Beer prices, and inflation, may have gone as high as they can go – Business Insider
- Supply chain costs have driven up beer prices.
- Brewers are waiting to see when consumers get fed up, as beer tends to be “recession-resistant.”
- The maker of Corona says customers have started to buy less beer where prices are highest.
It takes a lot to waive beer drinkers off the bottle. And for that reason, beer sales are a solid indicator of the state of the economy when inflation is in play.
“We are very fortunate in the alcohol beverage business that we tend to be recession-resistant,” said William Newlands, CEO of Constellation Brands, which owns Corona and Modelo along with major wine and spirits brands, on a Thursday earnings call.
Newlands and his peers from other companies have been warning investors that the current environment, in which supply chain costs have caused mass inflation, would test consumers’ desire for beer.
The average price of beer in the US increased nearly 8% from November 2021 to November 2022, according to Moody’s. All indications say it’s still going up, though there’s a lag in nationwide data.
“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. Molson Coors upped prices 5% in the spring and another 5% in the fall, company executives said.
Other players in the beer supply chain, including the stores that sell Modelo and Corona, up their own prices to varying degrees on top of the wholesale price, Newlands explained Thursday. So Constellations’ view of sales across the country shows how much consumers are willing to pay. The CEO said that in some places, especially California, prices have gone as far as consumers will tolerate.
“Many businesses, including ours, took additional pricing over what we had planned. And that caused an overall softness in the market,” Newlands said. “It wasn’t limited to us.”
Some supply chain costs are coming down as imports and overall freight demand cool, but those will take time to hit the balance sheet, and then perhaps eventually the shelf. Sales of Constellation beer brands were up 8% in the most recent quarter, but the company’s stock still fell on Thursday since high costs are continuing to strain profits.
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