Why Is Soda So Expensive? (10 Reasons)
For many people, soda is the perfect beverage on a hot day.
Its sugar and caffeine content can give someone the pick-me-up they need to feel refreshed.
The carbonation can also make it an enjoyable drink for children.
When looking to buy soda, however, you may find that the price is quite expensive.
Considering soda is available everywhere, you may wonder why it’s so pricey.
Why Is Soda So Expensive? (10 Reasons)
The average cost of soda has increased from $1.58 to $1.64 for a two-liter bottle.
Buying a box of 12 cans of soda is even more expensive.
Factors like panic buying during the COVID-19 pandemic, increased production costs, and tariffs on foreign countries have all impacted the price.
Let’s look at these factors in more detail.
1. Panic Buying
One of the initial causes of price increases in soda was the panic buying that occurred during the pandemic.
When lockdowns started getting implemented, a lot of people panicked about not being able to get food.
As such, they hit the stores and started buying soda and other types of food in large quantities.
It ensured that they had a good amount in storage should they need it.
Soda was particularly valuable since it lasts a long time.
However, this created a supply problem.
All the soda cans and two liters were gone from the shelves.
With several factories shut down or operating with reduced worker populations, it meant that soda manufacturers weren’t able to produce enough to meet demand.
As a result, there was a constant shortage of soda in grocery stores.
With demand high but supply practically non-existent, the price of soda skyrocketed.
Although the supply has more or less evened out with demand in most cases, the high price of soda has remained.
Soda is expensive because panic buying messed up the supply chain.
2. Aluminum Prices Increasing
Another big factor that’s increasing the price of soda is the fact that the price of aluminum has increased.
There are a few factors behind the increase in aluminum prices.
One of the biggest reasons is China.
In an effort to reduce carbon emissions, China has doubled down on using aluminum.
It’s imported a large amount over the past few years which is impacting the available supply elsewhere.
The war in Europe has also further impacted aluminum supplies.
This has made aluminum more expensive because it means there’s high demand for it but supply isn’t able to keep up.
Some aluminum suppliers are also shutting down plants which only further decreases the supply available.
Most soda cans are made of aluminum.
It’s a recyclable material that is kinder to the environment than other options.
The two major soda producers in the United States are aware that their customers want them to embrace more environmentally friendly practices.
Using aluminum cans is a part of honoring that wish.
However, when aluminum supplies are low, soda companies find themselves having to pay top dollar to source aluminum.
Because aluminum is so widely used throughout the world, the demand for it is extremely high.
If the soda companies end up paying an expensive price for it, then they’ll need to make up for that cost by putting a high price on their products.
Soda is expensive because the price of aluminum has increased.
3. Little Competition
When you go shopping, you may see an array of different soda cans available for purchase.
Upon closer inspection, you’ll notice that those sodas really only belong to two soda companies.
In the United States, there are two major soda producers.
They’re Pepsi and Coca-Cola.
While both Pepsi and Coca-Cola have their flagship drinks of the same name, they also produce several sodas that don’t share their name.
For example, Pepsi also makes Mountain Dew, Gatorade, and Tropicana.
Coca-Cola makes Dasani, Sprite, and Smartwater.
While there are a few other brands of soda out there, there’s no question that Pepsi and Coca-Cola are kings.
This becomes a problem because it means there isn’t much competition in the soda industry.
When you only have two major corporations in the industry, they don’t need to compete that much with each other.
They mostly just need to maintain their current customer base and not lose customers to their competition.
Since there are only two major soda companies in the United States, you could say that both have a monopoly on the industry.
This essentially means that they’re able to set prices for their products without too much backlash from consumers.
While they’re wary of what the other company is doing, it’s easier for those two companies to just agree to raise prices together rather than have one cut prices to steal customers from the other.
They don’t have to worry about competition as much since they’re the two powerhouses.
They can work together to drive as much profit as possible into their respective corporations.
That said, they are aware that they can only raise prices so much before they start to drive customers away.
There is still a limit on how high they can raise prices.
There just isn’t another competing force out there that’s also encouraging them to keep prices low.
In most instances, there are typically several businesses offering the same product.
They’re all competing with each other for customers.
To get the most profit, they usually lower prices to increase their customer base.
Soda is expensive because Pepsi and Coca-Cola have very few competitors in the industry.
4. Wage Increases
Another major factor that’s influencing the increase in price is wage increases.
When workers started returning to work following the pandemic, they had a bit more power.
Many of them got fired from the very company looking to hire them back.
Certain workplaces became desperate for labor.
With lockdowns lifting, demand for certain products was suddenly very high and companies didn’t have the workforce to support those demands.
This allowed workers to negotiate their salaries a bit more successfully.
Higher salaries meant that Pepsi, Coca-Cola, and other soda manufacturers were paying their workers more.
Since this adds to their production costs, those companies end up having to raise prices to offset those costs.
Every company has certain profit goals that they want to reach.
Increasing employee wages makes it harder to reach those goals.
They’re spending too much of their revenue on their workforce instead.
To reach profit goals, the only thing they can do is raise the prices of their products.
It isn’t just factory workers who are seeing increased wages, either.
Delivery drivers and other essential staff also negotiated higher salaries.
It’s also worth mentioning the wage increases in seemingly unrelated positions.
Those who mine aluminum, for example, also got higher wages.
That impacts the price of aluminum which also impacts the cost of buying that aluminum.
This means that soda companies have to spend more money on materials.
Since they’re spending more money on their product, they need to offset their costs with higher prices.
Soda is expensive because of higher labor costs.
5. Transportation Costs
Another factor that’s behind the increase in soda prices is transportation costs.
Soda is heavy.
A truck carrying bottles and cans of soda can only carry so much and still be compliant with highway regulations.
There are some states and some stretches of highway that have a weight limit on them.
Trucks exceeding that weight limit are either denied access or have to pay a fine.
Some routes are expensive for a soda company to deliver to because they need to pay those fines regularly.
Soda bottles and cans also take up a decent amount of space.
Even in boxes, truck drivers can only stack so much before running out of space.
That limits how much they’re able to deliver on each route.
When demand is exceptionally high, the truck drivers may not be able to deliver enough to meet that demand.
The price of soda ends up getting higher as a result.
However, the cost of transporting soda is the main factor behind an increase in soda prices.
Besides paying fines, delivery drivers are facing expensive gas prices.
Since Coca-Cola and Pepsi still use fleets of trucks that use gas or diesel, they’re taking on heavy costs due to gas prices alone.
Because shipping via airplanes isn’t always a good idea for soda cans and bottles, manufacturers really only have one choice.
When fuel costs are high, they have no choice but to pay those costs if they want their trucks to make it to their destinations.
There’s also regular maintenance that their trucks need to undergo to keep them operational.
That adds to their transportation costs, too.
Since inflation is making everything more expensive, it means buying parts for their trucks is also expensive.
Truck driver shortages are also causing problems.
With fewer workers to drive trucks, it means the companies can’t move as much product.
That impacts supply which also increases the price.
Soda is expensive because of transportation costs.
6. Marketing Costs
Soda is also expensive due to marketing costs.
Even though Coca-Cola and Pepsi are the main two soda companies in the United States, they still need to market their products.
They don’t want the other company to get an edge over them.
As such, they spend a good amount of money on marketing costs.
Since they’re directly competing with one another, it usually means that they need to spend a lot of money on marketing.
That’s because the other company is also spending a lot of money on marketing.
The company that spends the most money on effective marketing usually ends up getting the most customer interest.
One way that the companies market their products is with celebrity endorsements.
They might hire a famous celebrity to appear in their commercials and essentially be a spokesperson for the brand for a contracted time.
Celebrity endorsements aren’t cheap.
If the company wants to do other marketing campaigns not related to the celebrity, then marketing is going to cost even more.
Sometimes they’ll focus on a type of aesthetic or experience.
That usually entails high-production commercials.
Other strategies might be to buy a licensed song and then remix it.
That’s also costly, depending on the song being used.
Marketing costs are very expensive for big corporations like Pepsi and Coca-Cola.
To make up for those costs, they have to increase the prices of their products.
7. Operating Costs
The overall costs of running a business are also why soda is expensive.
In particular, the cost of ingredients has increased.
While Coca-Cola is mostly made up of water, it also uses other ingredients.
Some of the main ingredients include:
- Sugar
- Caramel coloring
- Phosphoric acid
- Caffeine
- Natural flavors
The “natural flavors” part of the recipe is the company’s secret.
It’s what gives Coca-Cola sodas that unique Coca-Cola taste.
When these ingredients become expensive, the overall soda also becomes more expensive.
The companies then have to raise the price of their products to offset high production costs.
Energy costs also impact the cost of business.
With energy prices increasing, it costs more to do business.
Factories use a lot of energy to run their machines and create their products.
If energy prices are high, then it’s also going to cost the business more money to produce its goods.
Soda is expensive because the cost of making soda and operating the business has become more expensive.
8. Tariffs On Chinese Imports
Another important factor influencing the price of soda is certain tariffs on Chinese imports.
In particular, there’s a tariff on Chinese steel that is impacting the price of soda.
Soda cans use a variety of materials.
One of them is steel.
Some soda companies get that steel from China because it’s cheaper.
Unfortunately, a tariff on Chinese imports has made the price of getting that steel more expensive.
The tariff also covers a variety of other imported products.
If soda companies are importing those supplies and materials too, then that’s going to make their production costs even more expensive.
To offset this expense, they increase the price of their sodas.
Soda is expensive because the tariff on Chinese imports is making production costs more expensive.
9. Declining Sales
Soda is also expensive because soda corporations were experiencing declining sales for some time.
As people turned to healthier drinks, some soda companies saw a decrease in sales.
This meant that they needed to raise prices to earn the same amount of profit that they had in the past.
As fewer people buy their products, soda companies have to make their revenue by charging more for their products.
It’s a bit of a gamble since it might drive away their current customers.
It isn’t always easy for a large corporation to scale back production and then rev it back up to keep up with the current soda-drinking trends.
As such, they usually choose to wait and just increase prices until the trend turns back in their favor again.
Soda is expensive because of declining sales.
10. Inflation
A final reason soda is expensive is inflation.
There’s no question that inflation caused by the pandemic is impacting the price of soda.
It’s making everything from ingredients to materials more expensive.
Since those things are more expensive, products are also more expensive.
Since employee wages have also increased, the price of soda becomes expensive.
Inflation is one of the big factors behind the increase in soda prices.
Conclusion
Soda is an enjoyable drink that many use for a quick and tasty energy boost.
Unfortunately, certain factors like inflation, production costs, and marketing costs have led to higher soda prices.