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CHICAGO -- Retailers can't seem to get a break in the packaged beverage category it seems, as PepsiCo's Quaker Tropicana Gatorade (QTG) division announced it was raising wholesale prices immediately on its Gatorade products. This move comes two months after McLane Co. announced it would be converting to a weight-based fee system to distribute packaged beverages.
"It's not news that significant pressures across the food and beverage industry over the past several years have increased input costs across the board, including fuel, ingredients, packaging, and manufacturing," the company said in a written statement. "While Gatorade has invested heavily over the years to make these cost increases invisible to the consumer, continued inflationary pressure now necessitate a modest price increase on most sizes of product effective March 19, 2007."
The change will boost prices on cases of 32-ounce Gatorade products by 5.05 percent, or 65 cents; cases of 20-ounce wide-mouth Gatorade will increase 9.06 percent, or $1.35; 24-ounce Edge Gatorade cased will see a 7 percent, or $1.49 percent increase; and a 10 percent increase, totaling $2.19 will be seen on bag-in-box concentrate Gatorade, according to published reports.
The catalyst might have been the weight-based distribution fee that McLane will assess on packaged beverage shipments, however the manufacturer would not reveal the trigger.
"To tie this pricing action to one particular issue simply wouldn't be accurate," the company added. "In fact, we've been talking about our intent to take judicious pricing across our portfolio of products -- as warranted -- since last October, when we hosted a full day overview of our businesses with Wall Street analysts."
In January, McLane announced a new weight-based fee, effective April 1, for its packaged beverage manufacturers at a cost of .095 cents per pound, with a minimum of $2.50 per case. Other requirements included a minimum standard to ensure that products, as well as packing materials, would withstand the distribution processes without breakage, leakage or other failures.
Shortly after that announcement, QTG came to agreements with McLane on the fee, however the results of the negotiations were not disclosed.
Roger Grogman, vice president of marketing for McLane, declined to express the details of the transaction to CSNews Online at the time, but did acknowledge that the solution was "mutually developed and provides a favorable agreement that supports the continued availability of QTG products."
The effect such changes will have on retailers has yet to be determined. Some retailers believe that these changes will cause a price increase in packaged beverage segments such as bottled water, isotonics, energy drinks and carbonated beverages for both retailers and consumers, CSNews Online reported at the time of the McLane announcement.
"Let's say a case of gallon water weighs 52 pounds," said Kristen Schmitt, category manager for CEFCO, which operates 70 convenience stores in central Texas. "At 9.5 cents per pound, the delivery fee will be $4.94 or roughly 82 cents per gallon on a 6 gallon case," Schmitt explained. "Manufacturers will have to adjust their costs and in turn, retailers will go up to remain profitable. This new beverage logistics model equates to more than the current up-charge system."
QTG remains confident that the price increases will not have an affect on Gatorade's performance. "From a customer perspective, our retail partners understand the leadership investments we have and will continue to make in packaging and product innovation, marketing support and customer programming," the company said. "From a consumer perspective, consumers understand the unique value of Gatorade. Athletes and active consumers trust Gatorade as a product that's been tested and proven for more than 40 years to deliver the functional hydration and performance benefits they demand from a sports drink."