Parinya Kitjatanapan, the general manager of PepsiCo’s beverage division that covers Southeast Asia, Japan and South Korea, told Nikkei Asia in an interview that the Covid-19 pandemic and the war in Ukraine had overshadowed global supply chains and that he couldn’t rule out lifting prices beyond earlier hikes that have already kicked in around the region.

“I think with the commodity price going up, we will have to price that in. There’s no question about it,” said Bangkok-based Kitjatanapan, who is also the company’s Asia-Pacific chief commercial officer. “We will try to minimise the impact on consumers, but I would not say we won’t be taking a price hike. We will watch it.”

Another price rise by the company, which beyond its namesake cola churns out brands such as Mountain Dew soda, Lipton iced tea and Gatorade sports drinks, would mark the latest in a long line of increases by food producers in the region and elsewhere, underscoring the pressure they face as costs soar.

Companies ranging from cup noodle maker Nissin Foods and mayonnaise producer Kewpie in Japan to consumer goods giant Hindustan Unilever and cookie manufacturer Britannia in India have all yanked up their prices in the last few months.

That comes after Russia’s invasion of Ukraine roiled supplies of key agricultural commodities and disrupted broader global logistics chains that had already been hit hard by fallout from the coronavirus pandemic. The United Nations’ benchmark food price index surged 115% from March 2020, around the beginning of the pandemic, to this November.

Analysts and other observers said price rises are to be expected in the food and beverage sector. “In an industry notoriously tight for margins, this potential price rise by PepsiCo is an inevitability,” said Andrew Delios, a professor at the National University of Singapore’s business school.

But he added that small price hikes are unlikely to alienate consumers. “Beverages and snack foods are not discretionary spends. People will not change spending on these products in response to small price changes, but they will do so in response to changes in taste and preferences – for example, from sugar to water.”

PepsiCo, which famously competes with The Coca-Cola Co as well as a host of other drink firms, beat estimates in the June-August quarter with revenues of nearly US$22 billion, largely due to price hikes. Its sales volumes for beverages rose 9% in the Asia-Pacific region while edging up just 1% in its key North American market and even shrinking in Europe.

Kitjatanapan said structural initiatives rolled out over the last few years have dampened the impact of inflation and logistics disruptions. Those include boosting local sourcing of ingredients such as sugar and using lighter plastic bottles. He said increased automation in plants has helped the company achieve more with less manpower.

PepsiCo also set up a beverage concentrate plant in Singapore in 2017, making it quicker to ship products to Japan, Thailand and Vietnam.

Meanwhile, the company is looking to tap the growing demand for healthier, no-sugar beverages, especially in evolved markets such as Japan, South Korea and Thailand. Those include zero-calorie versions of everything from Pepsi to Mirinda soda.

“We are seeing the future as no-sugar, but today the market is still quite small in Asia,” said Kitjatanapan. “We don’t introduce many full-sugar products anymore and bring a lot more mid-calorie or no-sugar types of products. No-sugar is definitely the next breakaway.”

And PepsiCo views Asia as a growth engine due to its long hot summers and the fact that emerging markets are broadly expanding at a faster clip than North America and Europe.

Meanwhile, PepsiCo is rolling out more of its global brands in Asia. For instance, it has started selling Rockstar, an energy drink it bought in 2020 for US$3.85 billion, in Vietnam and Thailand.

Data firm Statista estimates the size of Asia’s soft beverage market will reach US$257 billion in 2027 from US$186 billion in 2022, mainly driven by noncarbonated brands, along with energy and sports drinks.

According to consultancy firm Mersol and Luo, sales of sports and energy drinks have gathered pace in wealthy Asian locations like Singapore and Hong Kong, while such products have also started making inroads into emerging markets such as Malaysia. “Brand loyalty is low, with most consumers willing to try unknown brands or flavours,” the firm said in a report on Asia’s beverage market.

Asian consumers are also willing to “dedicate more of their increasing disposable income to beverages that will support a healthy lifestyle”, the report noted, adding that while PepsiCo and Coca-Cola are clear market leaders, local brands are gradually gaining momentum.

The duo compete with the likes of Thai juice maker Tipco and Singapore-headquartered Fraser and Neave, which manufactures Est Cola, Sunkist fruit drinks and the 100 Plus sports drink.

“Local players can have their strength in local production and distribution … which global firms must protect against,” said Delios from the NUS business school.

But Kitjatanapan said competition keeps PepsiCo sharp. “Competition is intensifying every year. It helps us be aware that we need to be a lot more nimble and bring the product much faster to the market.”