Pepsi’s Pricing: How Inflation Became a Profit Driver in 2022

In 2022, PepsiCo executed a pricing strategy that defied conventional wisdom, raising product prices by an average of 17% without significant sales erosion. This wasn’t a blanket increase as the company targeted items with lower price elasticity, where consumer loyalty outweighed sensitivity to price hikes. The move successfully offset a 12% rise in input costs (from sugar to aluminum). The revenue grew 16%, demonstrating that in inflationary environments, pricing power trumps volume concerns. What emerged was a counterintuitive scenario where inflation, rather than squeezing margins, became a tailwind for dominant brands.

Despite decades-high inflation, consumers continued loading Pepsi products into their grocery carts with only marginal cutbacks. This revealed brand habituation, even at premium prices. Another psychological factor that explains the phenomena is that consumers had been primed by media narratives blaming inflation on COVID-19 disruptions and the Ukraine war, making price increases more palatable. This created a rare opportunity where corporations could boost margins simply by aligning with macroeconomic trends.

Beneath the surface, an information asymmetry worked in corporations’ favor. Most consumers couldn’t track whether a 17% price hike truly reflected a 12% cost increase. They simply absorbed the inflation premium as inevitable. This gap between actual costs and perceived justification allowed firms like Pepsi to strategically widen margins under the cover of macroeconomic turmoil. The sticky nature of prices meant these gains would likely persist even when input costs eventually declined. By Q4 2022, this dynamic was evident across the FMCG sector, with Unilever and Nestlé reporting similar margin expansions through tactical pricing. 

While Pepsi’s actions were rational from a shareholder perspective, they raise ethical questions about corporations exploited inflationary psychology to pad profits beyond cost-covering needs. The regulatory scrutiny remained muted, as policymakers focused on traditional inflation drivers like energy costs. This created a permissive environment where pricing strategies could blur the line between necessity and opportunism.

The company proved that strong brands could not just survive inflation but weaponize it.