Beer prices and inflation may have gone as high as they can.
- Supply chain costs are high driven up beer prices.
- Brewers are waiting to see when consumers get fed up, as beer tends to be “recession-resistant.”
- Corona’s maker says customers are starting to buy less beer in areas where it is more expensive.
It takes a lot of effort to get beer drinkers off the bottles. Inflation is a strong indicator of the economy’s health. Beer sales are a good indicator of how it is doing.
“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 colleagues from other companies have been warning investors about the current environment in which they work. supply chain costs have caused mass inflation, would test consumers’ desire for beer.
The average beer price in the US has increased by almost 8% between November 2021 and November 2022. according to Moody’s. It seems that it is still increasing, but there is a delay in national data.
“It’s too early to be able give complete reassurance that this price increase has landed well but not changed consumers’ behaviour because we’re still learning and we’ll watch what unfolds over these next few months,” Gavin Hattersley, Molson Coors CEO, said at a Morgan Stanley investor conference. According to company executives, Molson Coors increased prices by 5% in the spring, and another 5% during the fall.
Newlands explained that other players in beer supply chains, such as the stores that sell Modelo, and Corona, raise their prices to varying degrees, on top of wholesale prices. Constellations’ view on sales across the country shows how much consumers will pay. According to the CEO, prices have risen in some areas, particularly California, beyond what consumers are willing to tolerate.
“Many businesses including ours have taken additional pricing above what we had planned. Newlands said that this led to a general softening in the market. “It wasn’t limited to us.”
Although some supply chain costs are starting to fall as imports and overall freight demands cool, it will take time for those to reach the balance sheet and then maybe eventually the shelf. Constellation beer brands sales were up 8% in their most recent quarter. However, stock prices fell on Thursday as high costs continue to strain profits.
The CEO stated that the company must be more cautious about increasing prices, as consumers are starting to protest.
Economists say that inflation will persistThrough the entire of 2023, however, a decline in goods demand, which then sends a message to companies to cool them with price increases, is a new phase on the way out.
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