Justin Sullivan
Bank of America considers report that the FTC is conducting a preliminary investigation into Coca-Cola (NYSE:KO) and PepsiCo (NASDAQ:PEP) for their pricing activities in the US beverage market.
The company believes that recent prices Actions in the beverage market may have attracted regulatory attention. Similar to the other food and beverage sectors, the rate of price increase of soft drinks is recorded to have increased above the historical average over the past two years amid inflationary pressures. The government may also be looking at different pricing methods from the beverage giants to different types of retailers.
However, BofA doesn’t think the case could be as simple as surrounding higher prices charged to smaller retailers or mother-and-child stores.
Analyst Bryan Spillance: “While retail prices are making headlines (and potentially attracting scrutiny from regulators), KO and PEP margins in the US are falling due to rising prices have not kept pace with inflation. This makes it difficult to draw a line from higher prices to some anti-competitive behavior.”
Regulatory Overhang for Coca-Cola (KO) and PepsiCo (PEP) wasn’t enough to push BofA out of the Buy rating for both.
Coca-Cola (KO) rose 0.21% in a premarket transaction on Wednesday and PepsiCo (PEP) was up 0.15%. Both companies are expected to report Q4 earnings in early February.
