Corona, Modelo beers to cost more due to inflation, supply chain woes

The maker of popular beer brands Corona and Modelo expects to raise prices by up to 2 percent this year because of a shortage of glass, an inflation-fueled rise in the price of commodities and supply chain bottlenecks.

Constellation Brands Inc, the largest beer import company in the US, told shareholders on an earnings call on Thursday that a shortage of brown glass is to blame.

The company also said that higher freight and warehousing costs brought about by disruptions in the supply chain are also driving up costs.

“We are diligently working to address the brown glass shortage that is acting as a headwind,” Constellation CEO Bill Newlands told shareholders, according to a Bloomberg report.

Scott DeFife, the president of the Glass Packaging Institute, told the Financial Times in November that the spirits industry is dealing with the same problems hamstringing other sectors of the economy.

He said that the supply chain crunch has been exacerbated by labor shortages and reduced trucking capacity.

DeFife told National Public Radio that while American glass makers “are still churning out plenty of bottles,” the problem lies in the faulty logistics and “import congestion.”

But delays in cargo shipments caused by a shortage of truckers has created a backlog at the ports. That bodes ill for the industry, since between 20 and 30 percent of bottles used in the US are imported from either Europe or Asia.

Others in the industry noted that some glass production was diverted from wine and spirits to making vials for the COVID-19 vaccine.

The problem was so acute that one company, St. Augustine Distillery in Florida, was forced to use wine bottles to store hard liquors like vodka, gin, rum, and whiskey, which were waiting in tanks without a way to get to store shelves.

Vintage Wine Estates of California said it was unable to ship around $7 million worth of wine due to glass shortages that delayed production and deliveries.

In the US, demand for wine and spirits rose by at least 13 percent during the pandemic, according to the Bureau of Economic Analysis.

Shares of Constellation Brands, whose headquarters are located just outside of Rochester, New York, fell by nearly 3.5 percent in trading on Wall Street on Thursday.

In recent months, the beer industry has been grappling with rising costs of aluminum cans and bottles. Breweries across the country have been forced to hike prices and pass along the costs to the consumer.

The latest government data indicates that inflation rose at a rate of 6.8 percent in November – a 39-year high. The consumer price index for November increased 0.8 percent.

Analysts said that the inflation is being driven by demand outpacing supply as the world economy slowly emerges from the lockdowns during the early stages of the COVID-19 pandemic.