Whether you’re relaxing or need something to give you a boost of sugar to get through the day, you might enjoy drinking soft drinks.
Several big brands produce soft drinks.
One of the biggest brands is Pepsi.
However, you may have noticed that the price of Pepsi drinks has increased.
It might make you wonder why Pepsi has become so expensive.
Why Is Pepsi So Expensive? (10 Reasons)
The average price of Pepsi is around $5.
However, a 24-pack can cost as much as $10 or more.
Certain factors like a lack of supply, high ingredient costs, and a duopoly have pushed Pepsi prices higher.
Let’s look at these factors in more detail.
1. Panic Purchases
One of the initial reasons behind high Pepsi prices comes from the COVID-19 pandemic.
During the pandemic, lockdowns occurred and kept people from shopping easily.
Because people had some concerns about becoming ill, they bought whatever food and drinks they could to last them a few weeks.
This meant that a lot of people started buying a lot of soft drinks in a panic.
They wanted to ensure that they had enough Pepsi to last them through the lockdown.
The problem with panic purchases is that it encourages other people to panic and also purchase everything they can.
This eventually led to a shortage of Pepsi.
With factories unable to produce as much as they used to due to their own reduced workforce, they were unable to fill the void that demand had created.
Since their supplies were so low, the price of Pepsi and other soft drinks skyrocketed.
Supply has slowly started to return to normal, but because of panic purchases, the price of Pepsi increased dramatically in just a few short years.
2. Aluminum Prices Increasing
Another problem impacting the price of Pepsi is the price of aluminum.
As most people know, soft drink can contain aluminum.
Aluminum is a recyclable material that offers quite a few benefits.
It’s strong enough to hold the liquid without tearing or falling apart.
However, it’s still soft enough that it can easily be recycled and reused in other products.
Aluminum also holds up well against water and other solutions that might degrade other materials.
As such, it’s a natural choice for housing something a bit corrosive like soft drinks.
The problem with aluminum is that its price has increased over the years.
COVID-19 is to blame for some of that price increase.
When factories had to shut down or reduce their production levels, it meant that there wasn’t as much aluminum on the market.
Pepsi had to spend more money to acquire the aluminum it needed to make its cans.
Since they were taking on higher costs, they had to sell their Pepsi products at higher costs.
Aluminum prices have fallen slightly in recent times, but they remain higher than they used to be.
Since it still impacts their costs, Pepsi continues to have high prices.
Pepsi is expensive because aluminum is expensive.
3. Little Competition
Pepsi is part of a duopoly on the soft drinks market.
A duopoly is a version of a monopoly.
In economics, a monopoly occurs when a single business owns most of its particular industry.
There may be a few other businesses in the market, but they don’t have as much buying power or control of the market as the main business.
Monopolies are a problem because nothing is keeping that particular business in check.
They’re able to set the prices of their products as high as they want to because no one else is powerful enough to compete with them.
A duopoly is when there are two major businesses in the same market.
In the case of Pepsi, it’s in a duopoly with Coca-Cola.
Both brands essentially control the soft drink market.
There are a few other brands out there, but Pepsi and Coca-Cola run the show.
Part of that is because both companies have bought smaller companies and taken control of them.
The problem with a duopoly is that the two businesses might start to work together instead of competing with one another.
Such is the case with Pepsi and Coca-Cola.
While they might be in competition with one another, in reality, they help each other by staying close in price.
If one raises its prices, the other also raises its price rather than lowers the price to steal customers.
Since they’re the two most powerful companies in the market, the other businesses can’t do much.
Consumers have no choice but to pay higher prices.
Pepsi is expensive because it’s part of a duopoly with Coca-Cola.
4.High Demand
Another major reason that Pepsi is expensive is that it’s in high demand.
More people than ever drink Pepsi.
Some enjoy the flavor of Pepsi while others use it as a way to get through the day.
For example, a standard can of Pepsi has a lot of sugar and caffeine in it.
As such, some people will drink Pepsi to stay awake and alert while they’re working.
Even Pepsi cans without sugar have a good dose of caffeine in them.
Since the product helps people stay awake or give them a boost in energy, they drink a few cans every day.
Others simply enjoy the flavor, so they drink it with dinner or as a snack.
Pepsi wouldn’t be as expensive as it is if it didn’t have a huge demand for its products.
However, because it has a lot of demand, the company can raise its prices.
Since people love Pepsi, they’re willing to pay higher prices to receive their Pepsi fixes.
Pepsi is expensive because there’s a lot of demand for its products.
5. Labor Costs
The cost of operations that Pepsi has to pay also impacts its selling prices.
One of the costs that they have to contend with is labor costs.
While some of the production steps use machines, Pepsi still employs humans to do the work.
Laborers working in factories have been pushing for higher wages.
Since the cost of living is increasing in most places, they need higher wages to compete and enjoy a comfortable life.
If they’re unable to afford to live there anymore, then Pepsi risks losing its employees.
While there are always more employees to hire, if they continue to move out of the town because of the high cost of living, then eventually, Pepsi won’t have anyone to hire.
To ensure they keep their factories operational, Pepsi has increased wages.
That means that they pay their employees more money.
That drives up their labor costs.
Since their labor costs are higher, their operational costs are higher.
To offset those costs, they have higher prices on their products.
Pepsi is expensive because of its higher labor costs.
6. Transportation Costs
Another problem impacting Pepsi’s costs is transportation.
Fuel prices have made shipping costs a lot higher.
When fuel costs are high, then trucking companies need to spend more money to move shipments from one location to another.
Since they take on higher costs, they charge higher prices to those they ship.
Pepsi has to move a lot of products every day.
While they tend to use their own fleet of trucks, they’re still facing high fuel costs.
They have to pay those higher fuel costs just to ensure their products arrive at grocery stores and other locations.
Fuel costs aren’t the only aspect making transportation more expensive either.
The cost of truck drivers is higher.
For one, there’s a shortage of truck drivers.
Drivers are realizing their worth and holding out for higher wages before returning to work.
Since Pepsi is paying their truck drivers more money, their transportation costs are higher.
Pepsi is expensive because transportation costs are high, and it needs higher prices to offset its expenses.
7.Sugar Prices
Sugar prices are another problem affecting Pepsi.
While there are sugar-free cans of Pepsi available, a lot of people like to drink Pepsi products that have sugar in them.
The problem with these products is that they’re quite expensive.
That’s because the price of sugar is also high.
There is a multitude of problems affecting sugar beets and other sugar crops.
Fertilizer costs are driving up the cost of farming sugar beets.
Farmers have to spend more money on fertilizer to ensure their beets grow large and healthy.
Since they’re spending more money, they’re selling at higher prices just to make up for those costs.
Drought, extreme temperatures, and other problems are also affecting sugar farmers.
They take on higher costs and have no choice but to sell at higher prices just to break even.
However, this also means that Pepsi is buying sugar at higher prices.
Since they’re taking on higher costs, they’re also selling at higher prices.
They have to offset their expenses, too.
Pepsi is expensive because of the high cost of sugar.
8. Drought In Brazil Increasing Caffeine Prices
Sugar isn’t the only problem affecting Pepsi’s prices.
Another staple ingredient, caffeine, is also higher in price.
In particular, drought is affecting farmers of caffeine-containing crops in Brazil.
Brazil is one of the biggest exporters of caffeine.
Like many other parts of the world, their farmers are having problems with water.
When plants are unable to receive enough water, they die.
Farmers either have to give up the crop for the season or try and acquire water from elsewhere.
The problem with buying water is that it’s extremely expensive.
It’s often too expensive for farmers to deal with.
Drought can also impact a farmer’s ability to plant seeds for the next harvest, too.
As such, both the current harvest and next year’s harvest could face low yields.
Since there’s a shortage, the price of caffeine increases.
Pepsi is expensive because caffeine prices are higher.
9. Corn Prices
A final ingredient that is causing Pepsi problems is corn.
Pepsi uses high fructose corn syrup in its beverages.
That ingredient comes from corn.
The problem with corn is that its prices have been high, too.
It’s also facing problems with drought and extreme temperatures.
However, corn is also in high demand.
It’s useful in making high fructose corn syrup, but it’s also used to make ethanol and other ingredients.
When corn prices increase, then Pepsi usually has to pay a lot of money to get access to the ingredient.
To offset their costs, they need to sell at higher prices.
Pepsi is expensive because of the high price of corn.
10.inflation
A final reason Pepsi is expensive is because of inflation.
Inflation has been at an all-time high.
It makes everything more expensive.
Since it makes basic resources and materials more expensive, then everything in the production line that uses those resources and materials is also more expensive.
Since companies like Pepsi are facing higher costs, they’re selling their products at higher prices to offset them and make a profit.
Some companies tend to charge a bit more to take advantage of inflation, too.
Conclusion
Pepsi is a beloved soft drink that some people rely on to get through the day.
However, the price of Pepsi has increased due to higher ingredient costs, labor costs, and transportation costs.
