David A. Grogan | CNBC
PepsiCo CFO Hugh Johnston expects another round of price increases for the company’s snacks and beverages early next year.
“I assume that we will probably see a little more price increases in the first quarter of next year, as we deal with the fact that the input costs are only higher,” said Johnston on Tuesday in the “Squawk Box” of CNBC. “This is just the reality for us and everyone else.”
This summer and well into the fall, Pepsi drink prices have risen, while snack prices are now starting to rise, Johnston said. Other consumer goods companies like Procter & Gamble and Pepsi’s rival Coca-Cola have also raised prices this year to offset the slump in higher costs that are hurting profits.
Like all food and beverage giants, Pepsi buys the raw materials and supplies it needs months in advance. But these contracts do not help the company escape inflation.
“The forward buy can only do us so much. What it does is give us about six to nine months, so to speak,” said Johnston.
This leeway enables the company and retailers to ease the higher prices for consumers and save them from the sticker shock.
CEO Ramon Laguarta told analysts on the company’s conference call that consumers are seeing pricing a little differently than before. He said the changes could be due to the strength of his brands and recent innovations.
“There could also be some behaviors as consumers shop faster in-store and pay less attention to pricing as a decision-making factor, and brands could be even more relevant,” said Laguarta.
In the third quarter, Pepsi saw higher labor, raw material, and transportation costs due to inflation, particularly for the Quaker Food North America business unit. The company’s net income declined 3% for the quarter, despite net sales growth of 11.6%.
Pepsi’s shares rose about 1% Tuesday after the company beat analysts’ estimates for the third quarter and raised its revenue forecast for the full year.