Pepsi says rising prices will cut into its 2011 profits
New York, NY, United States (AHN) – Pepsi said Friday that it expects rising commodity prices to cut into its 2011 profits.
Company officials said the prices of the commodities it uses in its products could increase this year by as much as 9.5 percent or $1.6 billion over 2010, which will eat into the company’s profits. In addition, the ongoing weak economy and high employment mean lackluster sales and also rule out raising prices to match costs.
Pepsi issued its 2011 net earnings expectations along with the news that its fourth-quarter 2010 profits were down 5 percent from the previous quarter. It blamed the drop in Q4 profits on increased costs.
Commodities that Pepsi uses include oil, in the manufacturing of plastic bottles, fuel for plants and transportation costs; aluminum, in the manufacturing of cans; and corn, in the production of chips and as high fructose corn syrup as a sweetener in its drinks.
The prices of all three of those commodities have increased on world markets and more increases are expected.
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