It’s been a rough run for the U.S. economy in recent years.
One of the few bright spots is the price of beer. The U.S. has the most affordable beer on the planet.
Americans can point with pride to a study published in The Economist Online.
Based on median hourly wages and average beer prices, it takes just five minutes of an American worker’s time to earn a cold one. Prices are lower in plenty of countries, but their wages are even more so. The average across 150 countries is 20 minutes of work to pay for a beer, and in some parts of Asia it can be close to an hour.
But there’s a proposed monopoly that threatens the American way of life.
Anheuser-Busch InBev wants to take over Grupo Modelo of Mexico (Corona beer), which would leave the country with just two companies (the second being MillerCoors) controlling half of the U.S. beer business. The Justice Department filed a lawsuit to prevent the merger. It has a pretty good case against the proposal, arguing that the marriage of Budweiser and Corona’s parent companies would eliminate competition between the rivals and lead to higher beer prices for Americans.
The brewing industry has already been consolidating like crazy for years. The number of major brewers in the U.S. fell from 48 in 1980 to just two after a mega-merger in 2008. Global Beer: The Road to Monopoly, a study from the American Antitrust Institute, shows how beer price increases started to accelerate immediately after 2008, with Anheuser-Busch leading the charge. Anheuser-Busch has kept prices high for decades by threatening a price war against any American brewer that breaks ranks and lowers prices, and the memory of retail bloodbaths in the 1980’s has kept them all in line. Grupo Modelo has been able to grab a lot of U.S. market share for its flagship Corona brand by keeping its prices stable. If Busch goes through with the purchase of Modelo that competition disappears, and pressure to keep prices down disappears along with it.
There’s also pricing pressure coming from everyone’s favorite Wall Street shakedown artists.
Last week the New York Times reported on an aluminum hoarding scheme perpetrated by Goldman Sachs that is bidding up the price of beverage cans. Apparently some Goldman analysts stumbled across a loophole in the arcane system of aluminum pricing. When they learned that storage times are factored into metal market prices, they realized that a killing could be made by buying up aluminum and lengthening the storage time. But since it’s not entirely legal to just sit on a stockpile of metal, Goldman Sachs designed a massive shell game.
Three years ago Goldman bought up a major storage system of 27 aluminum warehouses. Every day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. They load up in one warehouse and unload in another, sometimes making multiple circuits with the same bars in a single day, and each time they get to add a little rent charge to the price of the metal. The daily dance of the aluminum has stretched out average storage times from six weeks to more than 16 month. The scheme has earned $5 billion for Goldman Sachs over its three years, and the inflated rent charge ends up added to the cost of every can of beer.
At least we can shop wisely.
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