Why are beer prices so high right now?
Across summer festivals and live events, everyone seems to be complaining about sticker shock at the beer tent — $63 for a six-pack of Busch, anyone?
Why are beer prices so high right now?
Across summer festivals and live events, everyone seems to be complaining about sticker shock at the beer tent — $63 for a six-pack of Busch, anyone?
By Michael GersteinThere’s nothing quite like a cold beer to cut the summer heat. But like everything else, prices have gone up, and people are starting to grumble.
Fans at recent big-ticket Chicago summer events have paid pretty steep prices to get a brew. NASCAR fans paid $63 for a six pack of Busch Light or Michelob Ultra during the Chicago street race event earlier this month. The Chicago Cubs are charging $28.99 for a 26 oz plastic “beer bat” memorabilia cup filled to the brim with ice cold lager — a refreshing little pick-me-up that you might very well need to get over how much the cup costs.
The White Sox Guaranteed Rate Field is tied with five other teams where fans pay the second-highest beer prices in Major League Baseball — about 69 cents per ounce, or more than $11 for a 16 oz beer — USA Today reported. The White Sox and Cubs did not respond to a WBEZ request asking for the latest prices at concession stands.
Americans have been living with inflation for some time now. And while beer prices haven’t risen as much as food overall, it’s a particular quirk of summer that ale connoisseurs may be feeling it now, at the height of Chicago events season. Retailers are charging more, and so are event concessionaires, who have captive audiences with disposable incomes.
This is, after all, the season of the $30 beer bat.
“Beer has not been immune to the inflation we’ve seen in the rest of the economy though the rates have been lower than a lot of other food products,” said Bart Watson, an economist for the Boulder, Colo.-based Brewers Association, which lobbies for craft breweries.
Watson, like other beer industry analysts, attributes the increase to more expensive wheat, malt, aluminum (for the cans) and steeper shipping and labor costs.
The average price for domestic beer is up by 4.6% in the past 12 months, according to the latest data obtained from NielsenIQ, the world’s leading consumer intelligence company.
In the long view, the price of a drink outside your home is more than double what it cost 23 years ago, according to the Bureau of Labor Statistics, which also tracks beer prices.
This might be bad news or something that consumers simply accept — albeit with quiet complaint — at one of the many summer events coming up in Chicago, from Lollapalooza to Riot Fest to any one of the neighborhood festivals that populate late July and early August.
“The cost of raw ingredients are drastically going up for many things, including beer production, things like hops. That leads to the dilemma of the degree to which the beer manufacturers want to pass that along to customers,” said Jim Schummer, an economist at Northwestern University’s Kellogg School of Management.
“The challenge for beer manufacturers is nobody wants to be the first to pass along these cost increases to the customer, because whoever moves first is going to lose some business,” Schummer added. “On the other hand, they can’t just sit there and eat these losses.”
Higher prices, fewer drinkers
A closer look at the numbers show two interesting trends. One is that beer companies have been raising prices but they haven’t been hurting for revenue.
The other is that people are drinking less beer.
Constellation Brands (the maker of beers like Corona and Modelo, which recently replaced Bud Light as the most popular beer in the U.S.) raised prices about 3-4%, the company reported in June, according to Dan Su, a beverage analyst for Chicago-based financial services company Morningstar, Inc. And the company hasn’t lost profit from price increases prior to the most recent uptick, according to the latest financial disclosures.
Price increases at Chicago-headquartered Molson Coors seem to have been enough to get the company through the latest economic headwinds. After raising prices by 10% in two phases last spring and fall, Molson Coors noted in its latest quarterly filing with the U.S. Securities and Exchange Commission that such boosts helped buoy any losses the company might have otherwise faced due to higher input costs.
So perhaps the bigger concern for brewers big and small is that people are drinking less beer. Broadly taking on more market share are canned cocktails, spritzers and malt beverages like White Claw. And consumers may be getting a better deal: Prices for those haven’t risen as markedly as beer, federal data show.
In 2022, spirit supplier revenue surpassed beer revenue for the first time in history, according to the Distilled Spirits Council of the United States.
In an era in which most companies are jacking up prices, beer companies are banking on consumer expectations that everything simply costs more. But it doesn’t have to be that way, said Richard Wolff, an economics professor at the New School of Social Research in New York.
While it’s true that brewers face higher production costs, Wolff pointed out there are many ways to remain profitable besides raising the price, from increasing efficiency to exploring new markets or new marketing campaigns — tactics that companies are always investigating anyway.
“The answer to the question, ‘Why we have inflation,’ has to be that the employers made the decision that their best profit opportunity right now, or at least one of their best profit opportunities, is to jack up the price,” Wolff said. “There’s no necessary automaticity whatsoever between rising input prices and some decision to raise prices.”
Pointing to factors outside their control, such as the war in Ukraine yanking up wheat prices or higher costs for malt, energy, transportation and packaging — what Wolff calls “a flurry, a blizzard, of public relations, also known as bulls***” — has mostly worked in companies’ favor.
Simply put, beer companies have managed to continue making more money even if beer consumption has tapered somewhat.
Craft beer gets creative
Craft brewers aren’t immune to the economic headwinds facing beer. At Chicago-based Revolution Brewing, higher costs in ingredients, logistics, packing and everything else is “a huge challenge,” said Doug Veliky, head of marketing for the brewery.
“Everybody now has higher costs as part of their business,” Veliky said. “Wages aren’t necessarily keeping up with the cost of beer … and a little less beer is being purchased right now.”
A six pack of Revolution Brewing’s most popular beer, the Anti-Hero IPA, often sells at retailers for about $12. Last year it cost about $11, and three to four years ago it was about $9.99, Veliky said.
For now, like everybody else, the company is banking on waiting for the current economic turbulence to settle, and on getting creative in hard times.
“We’re still in a great position as a company — we have to make sure we’re being extra considerate about what our consumers are looking for from us,” Veliky said. “One way to get it all back is to come up with an exciting new beer that blows people’s minds and that is the real way to do it.”
For example, Revolution is rolling out a new nonalcoholic sparkling hop water called Super-Zero — tapping into rising interest in seltzers and nonalcoholic beverages.
For many craft beer lovers, specialty brews are still worth the higher prices. At a craft beer festival in Lincoln Park in mid-July, attendees paid $45 to drink all the beer they could stomach during a two-hour tasting window.
Among them was Norwood Park resident Elise Brooks, 36, and her husband Patrick Brooks, 40, who said they haven’t changed their beer buying habit just because it’s a little more expensive.
“I wish it made a difference in my life, but it does not. I will pay it,” said Elise Brooks, who works in the service industry. “I will pay to drink what I want to drink. I will never order something I don’t want to drink based on a couple bucks. Maybe I’ll complain a little bit, but I’ll still pay it.”
But even for die-hard craft fans, there’s a limit.
“We go up $10 bucks, maybe I’ll rethink things,” she said with a chuckle.