USA: Inflationary trends forcing brewers to raise prices
Beer sales have long been a gauge of the economy. It takes a lot for beer lovers to abandon their brews.
But now with inflationary trends that are only gaining momentum and the cost of brewing a beer (raw materials, shipping cost, etc.) on the rise, breweries are being forced to raise the prices of their products and increasingly consumers are buying less beer, the American Craft Beer reported on April 12.
The average price of beer in the United States rose nearly 8% from November 2021 to November 2022, according to Moody’s. And during the last 13 weeks of 2022, beer prices at retail rose “much higher than normal,” according to Bump Williams Consulting, an alcohol industry analytics company in Shelton, Connecticut.
On April 6 Constellation Brands, home to Corona and Modelo beer reported a 15% year-over-year plunge in its beer segment’s operating profits for the recent quarter. The culprit, reports Yahoo Finance was” across-the-board inflation.”
In March Brewing giant AB InBev saw its operating profit margins plummet to 24.6% from 25.7% it recorded last year. “Inflation was above what was originally planned,” AB InBev CEO Michel Doukeris told analysts on a conference call.
To try and offset persistent inflationary trends, beer makers continue to push through price increases on consumers. In the last months of 2022, the average price of a 24-pack of 12 oz. beer went up nearly 8% per Nielsen data.
Molson Coors, home to Miller Lite and Coors Light, upped its wholesale prices 5% in the spring of 2021 and another 5% that fall. And retailors are adding to the overall retail price of beer at their end as well to compensate for inflated employee and location costs.
“It’s obviously too soon to be able to give complete reassurance that the price increase has landed well and not changed consumers’ behavior because we’re still learning, and we’ll see what unfolds over the next few months,” Molson Coors CEO Gavin Hattersley said at a Morgan Stanley investor conference in early December.
Heineken CEO Dolf van den Brink, told the Financial Times: “In my 24 years in the business I’ve never seen anything like it, not even close. Across the board we are faced with crazy increases. There’s no model that can handle this kind of inflation. It’s kind of off the charts.”
“It is impossible to predict if consumers will stomach further price rises as behavior models break down,” Dolf van den Brink added.
One thing’s for sure, beer prices aren’t going down anytime soon. So fasten your seat belts beer fans, because 2023 is already shaping up to be a rocky year.
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