This fall, beer prices will be on the rise, as most brewers worldwide will be raising prices due to low sales volumes and higher commodity prices.

Anheuser-Busch InBev, which is the largest beer brewer in the world, announced its price hike on Tuesday.  “We plan on taking price increases on a majority of volume and in a majority of markets this fall,” Anheuser-Busch InBev said in a statement. “The increase helps cover some input costs.”

The company says they plan to raise prices across the board, affecting both low end and high end beers.

One of Anheuser-Busch’s competitors, MillerCoors, is also planning on raising prices, but selectively on only certain brands.  However, MillerCoors regularly raises prices in the fall and according to Julian Green, director of media relations the price increases are “more in line with catching up with costs and commodity prices rather than the economic environment.”

Benj Steinman, the editor of industry trade group “Beer Marketer’s Insights” told CNN that beer price increases are not abnormal in and of themselves.  However, Steinman elaborates by saying that “What is going to be a little bit out of the ordinary is that they are going to be able to go up less than in a normal year because economic conditions are tighter.”

Heineken has stated that its price increases have helped the company to stay afloat and keep profits up despite lagging sales.  Steinman said that Heineken will not be able to continue instituting price hikes because its main competitor, Corona, has stated it will not raise its prices in the down economy.

Even with the economic downturn, Anheuser-Busch and MillerCoors are faring better than Heineken and Corona due to the fact that they have a combined 80 percent of the United States market share, according to CNN Money.

Consumers are more price conscious and are increasingly choosing lower priced beers over higher prices brands which are helping Anheuser-Busch and MillerCoors’ bottom line.  “For the first time in a while, it is the lower price brands that are gaining share, and that is definitely because of the economy,” said Steinman.

Prices of these and other brands are rising as their sales are falling.  Anheuser-Busch has stated that their sales volumes were down 1.5% in the second quarter compared to the second quarter of 2008. 

Jean-François van Boxmeer, CEO of Heineken read a statement which said “The economic and trading conditions remain difficult, and there will be continued pressure on volumes in the second half of 2009.”

Our Take

If sales are declining due to the recession and what beer is being purchased is the cheapest possible, it seems counter-intuitive to raise prices if these companies are trying to increase sales and profits.  Companies should try lowering prices in the hopes of taking market share away from higher priced brands.