For Harry's personal blog: Thank You for Drinking Beer .
BreakingViews.com, via the New York Times, suggested yesterday that the Big Two brewers are "testing President Obama's tolerance" by "raising prices at the same time, during a recession and while beer demand is slumping. With 80 percent of the market between them, the move almost begs for an antitrust review."
Indeed, the media has been in a frenzy this week after the Wall Street Journal reported that ABI and MillerCoors are raising prices in the Fall on a part of their volume, even though they've raised prices every year in the Fall (and sometimes again in the Spring) for as long as I can remember, and this Fall's increase won't likely rise to the level of previous increases, as some price letters we've seen simply raise frontline pricing only to deal it back to previous promo levels. Plus, Crown and Heineken, for example, are likely sitting this price increase out.
Also, the news isn't exactly new. Back on August 4, BBD reported MillerCoors chief Leo Kiely as saying "the beer industry was slow on catching up with commodity pricing on the last three year cycle. Our point of view is that beer is a pretty good value right now....So we think there are some packages that will take an increase in the Fall.....on a market by market basis."
The fact is that beer pricing hasn't even come close to keeping up with cost of goods sold increases, and beer prices typically go up at or just below CPI. So, yes, there's going to be a nominal 4% price increase (MillerCoors' COGS was up 5% last quarter, and that was a vast improvement). So for the media to cry "antitrust" is something of a stretch. I think that rising costs, debt, and synergy targets are more of a driver of taking price than anything else.
Still, the Times notes that the "Obama administration is taking a tougher line on monopolistic behavior. Christine Varney, the head of the Justice Department's antitrust division, has even signaled a willingness to re-examine deals that were approved under the Bush administration" and "taking on Big Beer might be politically popular."
So we take it, from the Times, that it's politically popular to take on the few industries having some success in hard times? Has everybody taken a crazy pill?
1 entry has been found matching your criteria.