Beer is priceless

With 2016 coming to an end, most Dutch lager breweries announced an increase in their beer prices – for the hospitality industry. None of the brewers seem to have adjusted their prices for the supermarkets. Although there is NO existence of a cartel, it remains remarkable how all these individual companies make their price calculations: all increased the purchase price of a liter of lager with 2.5% to 3.7%. Grolsch kept it at 2.5%, and with 3.7% Heineken took the largest increase. Smaller breweries sat obediently between these percentages. Only AB InBev seemed to be happy with going just a little more than one percent up. The Brewers all claimed higher raw material prices and higher wages being the cause.

kartelSo it seemed but then AB InBev – the world’s largest brewing company, especially since the takeover of SAB Miller; of every 10 beers sold world-wide slightly more than three now come from AB InBev – announced on January 3, 2017 another price increase, now at 3.1% up to 3.9%. In total, some business owners saw their beer price go up more than 5% – in a year, while in recent years beer prices have gone up tens of percents.
For the hospitality industry.
For the supermarkets it isn’t all that bad.

All joking aside, I’m not winding myself up about the increased beer prices for the hospitality industry as such, and I cast all the suggestions that there could be a cartel within the larger beer producers in the Netherlands far from me. It is the same nonsense as claiming the existence of the Loch Ness monster or the suggestion that athletes use doping.

rekenfoutNo, where I get wound up about is on the appalling arrogance that AB InBev exhibits in their communication about this. “To our great regret, we have to conclude that an incomplete calculation of the price adjustment we have communicated to you earlier is a fact.” Do they think the hospitality businesses collectively consists of morons? That they say, “Ooooooo! An incomplete calculation! Well, it can happen, happens to us sometimes too. Bring on the percentages! “

AB InBev is not a brewery: it is, first and foremost, a bunch of incredibly smart and ultra-ambitious accountants, venture capitalists, bankers and other fmegabrewinancial leeches, unscrupulously pursuing total world domination – not of beer, which is only a way and a means, but financial and power based. Here are the smartest and most hard-boiled financial experts – and they would have made an ‘incomplete calculation’ per mistake?
Of course.
Just as Beijing is located in Denmark.

No, AB InBev writes, just to use a nice hospitality industry term, with the fork. In their statement, AB InBev announced more notable reasons for their price increases. There needs to be a correction because of earlier unforeseen ‘ambitious plans to work with you to achieve growth in the Dutch market.” Before you jump up and down in joy: what could be included in these ambitious plans? Investments? Innovation? No: pay back.

Carlos Britto

Carlos Britto

The ambitious plans are mainly in finding as much money as possible for Carlos Brito and his fellow financial gluttons to be able to pay them their bonuses, and to pay back the money they borrowed from banks, venture capitalists and other lenders as soon as possible for the takeover of SAB Miller, then on to the next one. Furthermore AB InBev will bring with accelerated pace beers formerly brewed by small craft breweries to our markets – for example Goose Island, which was once highly regarded but which many beer lovers now say the quality and taste have dramatically declined. The ambition of AB InBev has for years been going no further than their own pockets – and we are only here to fill them.

In short, the customers of AB InBev, especially those in the on-trade, are expected to fund the ‘ambitious growth plans”, also known as “growth and acquisition plans designed by a maniacal and bonus-hungry management”. I would think about this the next time you are considering to buy a beer.

2 Comments
  • Mariano
    January 7, 2017

    Interesting piece, thanks for sharing. Couple of questions if you don’t mind:

    First, do you know how do those price increases compare to the ones from smaller Dutch Breweries? If you look at yearly price increases from say, Grolsch, Heineken, Amstel and Bavaria, how do they compare to the ones of Jopen, de Molen, Brouwerij ‘t IJ or de Prael?

    Second, would you say Lagunitas is Heineken’s Goose Island? I’m asking because i’ve already heard people complaining about their quality but i haven’t drank them long nor regularly enough to make an educated call.

    The biggest tell in ABI’s bull-crap argument is the differential in their prices when you look at their channel split. If their excuse is that raw materials and salaries are the main driver, you should see an equivalent (not exact but close enough) price increase in all channels. That is obviously not the case and that has to do with the elasticity of demand (people who shop in off premise tend to be more price sensitive than the ones who purchase their beer on premise).

    Cheers,

    • Rick
      January 7, 2017

      Hello Mariano-

      As for price increases by smaller breweries I was referring to smaller Dutch lager breweries such as Lindeboom, Budel, Alfa and Gulpener. The even smaller ones are a bit difficult to compare: they brew different beers with a different calculation, and most of them do not even have a proper track record for pricing. In general I’m inclined to say these breweries do not take yearly increases and if they do it is based on accounting – not based on keeping the shareholders happy.

      As for Lagunitas and Heineken – no, I would not say that. Firstly because ABI has clearly been interfering big time with the GI operations, and Heineken is explicitely not interfering with Lagunitas’. They do supply increased distribution, and here’s where people run into the similar issues as with any imported USA – HOPPY – craft: it just isn’t like at home, simply because of the time lost in logistical transit. That simply takes the edge of the beer. GI doesn’t only do hoppy beer so the difference is even more remarkable there. Perhaps when Lagunitas gets brewed over here we’ll get a proper chance at comparing them.

      As for the ABI crap: it is not just price elasticity. It’s also about size. Firstly, at home consumption is around 70%- but you can’t control price to consumer because the large supermarkets cannot be told anything. They often use these beers as crowd-pullers with regularly rotating discounts (buy four, pay three or 10% – 50% bonus). Besides, their buying power is so much more than the scattered publicans representing only 30% of market – and in between them the differences are huge, what with the volume bonusses. Some bars get a 50% annual price rebate based on volume – guess who, in the end of the day, coughs it all up?
      Yup. You and me, regardless of where we buy.

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