With prices rising on cheap beer, some consumers spend extra on premium

Anheuser-Busch InBev — the world’s largest brewer — told investors that beer sales accelerated in the third quarter, which led to the company reporting higher-than-expected earnings. 

Executives told investors that the company was able to pass higher input prices onto customers, but they also said the company was able to persuade consumers to shift to higher-priced “premium” brands in most markets.

So are folks willing to try out different beers when the price of the cheap stuff rises? Or is all beer just kind of inflation-resistant?

To that latter point: “Beer is one of those things that when times are good, people drink. When times are bad, people drink,” said Mark Patterson at Kennesaw State University.

And if you’re making beer, you want people to choose that over wine or hard seltzer. You also want them to choose your beer. For giant companies like AB InBev, brand recognition has led to a better than expected quarter, said Garrett Nelson at research and analytics firm CFRA.

“It’s a combination of both volume — which was up 3.7% — but more so pricing. They’re successfully passing on higher cost to consumers,” he said

They’re passing along the cost of barley, hops and, most of all, transportation and fuel, by raising the price of Bud Light. But the company is also convincing consumers to buy higher priced so-called premium beers. 

“So, premium is going to refer to a price point,” said Bart Watson, chief economist at the Brewers Association. “’Premium plus’ is the category that a lot of craft brews fall into,” he added.

Many consumers who are price-sensitive will continue to buy Millers and Buds, but “the individual price of a brand is often less important than how the relative price of that brand changes compared to brands around it,” Watson said. “And companies, in general, watch this very closely.”

Consumers who are willing to spend more on craft beer tend to have a bit more disposable income, Watson added, so they can spend a couple more bucks on a six-pack they want to try rather than knocking back a few Natural Lights.

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