To The FED - Banks are 1 thing, but this my beer!
Fed chief Jerome Powell did his part in helping to stem a banking crisis in March, but he hasn't been able to halt another crisis that has direct implications on us and our show Think With A Drink — stubborn inflation that is driving up the cost of making & distributing beer...the horror!
Recently, Corona and Modelo ( last week’s featured brew on our Saving vs Spending episode) maker Constellation Brands (STZ) reported a 15% year-over-year plunge in its beer segment's operating profits for the just-completed quarter. The culprit: across-the-board inflation.
“Benefits from favorable pricing were more than offset by increased COGS [cost of goods sold] driven by higher packaging, raw materials, incremental depreciation, and logistics costs, and increased SG&A [selling, general and administrative] driven by increased headcount to align with the momentum of our beer brands," Constellation Brands said on its earnings release.
Constellation isn't alone in feeling the inflationary sting on beer input costs.
Budweiser giant AB-InBev (BUD) saw its operating profit margins fall to 24.6% in its most recent quarter from 25.7% last year, as reported in early March.
Similar to Constellation Brands, Ab-InBev called out elevated levels of inflation.
And guess who is feeling most of this pinch? Us! Big Beer (& let’s be fair little beer too) is trying to offset the nagging input inflation the only way they can at this point, by pushing through price increases onto consumers.
In the fourth quarter of 2022, the average price of a 24-pack of 12 oz. beer went up nearly 8% per Nielsen data.
The at-home beer, ale, and other malt beverages category in the Consumer Price Index report showed a 7% year-over-year jump in February.
If the Fed keeps going like it is, then our only suggestion is to stock up now (we’ve got a lot of shows to do!).