Graham Starfelt has always been a Diet Coke drinker. He describes it as a “family tradition” — he picked it up from his mom. He doesn’t drink coffee, so it’s his only source of caffeine. He figures it’s healthy enough, or at least his doctor has never said anything about his four-to-six-can-a-day habit. “I don’t know if that counts as a heavy Diet Coke user,” he says. Heavy or not, it is getting expensive.
Prior to the pandemic, Starfelt, who works in tech, enjoyed working from offices with refrigerators filled with Diet Coke cans, so he’d only buy a pack or two himself a month. Now, however, he has to foot the bill for his beverage consumption entirely, and he’s noticed the price tag on it going up significantly. “I remember in maybe 2018-ish still paying, like, three or four bucks for a 12-pack of Diet Coke,” he says. “And then, certainly, post-pandemic, prices massively spiked. If I go to my local Kroger chain, Ralphs, to get a 12-pack of Diet Coke, it’s 10 bucks.”
He’s not imagining things. The price of soft drinks has increased significantly over the past couple of years. According to the St. Louis Fed, the average price of a 12-ounce can in a package of 12 was under 34 cents in April 2018. As of October 2023, it’s over 56 cents. That’s a nearly 65 percent increase. Data provided by Square, a commerce technology company, finds that the average price of a Diet Coke from bars and restaurants that use its platform went from $2.05 to $2.77 over the same time period; it’s also about 10 cents more than non-diet options.
“They’ve been pretty relentless in raising prices over the last few years, really ever since the pandemic. It’s not just Coca-Cola, but it’s PepsiCo and Keurig Dr. Pepper, too. They’ve just continued to raise prices with very little negative impact on their sales volume,” said Garrett Nelson, vice president and senior equity analyst at CFRA Research, a financial intelligence firm.
Why such an uptick? In part, because companies like Coca-Cola have customers right where they want them after years of cementing their loyalty. They have a high degree of “demand inelasticity,” meaning demand stays where it is even when prices change. Consumers don’t often have — or necessarily want — a lot of alternatives. If you like Diet Coke, you want Diet Coke, and you may not be eager to switch over to Diet Pepsi or a generic brand, assuming you can find one, as there’s not a lot of competition in the soft drink industry. “[It’s] similar to cigarettes, tobacco is a good example. People are addicted, so tobacco companies can raise prices very easily,” Nelson said. “It’s kind of similar with soft drinks.”
How and why Diet Coke prices have gone up so much
Multiple factors have contributed to the increase in soda prices in the past few years. Coca-Cola has raised prices, but it’s not the only one that is a factor here. Grocery stores have their own strategies (though that may sometimes help consumers, when they’re offering deals to bring them in the door). Then there are also restaurants, bars, and other non-grocery locations, which have their own prices and costs to account for, too.
The broad story here is fairly straightforward. As inflation began to take off in 2021 and 2022, that impacted beverage makers like Coca-Cola and Pepsi, which pointed to higher costs coming from a variety of angles, including aluminum cans, packaging, labor, and general supply chain woes. Many cost pressures have eased — aluminum prices, for example, have moderated — though some are still a problem, such as sugar prices, which are at their highest level in years. (That doesn’t impact Diet Coke, specifically, but it does affect the company overall.) Inflation hasn’t disappeared, and many costs are still higher than they used to be.
Coca-Cola and other beverage manufacturers know they can push people on pricing a little more than their own costs and, perhaps, they’ve been pushed themselves.
“Coca-Cola, the soft drink companies, have been expanding their margins,” Nelson said. “Their revenues have been going up by more than their costs.”
Customers may be frustrated with higher prices (or smaller packaging, i.e., shrinkflation), but for months and months, they were largely going along with them.
“Really, over the past 18 to 24 months, when you look at revenue, the component that is your volume growth and the component that is your price growth, these companies have been able to take a considerable amount of pricing,” said Gerald Pascarelli, an equity research analyst at Wedbush who covers the beverage sector.
He explained that Coca-Cola, in a normal environment, expects revenue growth of about 4 to 6 percent over the long term, driven by a balance between volume and pricing. But this hasn’t been a normal environment. “They’ve been growing double digits, and the reason why they’re growing double digits is because their pricing growth has been so strong,” he said, though he warned this can’t go on forever. “You need a balance between volumes and price, and you can’t just have 10 percent increases every year and expect that to have no impact on the consumer wallet or the amount of consumption.”
Indeed, beverage companies, which have been quite open about price hikes, have started to pull back after observing that consumers do have their limits. Pricing for the major soda manufacturers has already started to moderate and should get closer to normal through the end of 2023 and over the course of 2024, Pascarelli said.
In July, Coca-Cola said in its second-quarter earnings call that it would cool it on price increases in developed markets like the US and Europe for the rest of the year. “We have seen some willingness to switch to private label brands in certain categories. Across the sector, consumers are increasingly cost-conscious,” said James Quincey, Coca-Cola’s chair and CEO at the time. “They’re looking for value and stocking up on items on sale.”
Pepsi’s put a pause on price hikes, too, though it plans some “modest” increases for next year.
Starfelt is one of those consumers who finally got tired and switched it up. He’s started to get the Kroger brand equivalent of Coke Zero when he shops there — the last evidence he has of buying brand-name Diet Coke from the grocery store was spending $8.53 for a 12-pack in February. He still does get Diet Coke at Costco, where prices have remained lower. “It’s gone up, but not as radically,” he said.
Coca-Cola did not respond to a request for comment for this story.
Diet Coke stans have noticed the rising prices
Every once in a while I ask around about prices that bug people — on social media, and among family and friends. I’m surprised how often Diet Coke comes up. It’s one of those things that people really do notice if they’re a regular buyer.
“Shoppers are price sensitive, but they’re not very price aware, meaning most shoppers can’t name the price of more than 10 or a dozen different items that they buy regularly. Diet Coke is one where a regular purchaser of it will know what a good price is,” said Jon Hauptman, the founder and president of Price Dimensions, a retail consultancy. For supermarkets, a product such as Diet Coke isn’t a big moneymaker, but it is a staple that helps get people in the door. They try to price aggressively on it when they can in order to strengthen their price image and attract shoppers.
It’s hard for a retailer to have a long-term advantage in the category, however, because Diet Coke is on sale somewhere much of the time — but not at the same place all the time, Hauptman said. Kroger might offer a deal one week, Walgreens the next.
The exceptions here are the Walmarts and Costcos of the world, which have an everyday low-price strategy. They may not offer big discounts, but their regular prices aren’t as high, either. (The FTC is reportedly actually investigating Coca-Cola and Pepsi over potential price discrimination between the prices they offer smaller retailers vs larger ones.)
Christine Hibbard, who lives in Dallas, jokes she’s been drinking and buying Diet Coke as long as Coca-Cola’s been selling it (which is since 1982) and has bought two 12-packs per week for years. When she shops at Walmart, the price is reasonable — her last receipt shows $5.98 for a 12-pack. When her husband buys it at a different store, say, Albertsons, he’s paying $9. “I just pay attention to the differences between the stores,” she said.
It’s not just in grocery aisles where Diet Coke and soda prices are rising, said Dan Su, an equity analyst at Morningstar who covers beverages. “When Coke discloses pricing, it’s not just pricing but pricing and the mix. By mix, they mean the different distribution channels,” she said, meaning a glass bottle at a restaurant, a soda gun at a bar, or a vending machine, among other scenarios. “Some channels definitely have more ability or willingness to pay a little bit higher, right? In instant consumption situations where you are in a bar or at a restaurant out with friends … you are less worried about the Coke price versus if you are buying a big family size Coke to bring home.”
However, she emphasized there are limits to price increases, which is what Coca-Cola is starting to run up against now. “You don’t kill your golden goose by jacking up the price so high that people stop buying,” she said.
None of this is to say that Diet Coke prices won’t go up again. Pascarelli said they likely will, but more at the pace they always have. “They’re not going to lower prices, but it’s just that percentage change in prices is going to moderate significantly,” he said.
America’s Diet Coke habit is not going away — even the World Health Organization’s warning about aspartame hasn’t really done much to slow people down. Coca-Cola knows that, much to its financial benefit, even if there are limits.
Nadine Babu, a Diet Coke fan in Minneapolis, told me she has seen deals coming back more to her local Walgreens, which she appreciates. At one point, she felt like Diet Coke got so expensive she actually started trading up for Zevia, a zero-sugar, zero-calorie drink that’s supposed to be good for you. “It was always so much more expensive, but now if you’re looking at it, it’s not that much more,” she said. “I diversified.”