The latest supply chain casualty? Your favorite six-pack of beer

The cost to make beer is soaring. The price to buy it is catching up.

Up until this point, brewers have largely absorbed the ballooning expenses for their ingredients, including barley, aluminum cans, paperboard and trucking.

But as high costs persist longer than many had hoped, brewers are forced to make the inevitable decision: Raising prices on their beer.

“Something has to give,” said Bart Watson, chief economist at the national Brewers Association.

As bars closed and consumers took more beverages home during the pandemic, liquor store sales grew 25% from 2019 to 2021, according to federal data. Breweries, distilleries and wineries started churning out more retail products to meet the demand for at-home drinking.

Here’s the problem: There weren’t enough aluminum cans and glass bottles to package this extra beverage volume, so packaging prices soared. Aluminum can suppliers started favoring their biggest customers, who could afford to place larger, more expensive orders.

“It has been a stress on our business to have so much of our business in cans, and that’s led to a lot of these issues in the supply chain,” said Tom Whisenand, chief executive of Indeed Brewing in Minneapolis. “We recently did price increases to help cope with this, but the increases are not nearly enough to cover the cost increases we’re seeing.”

Renée Jones Schneider/Minneapolis Star Tribune

Packing manager Erik Raivo packages up beer for distribution at Indeed Brewing Company on Feb. 18, 2022, in Minneapolis.

The prices for many of the essential elements of beer making and selling have surged in the past two years as a global supply chain struggles to untangle itself from the late-pandemic buying frenzy. Many brewers cite trucking and labor costs — and the increased time it takes to get supplies and ingredients — as their biggest increases.

Even the world’s largest beer manufacturers are passing on their higher costs to consumers. AB InBev (Budweiser), Molson Coors and Constellation Brands (Corona) have told investors they have been raising prices and will continue to do so.

Heineken told investors that the price increases it must push through are high enough that consumers might buy less of its beer.

“As we continue to take these quite assertive price increases … the big question is indeed whether disposable incomes will be hit to the point that it will dampen overall consumer spend and beer spend as well,” Heineken chief executive Dolf Van Den Brink said.

The price increases on beer, wine and liquor have only just begun, said Scott Scanlon, a beverage expert and vice president at Chicago-based market research firm IRI.

“We’re going to see a lot of manufacturers take price (increases),” Scanlon said. “That is only going to increase, probably higher than it has.”

So far, he said, consumers have taken it in stride. Just as higher grocery bills are offset by dining out less, a bigger tab at liquor stores is being absorbed by a lack of travel and entertainment expenses.

Even as some of those expenses return and other bills grow, Scanlon expects alcohol sales to be resilient.

“It’s that affordable indulgence,” he said. “This is the product that people are not going to want to give up.”