whole year.

These figures mark an uptick on the organisation's previous predictions of a lift potentially as low as 1%, but possibly hitting 2%.

Acquisitions may constitute a method for driving growth, and Kent stated Coca-Cola is willing to consider "bolt-on" additions, with energy drinks one viable target segment.

Equally, the firm has now developed a "working plan" to strengthen links with the bottling partners it purchased last year, thus improving supply chain flexibility and response times.

"There will be much better footprint of our production and logistical system," said Kent.

Data sourced from Financial Times; additional content by Warc staff