Thursday, February 17, 2011

Pepsi Joins Companies Which See Inflation Coming

My latest post concerning companies behaving differently in light of the inflation they see coming was earlier this month.

In last Friday's Wall Street Journal, Pepsi CEO Indra Nooyi defended her company's projections for lower earnings in the future,

"We have no idea what the commodity markets are going to look like in 2012 and beyond."

While one analyst was quoted in the article as chiding Nooyi and Pepsi for citing commodity price pressures, claiming that "everybody else" is facing these, as well, I think he is missing the point.

The article contends,

"At the same time, consumers are still holding back and so it will be difficult to raise prices on drinks and snacks enough to offset the higher costs."

And Nooyi is quoted, again, as saying,

"Had we not had the continued macroeconomic sluggishness and this commodity inflation, we are a solid, double-digit [percentage] player."

Simply put, commodity price inflation, at least partially induced by US monetary-policy, is affecting yet another, very large US company.

Despite Fed officials', current and former, claims to the contrary, US businesses continue to talk and behave as if inflation is coming and will affect their operations and financial results materially.

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