USA: Constellation Brands to hike beer prices more than its typical 1% to 2% this year

Constellation Brands Inc., the maker of alcoholic drinks including Corona and Modelo, said it expects to hike beer prices more than its typical 1% to 2% this coming year due to rising commodity costs and a shortage of brown glass, Bloomberg reported on January 6.

Chief Financial Officer Garth Hankinson said on the company’s third-quarter earnings call on January 6 that margins in the core beer business may suffer in the coming fiscal year in part because of inflation in commodity prices. He still expects operating margins for the beer business to be around 39% to 40% over the long term.

The glass shortage is the latest hit for beer makers, who spent the last year talking about shortages of aluminum cans as people switched from drinking at bars and keg parties to drinking at home or outside. MKM Partners analyst Bill Kirk said in a November research note that while Constellation’s most-affected brand seems to be Pacifico, Modelo Negra beers also come in brown glass and the largest risk would be if glass availability became so severe as to limit sales of Corona or Modelo Especial.

“We are diligently working to address the brown glass shortage that is acting as a headwind,” Chief Executive Officer Bill Newlands said on the call. Constellation also cited higher freight and warehousing costs among supply-chain changes brought on by the coronavirus pandemic.

Shares of the Victor, New York-based company fell as much as 4.2% before paring declines. The stock has risen 12% in the past 12 months, trailing a 18% gain in the S&P 500 Consumer Staples Index.

07 January, 2022