Coca-Cola And Chipotle Profits Skyrocket Despite Record Inflation
Gas pumps, grocery stores, you name it – it seems like everything has gotten more expensive this year, thanks to inflation. In fact, between May 2021 and May 2022, inflation rose 8.6%, a level the U.S. hadn't seen in four decades, according to the U.S. Bureau of Labor Statistics. Rising prices are a common topic of discussion and a reason for complaints at the dinner table and in workplaces. But inflation hasn't deterred everyone from spending like you might think it would, and companies have noticed.
According to The New York Times, executives from various industries stated that some consumers are still booking flights, staying at hotels, and buying goods. This same trend has been noted with food and beverage companies like Coca-Cola and Chipotle. Coca-Cola's chief executive, James Quincey, confirmed it, noting that customers are buying and drinking Coca-Cola products despite economic challenges.
According to Nasdaq, the soda giant thinks it will see a 14% to 15% rise in organic revenue (which comes from company sales rather than an acquired business, per Investopedia) for all of 2022. That's higher than what Coca-Cola previously expected. Meanwhile, its prices have risen by 14%. A Chipotle news release reported a 13.7% increase in revenue for the third quarter of 2022, compared to 2021. Its profits soared by about 26%. So how are these companies making such large profits, despite record inflation?
Companies raise product prices as consumers continue to pay
Chipotle's CEO and chair Brian Niccol claims most customers who eat at the chain regularly come from higher-income households (via Nation's Restaurant News), so they can still afford the food despite the chain increasing prices by 10.5% and planning an additional 4% price increase earlier this year. Plus, one of the most popular items on the menu, the chicken burrito bowl, costs less than $9, as CNBC reported. Higher-income customers may find that affordable. Meanwhile, Coca-Cola customers saw a 12% hike in prices, according to Reuters. But the brand's chief executive officer, James Quincey, said that the company partly responded to the situation "by rolling out smaller capacity bottles and reducing the number of cans in multi-packs to keep prices more stable."
The New York Times says some critics think corporate greed is the reason for the unnecessary price hikes. The president of the advocacy group Accountable.US, Kyle Herrig, told the newspaper that "corporations have used inflation, the pandemic, and supply chain challenges as an excuse to exaggerate their own costs and then nickel and dime consumers." And the fact that customers continue spending money on goods and services leads companies to keep their prices high.