The Reason For Coca-Cola's Price Increases

The Lempert Report
April 10, 2023

On today’s Bullseye – Coca-Cola, you know the brand that in 2020 was selling a 12 pack of Coke for $4.79 at Target and now sells a 12 pack of cans of Coke for $8.99 at my local Ralph’s -  has announced that their prices are still on the rise. We might finally have one of the reasons. More on that soon.

In February of this year Coke announced that it would raise soda prices again in 2023 to combat stubbornly high costs.  It also forecast annual profit growth above Wall Street expectations and it’s CEO James Quincy said they would continue raising process across the world at a moderating pace. In 2022 Coke’s average selling price rose approximately 11%.

No one seems to know exactly what it costs to make a 12 oz can of Coke, and I certainly don’t, but according to an article published by ICSID, a business and design blog in April 2022, the total cost to produce a can of Coke is about 26 cents which includes the cost of raw materials, packaging and shipping – but not advertising. Coca-Cola an average of 4 billion dollars a year on advertising worldwide according to Statista. I share all this to emphasize that Coke is a very profitable $43 billion company that is projecting a 4-5% higher profit in 2023 than it was in 2022. It’s gross margin as reported by Barron’s is 57.91%. So how to spend all that money instead of keeping – or lowering prices – to help their consumers?

Last week the company announced its new global ad campaign, called “A Recipe for Magic”, sorry polar bears I guess you will be pushed to the side by the likes of supermodel Gigi Hadid, Chinese actor and foodie Yang Yang, Mexican food influencer Oscar Meza and other food influencers. The campaign, according to a press release from Coke, will be in the US, Canada, Latin America, Europe, Japan and other key markets. In a 2021 study, Coke x Meals x Inclusivity in May 2022 , Coke says that 1 in 2 global shoppers surveyed agree that CocaCola helps make gatherings more enjoyable and approximately 86% of the brand’s global shoppers surveyed agreed that CocaCola makes any meal better. By the way TCCC Human Insights stands for The Coca Cola Company Human Insights. “A Recipe for Magic” according to the company is the moment of connection, the meal and an ice-cold Coca Cola; and celebrates the human bond formed by family members, friends and even strangers while breaking bread. How about making a connection with shoppers at the checkout and NOT raise prices again?