Why Coca-Cola could be Destroying Teeth AND Wallets

In a time long, long ago, I sat attentively in a classroom as a boring professor shared this golden rule on economics: “when demand for a good or service falls, so will the price.” For managing a stock portfolio for Decoding Wall St. (www.decodingwallst.com) clients, and making calls for years before my fresh duties, I have tweaked that boring professor's golden rule to: “when global economic growth is cooling prices on goods and services should follow suit.” The latest CPI report generally supports this view, but not entirely. You see, in spite of down trending employment growth, consumer confidence, and retail sales for any number of reasons one wishes to choose, prices on non-alcoholic beverages have continued to stay firm. Within the CPI's “food at home” index, the non-alcoholic beverage sub-category has not only risen consistently since March of this year (alongside slowing domestic growth), but is notching gains while other sub-categories are experiencing price declines. This brings me to Coca-Cola

and the one thing that immediately stuck out on its earnings release today. It was highlighted that the company maintained price increases in North America. So much for dropping prices on an end product as the inputs used in its creation are falling (sugar prices down from the start of the year, for example). Hey, I guess Coca-Cola has to counteract disappointing European volumes somehow, why not keep their price increases taken in 2011 intact for domestic consumers (said with a sarcastic undertone). Interestingly, coffee prices for all types of blends have declined at an accelerated pace from March (according to CPI data), indicating Starbucks right on down to local coffee shops may be passing lower bean costs onto the consumer to maintain or increase volume. Coca-Cola products may destroy teeth and the amount of cash in the wallet.