CHICAGO -- Don't blame the distributors who changed the way they will charge for delivering packaged beverages for the recent price increase on Gatorade products. In fact, Gatorade parent company Quaker Tropicana Gatorade (QTG) said the increase announced this week, asfirst reported by CSP Daily News, is the result of several variables coming to a head.1
We've been talking about our intent to take judicious pricing across our portfolio of productsas warrantedsince last October, when we hosted a full-day overview of our businesses with Wall Street analysts, the company said in a statement [image-nocss] released yesterday.
On Monday, Gatorade sent letters to retailers announcing the price increases, which went into effect the same day. An accompanying spreadsheet explains that pricing has increased:
5.05% or 65 cents on cases of 32-oz. Gatorade. 9.06% or $1.35 on cases of 20-oz. widemouth Gatorade. 7% or $1.40 on cases of 24-oz. Edge Gatorade. 10% or $2.19 on bag-in-box concentrate Gatorade.One retailer, who spoke on the condition of anonymity, said the increases apply to all channels of retail, perhaps allaying c-store retailers' concerns that they would be forced into disadvantaged pricing. A Gatorade spokesperson would not comment beyond the content of the statement, which in its entirety reads:
It's not news that significant pressures across the food and beverage industry over the past several years have increased input costs across the board, including fuel, ingredients, packaging and manufacturing.
While Gatorade has invested heavily over the years to make these cost increases invisible to the consumer, continued inflationary pressures now necessitate a modest price increase on most sizes of product effective March 19, 2007.
To tie this pricing action to one particular issue simply wouldn't be accurate. In fact, we've been talking about our intent to take judicious pricing across our portfolio of products -- as warranted -- since last October, when we hosted a full day overview of our businesses with Wall Street analysts.
We're confident the Gatorade business will continue to perform very well. From a customer perspective, our retail partners understand the leadership investments we have [made] and will continue to make in packaging and product innovation, marketing support and customer programming.
From a consumer perspective, consumers understand the unique value of Gatorade. Athletes and active consumers trust Gatorade as a product that's been tested and proven for more than 40 years to deliver the functional hydration and performance benefits they demand from a sports drink.
On January 19, McLane Co., the convenience channel's largest wholesaler, announced it would revamp its pricing structure for the delivery of packaged beverages, moving from a markup model to an activity-based-costing (ABC) strategy that sets a price based on the actual cost incurred during the receiving, product management and delivery process. Initially, it was suggested that new cost would be 9.5 cents per pound, with a minimum of $2.50 per case.
Since then, more than half of the top 10 industry wholesalers said they would fall in line with the change. They also began negotiations with Gatorade and Nestle Waters North America, the two suppliers most affected by the change, to ease the blow of such an increase.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.