How big banks raised the price of a 6-pack
MillerCoors says financial institutions' stockpiles of aluminum have created false shortages and driven up costs.
When banks' financial chicanery resulted in Bear Stearns' and Lehman Bros.' collapse, a crushing recession and the wholesale loss of jobs, the nation's response ranged from folks exiting the workforce to activists pitching tents and occupying public spaces.
What will the response be now that the banks may have driven up the price of beer?
As the Senate banking committee listens to testimony related to the London Metal Exchange and banks' ownership of warehousing companies and their influence on aluminum prices, the beer industry says such maneuvering spiked global aluminum costs by $3 billion in the past year. Considering nearly a quarter of beer costs come from packaging, that's no small drop in the pint glass.
Tim Weiner, a global risk manager at MillerCoors, told the committee Tuesday that banks including Goldman Sachs (GS), JP Morgan Chase (JPM) and others gave warehouse owners approval to sit on huge stockpiles of aluminum, create artificial shortages and leave prices "inflated relative to the massive oversupply and record production."
MillerCoors, a U.S. joint venture between SABMiller (SAB) and MolsonCoors (TAP), puts about 36 million barrels of the 59 million barrels of beer it produces each year into cans. As overhead goes, Weiner says, metal is the company's riskiest investment.
"We are challenged in managing our aluminum costs due to these LME warehouse practices," Weiner said in prepared remarks. "The aluminum we are purchasing is being held up in warehouses controlled and owned by U.S. bank holding companies, who are members of the LME, and set the rules for their own warehouses."
MillerCoors isn't the only company taking an active interest in how this Senate committee hearing plays out. Coca-Cola (KO), Dr. Pepper Snapple Group (DPS), Red Bull, Carlsberg Beer and sheet metal manufacturers Novelis and Ball Corp. (BLL) also joined MillerCoors' complaint. Even the smaller craft beer industry has a stake in the outcome, with Boston Beer Company's (SAM) Samuel Adams releasing its first canned beer this year and several other craft brewers embracing cans since 2002.
As Brewer's Friend pointed out five years ago, packaging alone accounts for 28% of the cost of a six-pack of beer. The price of aluminum that cratered below 60 cents per pound at the height of the recession in 2009 soared to more than $1.20 per pound in 2011 before settling around 81 cents, according to Kitco. During the same span, the amount of aluminum being warehoused skyrocketed steadily from 1.5 million tons to a current stockpile of nearly 5.5 million tons.
According to the Bureau of Labor Statistics and the Beer Institute, the cost of a six-pack jumped from $3.92 to $5.05 between 2001 and 2011, the last year for which information is available. However, nearly 40% (or 39 cents) of that increase occurred between 2008 and 2011, boosting six-pack prices by 8.1% during that span alone. There are many factors that affect the price of beer, but doubling the price of aluminum tends to have a more than coincidental effect on what beer lovers pay.
And how is this news - it's called Capitalism. The corporations own the banks, the banks own the money, the money owns the government and the government owns the people........ "Capitalism is the legitimate racket of the ruling class" - Al Capone
Are you saying that someone might be trying to horde sand or recyclable glass too?
My guess is that a slumping dollar due to QE Infinity and a lack of corresponding economic growth might have just as much or more to do with the price of more than just a 6-pack of beer too!
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'