Coca-Cola Gains Momentum Over PepsiCo in Q4 Due to Varied Pricing Strategies

Coca-Cola is positioned to surpass PepsiCo in the fourth quarter, capitalizing on a strategy of fewer price hikes that appeals to more price-conscious consumers. Despite both companies facing challenges related to higher input costs during the pandemic, Coca-Cola’s approach of less frequent price adjustments appears to resonate better with consumers, resulting in increased sales volumes.

Recent data from YipitData indicates a decline in PepsiCo’s beverage business in the United States, with an 8% drop in units sold in November and similar decreases in October and December. In contrast, Coca-Cola experienced a 3% increase in December, compared to 1% in October. Analysts suggest that PepsiCo may need to reassess its pricing strategy to avoid further negative volume growth.

While both companies encountered minimal resistance from consumers regarding price increases, prolonged inflationary pressures have compelled consumers to prioritize spending wisely. In the fourth quarter, PepsiCo implemented an average price increase of 6.2% in the U.S., whereas Coca-Cola’s increase was 4.5%, according to YipitData. In the carbonated soft drinks category, Coca-Cola achieved a sales growth of 3.8% in the United States, while PepsiCo experienced a 0.2% decline for the 12 weeks ending December 30, based on NielsenIQ data.

Fundamentally, PepsiCo reported flat organic volumes for fiscal 2022 with an average pricing increase of 14%, while Coca-Cola witnessed volume growth of 5% and an average price mix increase of 11%. Both companies are gearing up to release their fourthquarter earnings, with Coca-Cola expected to report a 4.7% increase in net revenue to $10.68 billion and an 8.5% rise in adjusted profit to 49 cents per share. On the other hand, PepsiCo is anticipated to announce a 1.4% rise in net revenue to $28.40 billion and a 2.9% increase in adjusted profit to $1.72 per share.

Despite a challenging 2023, Wall Street sentiment remains favourable for both companies, with a majority of analysts rating their stocks as “buy.” Coca-Cola’s shares fell 7.4%, and PepsiCo experienced a 6% decline during the same period.