Joe Six-pack braces as beer prices rise
Beer drinkers across America will soon find that it costs more to buy that next round at the bar or six-pack at the store, following announcements by the nation's two largest brewers that they plan to raise prices this fall -- just in time for football season.
Anheuser-Busch (AHBIF), the world's largest brewer and maker of Budweiser, and MillerCoors, a unit of Molson Coors (TAP), both said higher prices are on tap in response to reduced demand for their products, although neither company would say how much the increases would be.
A MillerCoors spokesman said price hikes would be tailored to individual markets. Insiders say prices will likely increase by 4 percent, in step with last fall's boost.
What isn't known is how beer drinkers will react to higher prices. Both companies have reported recent revenue decreases as consumers cut back on discretionary spending amid the recession.
Still, that hasn't stopped the beer-making behemoths from reporting higher earnings in the second quarter.
Earlier this month, Anheuser-Busch said it earned $1.07 billion, a 28 percent increase above last year, even as sales volume fell 1.1 percent.
Anheuser-Busch chief executive Carlos Brito said at the time that though the beer industry is resilient in many of the company's key markets, it is "not immune to economic pressures." He added that his company expected sales to similarly slow in the third quarter as they had in the second quarter.
Molson Coors said its second-quarter profits doubled, even as the volume of beer it sold worldwide slid 3.2 percent. The company noted, however, that U.S. sales rose 1.6 percent, even as profits were flat.
Despite the reports of lower revenues, at least one investor believes the Obama economic stimulus plan could be a boon for Molson Coors, along with 17 other stocks. Activist investor Daniel Loeb at Manhattan-based hedge fund Third Point bought 550,000 shares of the company in the second quarter. Loeb's portfolio of 35 stocks is valued at nearly $900 million.