The Fed hasn't stopped stubborn beer inflation

Brian Sozzi
·Executive Editor
Updated 2 min read
133

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 for stomachs worldwide — stubborn inflation for the inputs that make ice-cold beer.

On Thursday, Corona and Modelo 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.

An inflatable plastic Coronita bottle decorates Madrid's stock exchange to mark the going public of Mexican brewer Grupo Modelo on Spain's Latibex index of Latinamerican companies November 13, 2003. Grupo Modelo, which makes the popular Coronita beer, is Mexico's largest brewer company. REUTERS/Susana Vera SV/GM
An inflatable plastic Coronita beer bottle decorates Madrid's stock exchange to mark the going public of Mexican brewer Grupo Modelo on Spain's Latibex index on November 13, 2003. REUTERS/Susana Vera SV/GM (Reuters Photographer / reuters)

By comparison, lower grape prices in the company's wine business — led by top brands such as Kim Crawford — drove a 5% year-over-year improvement in that segment's operating profits in the quarter.

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.

"Inflation was above what was originally planned [last year]," AB-InBev CEO Michel Doukeris told analysts on a conference call.

Head brewer at the Exale Brewing and Taproom, Josh Walker, 37, shows how to check the specific gravity of the beer which indicates its stage of formation and alcohol content, at the brewery plant, in East London, on August 19, 2022. - The brewery boom started thanks to a tax shelter that gives a 50% tax rebate to breweries that produce less than 4000 hl per year, which, combined with relatively low installation costs, has allowed the emergence of hundreds of establishments in 20 years: 1900 last year in the United Kingdom, almost 5 times more than in the early 2000s. But according to the CAMRA, an association of British craft brewers interviewed by AFP, the boom in craft breweries in the country, is already slowing down and the closing of some establishments could accelerate due to cost inflation, particularly in energy. (Photo by Hollie ADAMS / AFP) (Photo by HOLLIE ADAMS/AFP via Getty Images)
Head brewer at the Exale Brewing and Taproom, Josh Walker, 37, shows how to check the specific gravity of the beer at the brewery plant, in East London, on August 19, 2022. (Photo by HOLLIE ADAMS/AFP via Getty Images) (HOLLIE ADAMS via Getty Images)

To try and offset the nagging input inflation, beer makers continue to push through price increases on 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.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis or anything else? Email brian.sozzi@yahoofinance.com

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