Despite the price hikes, PepsiCo's customers keep slurping, sipping, and crunching its goodies.
👉 Background: PepsiCo is the company behind iconic food brands - Pepsi, Gatorade, Doritos, Lays and also Lipton. With the cost of raw materials increasing, PepsiCo has increased its prices for the past 7 consecutive quarters.
👉 What happened: But despite the price hikes, PepsiCo's customers keep slurping, sipping, and crunching its goodies. Its net sales rose 6.7% to nearly $23.5 billion USD for the last quarter alone. And, its net income jumped 14% to over $3 billion USD.
👉 What else: Interestingly, despite the profit, PepsiCo's volume of sales actually fell... and this may suggest that its pricing may have hit the peak of what consumers are willing to spend.
💡Price elasticity measures how the demand of a product can change as a company makes increases or decreases in price.
💡The elasticity changes depending on the loyalty to the product or brand as well as any substitutes. And it is crucial for companies like PepsiCo to understand how elastic their products are.. because as they increase prices, they run the risk of reducing the demand for their products.
💡 And for PepsiCo, it's increase in unit prices has offset the drop in purchasing volume... so this has been a worthwhile tradeoff.
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