Every reporter: Zhang Yun Every editor: Liang Xiao
Today (April 20), "Coca-Cola will increase prices" has become a hot social media search.
The "Daily Economic News" reporter read the minutes of the conference call for the quarterly report of 2021 disclosed by Coca-Cola on its official website. This summary was released at 6:55 am Eastern Time on April 19th. It only mentioned that John Murphy, CFO and Executive Vice President of Coca-Cola, said in response to investors’ questions: “We usually hope that the pricing will be consistent with inflation. In the second half of 2021 and 2022, this principle will continue to be observed."
Coca-Cola China said in response to a reporter’s inquiry from the “Daily Economic News” that it is currently unable to grasp the exact source of the “price increase” news. In the conference call, John Murphy fully demonstrated the issue of rising raw material prices and said that he would use revenue growth management (RGM) measures for pricing.
is paying close attention to the upward pressure on the supply chain
On April 19, the Coca-Cola Company released its first quarter 2021 financial report. The company achieved revenue of 9.02 billion US dollars, a year-on-year increase of 5%, and net profit fell 19% year-on-year. US$2.25 billion.
Coca-Cola Chairman and CEO James Quincey said that in the first quarter, Coca-Cola’s global single-box sales were the same as the same period last year, and March sales have returned to the same period in 2019. “In the Asia-Pacific region, China continues to lead the recovery, and sales in the first quarter are ahead of the same period in 2019.”
On the issue of cost, John Murphy said: “Although commodity prices are rising, we are expected to hedge against The impact in 2021 is relatively mild. The current increase in commodity prices is still continuing, and we are paying close attention to the upward pressure on the supply chain, such as high fructose syrup, PET materials, metals and other packaging materials. In the current situation, we will continue Carry out a revenue growth management plan. By designing a reasonable diversified price package combination, we can provide consumers with product choices in different price ranges to meet their diversified needs, while also bringing more value to customers."
Photo source: Coca-Cola Phone Screenshot of meeting minutes
In response to media reports on "Coca-Cola price increase",The reporter did not find a clear statement in the minutes of the above-mentioned meeting. Coca-Cola China told the "Daily Business News" reporter that there is no more information. However, it is worth noting that the Coca-Cola Company has clearly sensed cost pressures for rising raw materials.
How to deal with inflation? John Murphy said: “First, we will set prices based on inflation and strengthen RGM to implement pricing strategies in an optimal manner. In the next year, we will continue to strengthen the efficiency of supply chain management with bottling plants and rely on Coca-Cola’s cross-border strategy. The procurement department of the company has obtained the world's most competitive raw material prices."
In China, Coca-Cola has two bottling partners, COFCO and Swire. The "Daily Economic News" reporter learned that Coca-Cola is increasing its supply chain investment to increase production capacity. Since 2020, a total of 9 production lines of Swire Coca-Cola have been launched or upgraded. At the end of March last year, Zhengzhou Swire Coca-Cola expanded and rebuilt an intelligent green factory. The factory is expected to be put into operation within two years, with an annual output value of 2.3 billion yuan. In addition, the 20th plant of COFCO Coca-Cola in Guizhou is expected to start production in December this year.
The prices of a variety of raw materials have risen
In the first quarter of 2021, Coca-Cola China has product innovations in multiple categories such as flavored soda, juice, and coffee. In terms of promotional activities, James Quincey said: “We will use Coca-Cola’s RGM capabilities and global bottling system on the basis of reasonable pricing to promote business development.”
The reason why fast-moving consumer companies introduce RGM is based on Real-time and in-depth analysis of data, enabling refined operations, has become an important "magic weapon" for fighting the epidemic, restoring growth, and ensuring profits. In the Coca-Cola quarterly report conference call, "revenue growth management" was mentioned 13 times by two executives.
Coca-Cola believes that through refined management, cross-departmental collaboration and digital tools, it can effectively respond to the pressure of rising commodity prices on income growth, and mainly adopts multiple price packaging strategies to adjust pricing.
In the field of bottled beverages, due to the impact of the epidemic, international supply and demand have not yet been balanced. Under this circumstance, the prices of raw materials and commodities such as plastics, aluminum, and iron have seen a significant rise.The upstream and downstream of the beverage industry have also been affected to a certain extent. According to the economic situation announced by the Federal Reserve last week, the U.S. March CPI rose by 2.6% year-on-year, the highest level since the fall of 2018. By the beginning of April, prices rose further and it is expected that they will continue to rise in the short term.
On the raw material side, the price fluctuations of packaging raw materials such as plastic bottles have a greater impact on domestic bottling manufacturers. In the first quarter of this year, the prices of many commodities rose. On April 19, the National Development and Reform Commission also stated that in recent times, the rise in commodity prices and the rise in global inflation have aroused widespread concern from all quarters.
Previously, in response to rising raw material prices, the two major beverage giants Coca-Cola and Pepsi have launched small-package products to increase product prices. This strategy can make consumers more affordable. During the epidemic, Coca-Cola preferred to produce large-package products to meet the needs of consumers for hoarding at home. Since then, the company expects to introduce a more flexible product portfolio.
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