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Pepsi CFO Says Stagflation Presents Pricing Challenges

Pepsi CFO Says Stagflation Presents Pricing Challenges

With uncertain economic conditions, consumer products companies face a number of challenges, particularly in terms of pricing, PepsiCo Inc. CFO Hugh Johnston said at a recent conference hosted by Barclays.

According to Reuters, the fact that the U.S. and other developed markets are experiencing a "stagflationary environment" hinders companies like Pepsi when they look to raise prices to combat higher commodity and production costs.

Johnston pointed out that stagflation - which is the combination of weak economic growth and high inflation - presents a risky situation for consumer products companies that could ultimately drive away customers with higher prices, the news source reported.

"This stagflation has made pricing a tricky balancing act," Johnston admitted at the conference.

Price increases have been a hot-button topic for PepsiCo, which initiated a new raise after July 4, according to Reuters. Additionally, the company plans to increase the price of its Gatorade product during the fourth quarter.

Perhaps reflecting this difficulty with striking a pricing balance, PepsiCo's stock dropped 1.9 percent over news that Morgan Stanley had downgraded the stock from equal weight to overweight, according to published reports.