Coke and PepsiCo Post Big Sales Gains on Big Price Increases

 

"Coke’s organic revenue increased 9% in the quarter ended Dec. 31 from a year before, driven by a 10% increase in prices (WSJ, Feb. 2022). These percentage changes imply that the quantity sold decreased by approximately 1% assuming that nothing else changed besides price to affect the quantity sold. the percentage change in total revenue is approximately equal to the sum of the percentage changes in price and quantity sold and 1%; 10% - 9% = 1%. The percentage changes in turn imply that the price elasticity of demand is approximately equal to -0.1 assuming that the quantity sold = the quantity demanded; the price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price and -1% / 10% = -0.1.

However, other changes were probably increasing the quantity demanded and sold. "Coke and PepsiCo, two of the world’s biggest advertisers, said they ramped up marketing spending during the most recent quarter." Moreover, the continued recovery following COVID lockdowns was increasing consumer spending in general. Therefore, the quantity sold would probably have fallen more that 1% without these other changes and the price elasticity is probably less than -0.1.