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Prices are sticky and they're betting that their costs will come back down in the future. They don't want to hike prices, ruin their brand and market positionin

by mdasen 5y ago

Prices are sticky and they're betting that their costs will come back down in the future. They don't want to hike prices, ruin their brand and market positioning, just to see things like aluminum prices come back to normal in 6 months and for customers to have moved on. While other drinks may have hiked prices over the years, I haven't noticed spikes in the price of other soft-drinks over the past few months. Their costs are rising too. I think most companies don't want to alienate their fans over what they're hoping will be transitory cost increases. If Coke hikes prices and people start trying Pepsi, will they come back? If Arizona hikes prices, do they lose the "just a buck" cliff that makes them seem a lot cheaper than anything more than a dollar? Does $1.50 look a lot closer to $2.50 than $1 does to $2? Do people buy a $1.79 Snapple or $1.99 Gold Leaf if Arizona is $1.29 (even if it is still both cheaper and larger)? Given that they're a private company and the owners are multi-billionaires, it seems reasonably wise to eat some margin over the short-term. It's not like they're struggling and it's not like they have lots of shareholders to appease on a quarter-by-quarter basis. I don't think people expect the cost of aluminum to stay at double long-term and if the Ukraine/Russia war ends, it seems like fuel prices will likely ease (and long-term it seems likely that Europe now has very strong incentive to reduce its dependence on Russian fuel). If costs remain high, they can re-evaluate this decision in 6-18 months while potentially missing out on a small amount of profits. $43M in increased aluminum costs over a year doesn't seem that much compared to a $4B net worth - especially if you're still making money, just $43M less. If I were them, I'd weigh it out: raise prices and potentially damage the brand long-term and risk a good bit of what the family has built over decades; or keep prices steady, potentially lose out on profits that would make us 1-2% richer, and still be able to re-evaluate this decision in a year. If I had $4B, I'd much rather keep consumer sentiment thinking that I'm the small quirky outsider offering them great value.

gruez 5y ago
>I haven't noticed spikes in the price of other soft-drinks over the past few months. Their costs are rising too I haven't noticed any "spikes" in soft drink prices, but I have noticed that sale prices have edged up around 15%. This is for name brand drinks, multi-packs, sold in grocery stores. I don't pay attention to regular prices so I don't know whether it's limited to just sale prices or to regular prices as well.
- Supermancho 5y ago
  > I haven't noticed any "spikes" in soft drink prices, From fountain soda to 2-liter there have been spikes. https://fred.stlouisfed.org/series/APU0000FN1101 https://fred.stlouisfed.org/series/APU0000FN1101 Walmart: https://www.walmart.com/ip/Pepsi-Cola-Soda-Pop-2-Liter-Bottle/13424325 https://www.walmart.com/ip/Pepsi-Cola-Soda-Pop-2-Liter-Bottl... (1.98) The midwest happens to have a couple gas-station quickmarts that have deals like pay $7/month for a free (any size) soda or coffee per day that many people take advantage of, but in the supermarket the price changes are evident. The real spikes have been in restaraunt/fast food drinks. It's not uncommon to see over $2.75 for a relatively modest drink cup. This has been primarily a tactic for low-margin food businesses to avoid raising their consistently low prices, in comparison to their competition. Ironically, this has led some market losers (like Burger King) to leap ahead of competition (Carl's Jr/Hardees) as they had to raise prices to survive, leading to incidentally higher quality meals. ie Compare the mc-donalds cardboard quality Carl's Jr famous star to a Burger King burger today. But that's just my observation.
  - gruez 5y ago
    > > I haven't noticed any "spikes" in soft drink prices, >From fountain soda to 2-liter there have been spikes. >https://fred.stlouisfed.org/series/APU0000FN1101 https://fred.stlouisfed.org/series/APU0000FN1101 I'm not sure what your point is. I explicitly mentioned experiencing a 15% rise later in the same sentence. That's pretty much exactly in line with pre-pandemic prices in the chart you linked. Also, on a purely subjective basis, the chart you linked doesn't show any "spikes" to me. There's a modest rise in early 2022, but it's roughly in line with pre-pandemic price rises.
    - Supermancho 5y ago
      Price spiking is meaningless without a timeframe and market. > I'm not sure what your point is. My point was very clear. There have been spikes. The spikes have been for various reasons, beyond pure inflation. You can agree to disagree because (maybe you weren't paying attention at the same time periods or to the same markets), but the pricing has changed nonetheless.

by mdasen 5y ago

gruez 5y ago

>I haven't noticed spikes in the price of other soft-drinks over the past few months. Their costs are rising too I haven't noticed any "spikes" in soft drink prices, but I have noticed that sale prices have edged up around 15%. This is for name brand drinks, multi-packs, sold in grocery stores. I don't pay attention to regular prices so I don't know whether it's limited to just sale prices or to regular prices as well.

Supermancho 5y ago
> I haven't noticed any "spikes" in soft drink prices, From fountain soda to 2-liter there have been spikes. https://fred.stlouisfed.org/series/APU0000FN1101 https://fred.stlouisfed.org/series/APU0000FN1101 Walmart: https://www.walmart.com/ip/Pepsi-Cola-Soda-Pop-2-Liter-Bottle/13424325 https://www.walmart.com/ip/Pepsi-Cola-Soda-Pop-2-Liter-Bottl... (1.98) The midwest happens to have a couple gas-station quickmarts that have deals like pay $7/month for a free (any size) soda or coffee per day that many people take advantage of, but in the supermarket the price changes are evident. The real spikes have been in restaraunt/fast food drinks. It's not uncommon to see over $2.75 for a relatively modest drink cup. This has been primarily a tactic for low-margin food businesses to avoid raising their consistently low prices, in comparison to their competition. Ironically, this has led some market losers (like Burger King) to leap ahead of competition (Carl's Jr/Hardees) as they had to raise prices to survive, leading to incidentally higher quality meals. ie Compare the mc-donalds cardboard quality Carl's Jr famous star to a Burger King burger today. But that's just my observation.
- gruez 5y ago
  > > I haven't noticed any "spikes" in soft drink prices, >From fountain soda to 2-liter there have been spikes. >https://fred.stlouisfed.org/series/APU0000FN1101 https://fred.stlouisfed.org/series/APU0000FN1101 I'm not sure what your point is. I explicitly mentioned experiencing a 15% rise later in the same sentence. That's pretty much exactly in line with pre-pandemic prices in the chart you linked. Also, on a purely subjective basis, the chart you linked doesn't show any "spikes" to me. There's a modest rise in early 2022, but it's roughly in line with pre-pandemic price rises.
  - Supermancho 5y ago
    Price spiking is meaningless without a timeframe and market. > I'm not sure what your point is. My point was very clear. There have been spikes. The spikes have been for various reasons, beyond pure inflation. You can agree to disagree because (maybe you weren't paying attention at the same time periods or to the same markets), but the pricing has changed nonetheless.