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Jul 27, 2018

Coca-Cola is Raising U.S. Soda Prices in Response to Tariffs

By Team Stash

Get ready to pay more for your soda.

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In a move that’s sure to shake up many Americans, soft drink maker Coca-Cola is planning to increase prices for its products in the U.S.

The price increases will come as the company wrestles with higher production costs as a result of new tariffs, Coca-Cola CEO James Quincey told the Wall Street Journal. The tariffs on aluminum and steel, specifically, are expected to increase the company’s costs.

Trickle-down taxation

Earlier this year, the government announced tariffs on imports of steel (25%) and aluminum (10%). While those initial import taxes turned out to be the first of many—the government has since announced tariffs on a slew of other foreign goods—it’s these that seem to be hurting Coke’s business.

It’s the increased costs associated with freight rates and metal prices, specifically, that spurred Coke to announce price hikes, Quincey said. The additional costs are being passed on to consumers.

Though Coca-Cola benefited from a corporate tax cut passed in December—lowering the corporate rate from 35% to 21% and likely freeing up tens of millions of dollars for Coke—the company is still set to increase the costs of its products.

What can consumers expect?

While we don’t know how big of a price hike Coke executives are planning, we do know that soda is now one of several goods that are expected to become more expensive as the U.S. has announced tariffs on a wide swath of foreign products.

Coke isn’t the only company that’s feeling the heat. Several others have said that tariffs will increase the price of their products, including automakers and solar panel manufacturers.

And given that many cities are already instituting taxes on sugary soft drinks—commonly called “soda taxes”—making them more expensive. Now, trade spats could increase costs even more.

The bottom line (of Coke)

The recent slate of tariffs is going to start affecting the average American in some shape or form. Coca-Cola’s management is being upfront about what it means for their business, and consumers will likely end up drinking down the price hike or finding something else to guzzle down during lunch.

Coke still beat expectations in its most recent quarterly report, and most of its growth was overseas, clear of the tariffs in the U.S. So, even with sticker shock affecting U.S. customers, Coke execs don’t appear worried. Of course, markets are unpredictable and volatile, and few people anticipated a soda price hike as the result of tariffs—so, anything can happen.

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