According to a Restaurant Business magazine, manufacturers are likely to an increase their soda prices due to costs imposed by a shortage of truck drivers and the tariffs put in place by the Trump administration.
Carbonated beverages in North America are already seeing a price increase by Coca Cola Co. and their bottlers. The move was deemed “pretty unusual” by CEO James Quincey to be made midyear. Quincey then tied the price boost to the aluminum and steel cost increase which was due to tariffs levied by the White House. The tariffs were supposed to give an edge in pricing to the suppliers along with “broad-based inflation out there.”
It was also explained by Quincy to his shareholders that there has been a surge in fright costs as shippers struggle to find truck drivers to travel the long hauls. A number of companies have increased pay and benefits to entice prospective hires.
Coca Cola also expects retailers to pass the increase in price to the consumers.
“The customer conversation is not a comfortable conversation, but they can see what’s happening,” Quincey said during the CNBC program.
Coca Cola is not the only company expected to be raising prices. PepsiCo expects more pressure on margins for the second half of the year in their N. American beverage business. This, in part, is a result of trucking fleets having difficulty recruiting younger drivers. The average age for truck drivers at this time is currently 55. It has been estimated by American Truck Associations that 900,000 drivers need to be recruited to keep up with demand. The truck trade group also warned of a 174,000 driver shortage by 2026.
The shortage of drivers and the new steel and aluminum tariffs have affected more than just the soda industry. Since the tariffs have been proposed, the beer industry has warned of a price increase. The Brewers Association has said that the tariffs will add another $347 million annual cost to beer suppliers.
A number of companies have already expressed concern about the imposed tariffs. The Coca Cola Co., PepsiCo Inc., Dr. Pepper Snapple Grouple Inc., and Constellation Brands Inc. came together in February to issue a letter to the president about the tariffs. Within the letter, the companies wrote that “tariffs or quotas on imports of primary aluminum would have a major negative impact on downstream U.S. manufacturers like food and beverage companies.”
Another company to express their concerns was Brewer Anheuser-Busch Inc. which said the following.
“Because beer is increasingly packaged in aluminum cans, the proposed 10% tariff on aluminum will likely cost U.S. brewers millions of dollars, making it more difficult to grow and further invest in our U.S. operations,” the company said in a statement. “We urge the administration to consider the impact of these decisions on the thousands of hard-working Americans and millions of beer drinkers that make up the U.S. beer industry.”