Faced with a deep recession and a terrible job market, more than a few hard-pressed Americans no doubt enjoy the simple pleasure of a cold one after a long day.
Beer prices rose nearly 4% in the first half of the year, and big brewers say prices will keep going up this fall. They're up less than a dollar a case thus far, but it bucks the trend of a 1.5% overall decline in food and beverages prices this year.
And what's the extra dough paying for? Profit growth and pricier commodities used to make beer, the brewers say.
Oh, and at least one other thing: more-expensive executives, whose pay in many cases has nearly doubled over the last year.
Maybe they'll buy the next round.
Can you say bonanza?Take the top executives at . While consumers shelled out more for their blue-collar Budweisers in the first half of this year, compensation for Bud execs advanced 92%. The top 13 executives made $73 million in the first half of 2009, or $5.6 million each, on average -- up from $38 million a year before.
And mind you, Anheuser-Busch InBev execs received a 79% pay increase in 2008, reminds Paul Hodgson of The Corporate Library, an independent corporate governance research firm. The increases are mainly due to gains from stock options and stock vesting.
Anheuser-Busch InBev top brass aren't the only beer execs getting in on the act.These pay increases for the beer-sector execs come at a time when executive pay has been going the other way. Median pay for CEOs of companies in the Standard & Poor's 500 Index chief Peter Swinburn got a 120% pay increase in 2008, to $6 million from $2.7 million the year before, according to company reports. And chief Martin Roper saw his pay go up 28% last year to $2.75 million, according to company filings. ($INX) last year declined 8.7%, according to Equilar, an executive compensation research firm.
But the big beer companies say the pay increases make sense because their companies just got a lot bigger through mergers and joint ventures. Molson Coors has grown as a result of a joint venture that combined its U.S. operations with those of Britain-basedinto a new company called MillerCoors. And of course, Belgian company InBev created an international beer monster last year when it bought Anheuser-Busch and created Anheuser-Busch InBev.
Beer companies also say their execs deserve more because they are hitting higher performance targets. These are the profit gains that bring beer lovers pain -- because they translate to higher prices.
The price increasesIn the first half of the year, beer prices in the U.S. went up 3.7% overall, according to beer expert Ben Steinman of Beer Marketers Insights. And beer companies said last week that more increases are on the way.
"We plan on taking price increases on a majority of volume and in a majority of markets this fall," says an Anheuser-Busch spokesman. MillerCoors says it will also raise prices on some products. At least one producer of pricier imports, Heineken, has similar plans.
Beer companies say they have to raise beer prices because they're still catching up with big increases in commodity prices over the last several years. "You can't take beer up $2 a case (at once)," says Harry Schuhmacher of Beer Business Daily. "It would be too much of a shock to the consumer. So beer went up way less than the costs went up for the last five years, and the beer companies just ate the difference. Now they are trying to get some of that back."
The power to raise prices without hurting sales is rare in a recession. But these companies seem convinced you'll put your beer goggles on and keep buying.
Recessions may make people want more beer, says a study from Mintel, a consumer research company. The theory: Beer drinkers crack open more brews during downturns as a form of escape, and also because they're forced to spend more time at home. Plus wine drinkers "trade down" to beer.