Graham Starfelt has always been a Diet Coke drinker. He describes it as a “family tradition”, inherited from his mother. He doesn’t drink coffee, so coffee is his only source of caffeine. He thinks it’s healthy enough, or at least his doctor hasn’t said anything about his 4-6 cans a day habit. “I don’t know if that applies to heavy Diet Coke users,” he says. They are becoming heavier and more expensive.
Before the pandemic, Starfelt, who works in the technology industry, enjoyed working in an office with a refrigerator full of Diet Coke cans, so he only bought himself one or two packs a month. . But now he has to pay for his beverage consumption in full and finds that the price has increased significantly. “I remember him paying about $3 or $4 for a 12-pack of Diet Coke, probably around 2018,” he says. “And certainly after the pandemic, prices have gone up significantly. If you go to your local Kroger and go to the Ralphs chain and buy a 12-pack of Coke, it’s $10.”
He’s not imagining things. The price of soft drinks has increased significantly in recent years. According to the St. Louis Fed, the average price for a 12-ounce can (pack of 12) was less than 34 cents in April 2018 and more than 56 cents as of October 2023. This is an increase of almost 65%. According to data provided by commerce technology company Square, the average price of a Diet Coke from bars and restaurants using its platform rose from $2.05 to $2.77 over the same period. It’s also about 10 cents more expensive than non-diet options.
“They’ve been raising prices pretty relentlessly over the last few years, really ever since the pandemic. Not just Coca-Cola, but PepsiCo and Keurig’s Dr. Pepper as well. They’ve raised prices with very little negative impact on sales volume. Garrett Nelson, vice president and senior equity analyst, said. CFRA investigationa financial intelligence company.
Why are we seeing such an increase? One reason for this is that companies like Coca-Cola have their customers where they want them, after years of solidifying their loyalty. They have a high degree of “demand inelasticity,” meaning that demand remains the same even if the price changes. Consumers often don’t have or necessarily want many alternatives. If you like Diet Coke, you want Diet Coke. There isn’t a lot of competition in the soft drink industry, so assuming you can find Diet Pepsi or a generic brand, you might not be tempted to switch to one. “[It’s] Cigarettes are a good example, as are cigarettes. People are addicted, so tobacco companies can easily raise prices,” Nelson said. “Soft drinks have a similar feel.”
Why did the price of Diet Coke go up so much?
Multiple factors are contributing. Soda price rise In the past few years. Coca-Cola has raised prices, but that’s not the only factor. Grocery stores have their own strategies (although if the grocer is offering a sale to bring to the store, it may also be helpful to the consumer). Additionally, there are restaurants, bars, and other non-grocery locations that also impose their own prices and costs.
The general story here is very simple. From 2021 to 2022, inflation began, impacting beverage manufacturers such as Coca-Cola and Pepsi. It pointed to Costs are rising from many angles, including aluminum cans, packaging, labor costs, and general supply chain issues. Many cost pressures have been alleviated — aluminum priceSome still remain problems, for example, sugar prices, but they have eased. at the highest level In a year. (It doesn’t affect Diet Coke specifically, but it affects the company as a whole.) Inflation hasn’t gone away, and many costs are still higher than before.
Coca-Cola and other beverage companies know that they can, and perhaps have been forced to, push prices a little higher than their own costs.
“Coca-Cola, the soft drink maker, is expanding its profit margins,” Nelson said. “Their revenue is increasing more than their costs.”
Customers may be dissatisfied with high prices (or small packages). Shrinkflation), but for many months they were mostly attuned to them.
“In fact, over the last 18 to 24 months, if you look at the revenue, the volume growth factor, and the price growth factor, these companies have been able to do a significant amount of pricing.” said. Gerald Pascarellian equity research analyst at Wedbush, covering the beverage sector.
He explained that under normal circumstances, Coca-Cola is expected to see revenue growth of about 4% to 6% over the long term, depending on the balance between volume and price. But this was not a normal environment. “Both companies are growing in double digits, and the reason they’re growing in double digits is because price growth is so strong,” he said, but cautioned that this won’t continue forever. “There needs to be a balance between volume and price. You can’t just increase it by 10% every year and expect it not to impact consumer wallets and consumption.”
In fact, beverage companies have been fairly open about raising prices in the past, but they are starting to back away, seeing that consumers have a limit. Prices for major soda makers have already begun to ease and should approach normal prices by the end of 2023 or into 2024, Pascarelli said.
Coca-Cola in July mentioned in the second quarter financial results announcement. If prices continue to rise in developed markets such as the United States and Europe for the rest of the year, the economy will cool. “In certain categories, we are seeing a willingness to switch to private label brands. Across the industry, consumers are becoming increasingly cost-conscious.” james quincy, Chairman and CEO of Coca-Cola at the time. “They’re looking for value and stocking up on sale items.”
Pepsi also temporarily suspended price increases, but We are planning a slight “modest” increase. For next year.
Starfelt is one of those consumers who finally got fed up and made the switch. When he shops there, he now gets the Kroger brand equivalent of Coke Zero. The last evidence that he bought a brand name diet Coke at the supermarket was that in February he spent $8.53 on a 12-pack. He still buys Diet Coke at Costco, where it’s cheaper. “It’s trending up, but it’s not as steep,” he said.
Coca-Cola did not respond to a request for comment on this story.
Diet Coke fanatics are aware of rising prices
I sometimes ask about prices on social media and among family and friends that bother people.surprised How often does Diet Coke appear?. This is one thing that anyone who buys regularly will definitely notice.
“Shoppers are price sensitive, but they are not very price conscious, which means most shoppers cannot tell you the price of more than 10 to 12 different products that they buy on a regular basis.Diet Coke is a product that anyone who buys it regularly will know is a fair price.” John Hauptmann, founder and president of retail consultancy Price Dimensions. For supermarkets, products like Diet Coke don’t make a lot of money, but they are staples that help bring people into the store. They try to price as aggressively as possible to strengthen their price image and attract shoppers.
But while Diet Coke is almost always sold somewhere, it’s not always sold in the same place, making it difficult for retailers to have a long-term advantage in this area, Hauptmann said. Told. One week Kroger might offer a deal, the next week Walgreens might offer a deal.
The exceptions here are the Walmarts and Costcos of the world with routine low price strategies. They may not offer huge discounts, but their regular prices aren’t that high either. (The F.T.C. reportedly actually investigating potential price discrimination between the prices offered by Coca-Cola and Pepsi at small and large retailers).
Christine Hibbard, who lives in Dallas, has been drinking and buying Diet Coke for as long as Coca-Cola has been selling it (since 1982) and has been drinking 12 packs a week for years. I joke that I’m buying two boxes. When she shops at Walmart, her prices are affordable. Her last receipt lists her 12-pack as $5.98. When her husband buys it at another store, say Albertsons, he pays her $9. “I only pay attention to the differences between stores,” she said.
It’s not just the grocery store aisles that are seeing increases in the price of Diet Coke and soda, he said. Dan Sue, a Morningstar equity analyst covering beverages. “When Coca-Cola discloses prices, it’s not just pricing, it’s pricing and a combination of them. By mix, we mean different distribution channels,” she says, noting, among other things, glass bottles in restaurants, bars meant soda guns, vending machines, etc. “There is definitely an ability or willingness to pay a little more depending on the channel. Now, you don’t have to worry so much about the price of coke.”
But he stressed that there are limits to price increases, which Coca-Cola is now beginning to face. “You can’t kill the golden goose by raising the price so much that people won’t buy it,” she says.
None of this is to say that Diet Coke prices won’t rise again. Pascarelli said that’s likely to happen, but it will be at the same pace as usual. “We’re not going to lower prices, but we’re just going to have a much slower rate of change in prices,” he said.
America’s Diet Coke habit isn’t going away. Even the World Health Organization’s warnings about aspartame haven’t done much to stem the tide. Coca-Cola knows that even with limitations, it can lead to financial benefits.
Nadine Babb, a Diet Coke fan in Minneapolis, said she’s seeing the sale coming back to her local Walgreens and is grateful. At one point, she found Diet Coke so expensive that she started replacing it with Xavier, a zero-sugar, zero-calorie drink that’s actually good for you. “It used to be more expensive, but when you look at it now, it’s not that expensive,” she said. “We have diversified.”