Get Ready for Food and Beverage Inflation
Hitting up your local grocery store or sitting down for a meal at a favorite restaurant may weigh heavier on your wallet this summer, as two major food and drink companies stated today that they plan to raise prices.
Coca-Cola (NYSE:KO) spokespeople said this afternoon that the company plans to raise product prices 3-4% in July, on top of a 2% price hike on coke beverages earlier this year. Pepsi (NYSE:PEP) too will reportedly follow coke’s lead in raising prices on drinks, planning a 3-5% increase of its own to take effect sometime before labor day. According to Credit Suisse (NYSE:CS) analysts the move has been long expected due to rising fuel and transportation costs faced by the drink-makers, and will come as a relief to investors concerned over decreasing profit margins.
But it won’t be just your favorite brand of soda that costs more this summer, as Chipotle Mexican Grill (NYSE:CMG) announced today that it will be bumping up prices “moderately” this summer to offset similar rising fuel and transit costs. The pricier menus at Chipotle will be the first time the company has moved on prices in over three years. The restaurant chain has partly blamed expensive avocado’s for the move, says Marketwatch, “avocado prices alone will add about 0.5 to 0.6 percentage points to its total food costs, making food costs comprise 32% to 35% of its overall costs, up from 32% in the first quarter.”
More food and beverage company’s may follow suit shortly, as “Traditional fast-food giants McDonald’s Corp. (NYSE:MCD) and Yum Brands Inc. (NYSE:YUM), Bell, doubled their estimates of food inflation for the year following the first quarter. McDonald’s and Yum are now expecting their commodities costs in the U.S. to rise 4% to 4.5% and 6%, respectively.”
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