Opinion

Rising Inflation Keeps US Soft Drink Prices Bullish

Soft Drink
United States
Published Nov 28, 2022
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Over the past three years, soft drink prices in the US have skyrocketed, owing to high production costs. In 2019, the average price of a can of soda (12 ounces) was USD 0.35. The same product now goes for USD 0.51, a considerable rise of about 46% in the past three years. Inflation had the most considerable effect on soft drink prices, starting in early 2020 when consumers were panic buying due to the pandemic. As a result, it rose significantly from 1.4% to 7% between 2020 and 2021. This pattern has continued into 2022, with the current rate of inflation estimated to be 7.7%. The situation has been compounded by high packaging costs and supply chain disruptions. Despite the hike in prices, demand for soft drinks remains strong in the US. The fact that there are only two major players responsible for most of the products on the market is also not helping. However, soft drink producers remain cautious of the market and expect an eventual dip in sales as consumers react to rising prices.

Over the past three years, soft drink prices in the US have skyrocketed, owing to high production costs. In 2019, the average price of a can of soda (12 ounces) was USD 0.35. The same product now goes for USD 0.51, a considerable rise of about 46% in the past three years. Shoppers paid USD 1.58 for 2 litres of soda in 2019, but in 2022 they are paying USD 1.72 for the same beverage. The price for a 12-pack of Diet Pepsi in Ocean County, New Jersey, is now USD 6.79, a 36% increase compared to USD 4.99 in 2020. Online retailers are selling the same product for as much as USD 8.99, which would constitute an 80% rise in two years.

Inflation had the most considerable effect on soft drink prices, starting in early 2020 when consumers were panic buying due to the pandemic. As a result, it rose significantly from 1.4% to 7% between 2020 and 2021. This pattern has continued into 2022, with the current rate of inflation estimated to be 7.7%. The soda industry has also been impacted by the rising cost of aluminium, which skyrocketed by 60% over the past year. Aluminium plays a vital role in the production of soft drink cans. Aluminium prices rose to USD 2,000 per mt in 2021, 17% more than the previous year, and skyrocketed to USD 4,000 per mt in Mar-22, the highest in recorded history.

The situation has been compounded by high packaging costs and supply chain disruptions. Packaging costs have been elevated by the increase in raw material costs and energy prices, unexpected production disruptions, increased demand in Asia and the EU, while the war in Ukraine is also adding to the pressure. As a result, major producers are transferring these costs through the chain to consumers/end users.

Despite the hike in prices, demand for soft drinks remains strong in the US. The fact that there are only two major players responsible for most of the products on the market is also not helping. As a result, consumer elasticities are holding up better than expected, with sales increasing despite prices rising. Sparkling soft drinks registered a growth of 8% in Q3 2022, while Coke and Coke Zero rose 7% and 12%, respectively.

However, soft drink producers remain cautious of the market and expect an eventual dip in sales as consumers react to rising prices. Industry experts foresee a continual hike in the rate of inflation and production costs in 2023, making the price of a can of soda at this point, not so refreshing. 

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