CNBC reported that Coca-Cola CEO James Quincey said on the 19th that the company plans to raise product prices due to rising raw material costs. "We have good hedging measures in 2021, but pressure is increasing in 2022, so prices must rise," Quincey said.
Just a mention of a price increase, and Coca-Cola immediately hit the hot search list, igniting a wave of netizens—
It's very much like the sensation caused when Coca-Cola announced changing its formula in 1985. Within just one week of the announcement, Coca-Cola received an average of 5,000 consumer complaint calls per day, and after three months, that number rose to 8,000 per day. Not only that, but Americans even held street demonstrations to keep the original classic flavor...
The new Coke, which cost $4 million to develop, not only dealt a huge blow to Coca-Cola's brand image at the time but also gave Pepsi a golden opportunity, allowing it to surpass the previously far-ahead Coca-Cola in sales the following year.
If Coca-Cola could trigger consumer protests just by announcing a new flavor, can consumers really accept a public "price increase"?
-01- Coca-Cola has actually been raising prices "under the table" for a while
From the consumer's perspective, a price increase means adding to the price of existing products, like when Haidilao, after the pandemic in 2020, raised the price of half a portion of potatoes to 13 yuan, making each slice 1.5 yuan, which immediately sparked consumer discussions and hit the hot search.
If a food and beverage FMCG company tried to directly raise prices, it would likely be "banished" from the convenience stores downstairs by consumers.
In the food and beverage FMCG industry, if a brand wants to increase revenue through "price increases," it typically uses three methods—
1. Change the packaging
In the first 20 years of FMCG development, if a brand wanted to "raise prices," it usually used "packaging upgrades" to create a sense of ritual when consumers encountered the new packaging, subconsciously creating a "barrier" between the new and old packaging.
In an era when there weren't many new product forms, "packaging upgrades" became the best choice for brands to raise prices.
The essence of changing packaging is to influence consumers' subconscious through the concept of "upgrade."
2. Change the specification
As brands gained a deeper and more segmented understanding of consumer needs, and consumer awareness continued to upgrade, the tactic of raising prices through "packaging upgrades" could no longer influence consumers.
So brands began to segment "scenarios," producing products of different specifications for different scenarios. It was Coca-Cola that first introduced the family share pack, tapping into the family gathering scenario, a move that even drove growth across the entire beverage industry.
The essence of changing specifications is to meet the needs of different scenarios.
3. Change the brand/concept
When the internet era arrived, the data consumers fed back to brands became more precise. When most daily consumption scenarios could be satisfied by existing products, it became necessary to find new segmented needs and meet specific consumer demands through new products or brands.
During Roberto Goizueta's tenure as CEO, Coca-Cola once proposed a philosophy—
Coca-Cola's competitors are not just carbonated drinks, but all other beverages. Coca-Cola is not fighting for the carbonated drink market, but for consumers' stomachs.
From then on, Coca-Cola began to develop a multi-brand strategy. Creating a high-end new brand is far more beneficial to the brand in the long run than raising prices on existing products.
One common method is "1+1 innovation" on existing products. For example, cola + coffee, cola + fruit, cola + tea, cola + alcohol... and so on.
Especially in this era of "topic is king," brand innovation can both engage consumers through "curiosity psychology" and quickly test product feasibility and the authenticity of demand through feedback.
Moreover, the added value brought by "1+1 innovation" often doesn't trigger consumer aversion to high prices.
-02- How to get consumers to accept price increases?
Have you noticed that in different environments, the same product can sell at different prices and be widely accepted by consumers?
A bottle of cola costs 2.5 yuan at a mom-and-pop store, 3 yuan at 7-Eleven, 5 yuan at a restaurant, 9 yuan at McDonald's, 12 yuan at a bar or KTV, and 20 yuan at a tourist attraction, especially on a mountain top...
Have you noticed that in different seasons, the same product can also sell at different prices and be widely accepted?
For example, airfares in peak and off-peak seasons, fruits in season and out of season, clothes in different seasons...
So prices can rise, but you have to give a reasonable reason, and whether that reason works is not up to the company—it must be recognized as reasonable by consumers.
Selling the same product at different prices in different environments and seasons is called—dynamic pricing.
Dynamic pricing means "companies adjust the price of the same product based on market demand, their own supply capacity, and other factors, selling to different consumers or different market segments to maximize revenue."
So how can dynamic pricing give consumers a reason to accept a "price increase"? There are three ways.
1. Satisfy personalization (first-degree price discrimination)
Take Coca-Cola as an example. Coca-Cola's retro-flavored products are mainly sold in mid-to-high-end large retail outlets like Hema Fresh, Walmart, and imported supermarkets. These are personalized products that cater to small but beautiful needs.
This product is priced at around 18-25 yuan. Anyone would think it's expensive, but with its unique retro packaging and flavors different from the everyday, there are always people who try it for the "novelty," and some need such products to showcase taste and personality on specific, important occasions.
Consumers are willing to pay 18-25 yuan for personalization, and this price range is also the highest they are currently willing to pay.
2. Quantity discounts, buy more and save (second-degree price discrimination)
This is easy to understand: the price difference is based on how much you buy.
As mentioned earlier, Coca-Cola's "family pack" emphasizes the concept of "more quantity, same price," getting consumers to accept the idea that "the more you buy, the cheaper it is."
Similarly, the recent trend of "smaller packaging" emphasizes "exquisite appearance" + "health." Consumers buy fewer units, but the unit price increases.
For example, Coca-Cola sells 600ml for 3 yuan, 2L for 6 yuan, and 200ml for 1.5 yuan. This adheres to the concept of "quantity discounts, buy more and save," while also meeting the needs of different scenarios through different packaging specifications.
3. The more sought-after, the more valuable; the better the experience, the more valuable (third-degree price discrimination)
If you go to the opera, and there's only one shop in the theater with no other options, buying a can of Coke there might cost several times more than at Costco. Would you be upset? Maybe a little.
But in reality, most people accept it. After all, theaters charge high prices because they have a monopoly; the supply-demand relationship is inherently unbalanced, so paying a bit more is acceptable.
So as mentioned earlier, a bottle of cola costs 2.5 yuan at a mom-and-pop store, 3 yuan at 7-Eleven, 5 yuan at a restaurant, 9 yuan at McDonald's, 12 yuan at a bar or KTV, and 20 yuan at a tourist attraction, especially on a mountain top... Most consumers accept the corresponding price in similar situations.
This shows that in these scenarios, consumers choose Coca-Cola because it is sought-after, scarce, and offers a better experience.
Why are these three forms of pricing acceptable to consumers?
Because these three methods achieve "fairness" in some dimension, making consumers feel they are reasonable. So consumers have no complaints; they tacitly accept these three forms of price discrimination and make them successful examples of dynamic pricing strategies that continue to this day.
-03- Classic cases of "price increases"
Among local Chinese food and beverage FMCG brands, only a few have broken through 10 billion yuan in sales with a single product. "Six Walnut" is one of them. Why use Six Walnut as an example? Because nearly 60% of Six Walnut's sales revenue came from "price increases."
In its early days, Six Walnut found a market opportunity by targeting the "college entrance exam" scenario and the "brain health" positioning, accurately entering the student and parent market. Leveraging cognitive and demand advantages, it quickly gained consumer recognition.
Around 2010, Six Walnut made a key move—
Six Walnut upgraded from 180ml x 20 cans to a 240ml x 12 can gift pack, priced at around 70 yuan, and launched it as a gift product for the Spring Festival season.
For all FMCG brands, Spring Festival is an essential opportunity to increase sales revenue, but Six Walnut didn't just see it that way. When its scale was still small, Six Walnut chose the "Ji-Lu-Yu" region (Hebei, Shandong, Henan) as its base, gradually expanding southward, and eventually achieving national coverage.
Why Ji-Lu-Yu? In preliminary research, Six Walnut found that the Ji-Lu-Yu region, represented by Henan, has a strong gift-giving culture. Visiting relatives during festivals is almost a daily routine, and the value of gifts is generally within 200 yuan.
So Six Walnut hoped to open the Ji-Lu-Yu market with gift packaging. But gift packaging alone wasn't enough; the real breakthrough came from the product's "tin can" advantage.
The biggest difference between Six Walnut and other products in its early development was that Six Walnut's products were mainly in "tin can packaging." The biggest advantage of "tin cans" in gift packaging is—weight.
It's easy to imagine that in regions with a strong gift-giving culture, the meaning of giving gifts is to express the importance you place on the recipient. But overly expensive gifts can bring financial pressure. So a gift that is both substantial and cost-effective was a scarce and sought-after item in the Ji-Lu-Yu region at that time.
The 12 heavy tin cans in the Six Walnut gift pack, combined with the 70 yuan price, offered such high cost-performance that Six Walnut achieved 6 billion yuan in sales within just 3 years.
So, combining what was said earlier, Six Walnut cleverly used three "price increase" methods—
1. Personalization
By leveraging the "brain health" need and the "college entrance exam" scenario, it met specific consumer needs, allowing Six Walnut to sell at 4 yuan per can in its early days.
2. Quantity discounts, buy more and save
Using gift packaging, it gave consumers the experience of quantity discounts and buying more to save, increasing per-capita purchase volume.
3. The more sought-after, the more valuable; the better the experience, the more valuable
Using the product's packaging advantage, it provided a new solution for gift-giving needs, offering consumers a strong sense of satisfaction in the gift-giving experience, making the gift pack directly the key to Six Walnut's national market expansion.
-04- Summary
Regarding Coca-Cola's price increase, there's no need to be overly sensitive.
But from the principles behind "price increases" and the insights from the Coca-Cola and Six Walnut cases, we can judge whether a product's pricing is reasonable and whether it can help a brand and company open a new track and create the next miracle.
We also hope distributors can use packaging to judge a product's future potential, improve their team's and company's product selection capabilities, and find the next emerging brand that breaks through 10 billion.
Tips will be paid 400-2000 yuan once adopted.