It’s not inflation – it’s EXCUSEFLATION: Top companies including Wingstop and Pepsi are accused of using inflation, COVID and the war in Ukraine as an excuse to raise prices and inflate bosses’ wages
- Companies like PepsiCo. and Wingstop have capitalized on stories and headlines about global crises to drive up their prices and line their pockets
- Home Depot, Walmart and Dollar Tree have also been accused of the practice
- The companies have pushed up prices to see how much consumers will pay
A number of companies have been accused of capitalizing on headlines about global crises and inflation to drive up prices and boost profits for shareholders and executives.
Business analysts have said that companies like PepsiCo., Wingstop, Home Depot, Walmart and Dollar Tree have clung to narratives surrounding crises such as the COVID-19 pandemic, the Russian invasion of Ukraine and inflation as an excuse to raise prices and see how many consumers are willing to pay.
The practice, known as “excuse inflation,” has even spread to local businesses, with a Chicago bakery manager admitting it, telling Bloomberg, “It’s an opportunity to raise prices without getting a bunch of customer complaints.” to get.’
While inflation has eased from its dizzying peaks last year and the pandemic has moved further and further away, some companies have continued to deliberately raise the prices of their goods, with corporate profit margins hitting a record 13.5 percent by 2021. according to Bloomberg.
And as those prices continue to rise and customers become accustomed to them, they become normal and allow customers to spend more for products as companies fill their pockets.
PepsiCo. CEO Ramon Laguarta and WIngstop CEO Michael J. Skipworth
PepsiCo. was a company recently accused of questionable practices by Rines on a recent episode of the Bloomberg podcast Odd Lots.
Rines said Pepsi’s tactic follows a strategy called price over volume, or POV, which passes the cost of lagging sales volumes caused by global events to the customer.
He told Odd Lots how Pepsi lost sales from the Russian market when the country invaded Ukraine last year, only raising prices for consumers elsewhere to make up for that loss.
In fact, Pepsi asked consumers to compensate them for the loss of the Russian market, according to Bloomberg. And while normally a price hike could send customers to competitors like Coca Cola, the story surrounding the Russian invasion has allowed Pepsi to keep its customers despite the price hikes.
“You shouldn’t theoretically allow Pepsi to drive up the price, right? It should be Pepsi and Coca-Cola battling it out and you have very minimal price increases and they don’t have the ability to really catch up with inflation,” Rines said. “And that’s just not the case now.”
Ramon Laguarta, CEO of Pepsi, recently evaded a question from analysts about whether the company would cut prices by promoting the brand integrity he was trying to promote.
He said Pepsi is “trying to create brands that can deliver greater value to consumers and that consumers are willing to pay more for our brands.”
Wingstop is a brand accused of ‘excuse inflation’
PepsiCo. increased prices to make up for lost sales volumes due to the Russian invasion of Ukraine
Chicken wing restaurant chain Wingstop has also been a culprit in using excuse inflation to raise their prices, Rines said, as they continued to drive up their prices even after the effects of the 2021 avian flu on the poultry market eased.
That year, wholesale prices for chicken wings rose 125 percent over the course of 12 months, according to Bloomberg.
Rines said during that crisis that Wingstop “started pushing the price, pushing the price, pushing the price and they didn’t have any consumer backlash.”
Despite those increases, he said, “Consumers just kept buying chicken wings, and it’s not like there’s a limited number of places you can buy a spicy chicken wing.”
And even though wholesale prices for wings have dropped by 50 percent, Wingstop has kept their prices high.
Wingstop isn’t exactly going to stop driving up their price. In fact, they say and steer towards a typical price increase of 2 to 3 percent,” Rines said.
In turn, according to Bloomberg, earnings for Wingstop are up nearly 250 percent since 2020.