E-Malt.com News article: USA: Major brewers toasting higher prices

Last summer, a price war among the major USA brewers devastated profits, which led to declines in the companies’ shares. This summer, price increases that were implemented early in the year are holding — even in the heat of summer — and boosting company results, Times Leaders posted August 13.

More price increases are on the way, although other problems persist for big beer, including changing consumer tastes and lackluster sales volume.

Which brewer started last year’s price war as a way of raising market share is a matter of debate. But once it was under way, Anheuser-Busch Cos. pledged to do “whatever is necessary” to regain share and protect its leading position — even if that meant sacrificing short-term profits by further cutting prices.

Those days are over. At Anheuser-Busch, profits were up 7.4 percent in the second quarter, in part because of higher prices that have offset some rises in commodity prices such as aluminum. Anheuser-Busch stock hit a 52-week high of $48.81 on July 27. Last year, the St. Louis brewer’s profits were down almost 10 percent in the second quarter and 24 percent in the third quarter.

“The pricing environment has been favorable this year, including the important Memorial Day and July 4 holidays,” Randy Baker, chief financial officer of Anheuser-Busch, said during the brewer’s second-quarter conference call late last month. “Promotional prices were significantly higher than last year.”

Good news for investors, who see a stock sitting close to the year high. Not so good news for beer drinkers.

The King of Beers is not alone. Molson Coors Brewing Co. reported Aug. 1 that its second-quarter profits quadrupled, although a big part of that improvement was due to a reduction in its Canadian income tax.

“The U.S. beer price environment this summer has been more positive than last summer,” said Leo Kiely, Molson Coors’ CEO. He expects this will continue in the second half of the year.

“Compared to last year, it’s calm,” said Art Friedman, president of Gold Coast Beverage Distributors Inc. in Florida, the fifth-largest U.S. beer wholesaler in dollar sales. “Last year at this time the coupon wars were really escalating.”

Last year, $5 coupons to redeem on 18-packs of domestic beer were common, Friedman said. This summer there are some $2 coupons available, but for use on related merchandise such as chips and other snacks.

In addition, he said, the price per pack is higher: about $11.99 for an 18-pack of beer, compared with $9.99 to $10.99 last summer.

During the two weeks surrounding July 4, the average price per volume in supermarkets was up 2.4 percent for Anheuser-Busch, 2.9 percent for Molson Coors and 1.5 percent for SABMiller PLC’s Miller Brewing Co., all compared with a year ago.

“This summer has been a much better pricing environment,” Miller spokesman Peter Marino said. “Discounting last summer got to be very expensive for everybody.”


16 August, 2006