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10.2009

Massachusetts Beverage Business

archivedOnBeerReport

A BUMP in PRICES?

It’s one thing to voluntarily spend money on expensive beers. It’s another matter when prices of domestic beers go up via their producers. MillerCoors and Anheuser-Busch r ecently announced plans to increase prices, blaming rising expenses. Together, the companies control 8O% of the US beer market. But according to Bob Zieger, a sourcing expert at Ariba Inc., a Sunnyvale, California supply management software and consulting firm, the brewers are using commodity prices as “a convenient scapegoat for a price increase”. He added, “After all, beer is not made from a combination of pork bellies, copper and cocoa. Its key price drivers, like hops and barley, are actually not experiencing a serious price increase right now. If there was ever a time to blame commodity costs for a necessary price increase, it was last year.”

Zieger did have some advice for businesses operating in the current low inflation recession, saying, “As the market rebounds and companies look to recover profits lost during the recession, you must know your cost drivers.” He suggested companies closely follow the true cost drivers of the material and inputs into their businesses, including commodities, currencies, labor, and transportation. Armed with that information, “you can push back against unwarranted proposed price hikes,” he said. Ultimately, Zieger didn’t see that beer drinkers will have much choice. “Consumers won’t have much ability to push back if the price per six-pack goes up and will likely take any modest increase in stride,” Zieger said. Well, they could switch to craft beers.

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