Opening Thoughts: January 12, 2023 - Beverage-Digest

During an interview at Future Smarts last month, a Wall Street analyst said he would have been laughed off the stage several years ago had he predicted US carbonated soft drink pricing growth of +15% without a troubling pullback in volume. No one is laughing now.
             
          Consumer acceptance of significant pricing growth across major beverage categories has shocked even the most seasoned industry watchers. Despite the price escalation, CSD volumes declined at a manageable -1.4% last year. Energy drink makers, who are generally slower to boost prices in a booming category with lots of new entrants, raised pricing by +6.3% and still added +3.5% more volume.

          While Sports drink category pricing jumped +14.2%, volume declined just -2.0%, despite a -9.0% decline by Coca-Cola alone following the company’s 2021 acquisition of BodyArmor. Pricing in the heavily commoditized bottled water category grew almost +13% as volume rose +1.7%. Even the lackluster ready-to-drink tea category added +9.5% more pricing and lost volume sales of just -2.2%.

            All eyes are now on 2023. US inflation rates slowed for six straight months last year from July through December. However, well more than a year of elevated inflation has already pushed consumers to use credit cards to fund routine expenses. Average bankcard balances were up during the third quarter of last year, according to Transunion. And Bankrate said more people are carrying balances on their credit cards, even as interest rates spike.

            As you’ll read in today’s cover story, beverage executives are watching closely for signs that consumers’ household budgets become pinched enough that they pullback on even affordable luxuries, like beverages. Even with the price hikes, soft drink makers haven’t caught up to rising input costs, so more pricing increases are likely to come. If consumers pull back, beverage executives will have to be even more sophisticated and creative with promotions and packaging to keep consumers buying.         

  

                

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