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.

By Jason Notte Jul 23, 2013 3:13PM

Man holding a can of Pabst Blue Ribbon (© Jeremy Hogan/Alamy)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.


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98Comments
Jul 23, 2013 4:17PM
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Here we go again Goldman Sachs the greediest of the greedy manipulating another commodity at the expense of the american consumer and all other businesses that depend on us spending our money that we don't have thanks to these devils. WHERE IS THE GOVERNMENT STOPPING THIS BULL!!  This is the reason we need to vote everyone out of Washington because they do nothing but line there own pockets.
Jul 23, 2013 4:08PM
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im tired of them fn with my beer ammo and smokes leave me alone

 

Jul 23, 2013 4:35PM
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The big wall street banks need to be broken up.  They control way too much of the economy.  Break each of them into thirds and we would be much better off.Monopolies were bad in the 19th century and they are still bad.
Jul 23, 2013 3:21PM
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That's all I can stands and I can't stands no more.  Just one day, one day is all I ask where my personal freedom or personal finances are not F&%$$^ed with.  I need to talk to my psychiatrist!!! 
Jul 23, 2013 3:35PM
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That does it!  Time to switch to whiskey.
Jul 23, 2013 4:35PM
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That would be-- banks impeding the path of enterprise. It's terrorism. Do we really need banks? Let's see what happens when we get rid of them.
Jul 23, 2013 4:34PM
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Drink bottled beer Sam Adams good and still owned as an American company
Jul 23, 2013 4:42PM
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Wall Street has taken this country down with their greed of the 9th degree. Capitalistic pigs is what they are. They try to control Washington DC's politics with their money waiting for a politician to put into their pockets. They are trying to control this country from voters through any means mostly made up of hedge funds. They are part of the Republican GOP or should I say the GOP works for Wall Street. To close of ties between DC & Wall Street. Paulson, treasurer & ex Senator Dodd just to name only two of powerful men who had their hands filled with greed. Paulson got Wall Street the 2008 bailout. He had worked at Wall Street before he got himself in as the Fed Treasurer making back room deals for the banks. It's crooked as heel what Wall Street has become. They represent their own little America for the super rich & the hell with the 90% of the other people that we are among.
Jul 23, 2013 4:34PM
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Banks continue  to screw the public and Washington does no thing about it. it's no coincidence that Washington DC has more millionaires, over 100,000 of them, than any other jurisdiction in the USA.
Jul 23, 2013 5:14PM
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Switch back to glass and leave the greedy banking bastards holding massive quantities of aluminum. Remember the movie "Trading Places". How do you hurt rich greedy bastards? You make them poor bastards. 
Jul 23, 2013 4:35PM
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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

Jul 23, 2013 3:57PM
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But this theory does not explain why bottled craft beer prices are up by about $1.50 per 6-pack here in Colorado in just the last 8 months, from about $7.50 to about $9.00, or by about 20%.

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!

Jul 23, 2013 6:22PM
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God is great, beer is good, and people are crazy....
Jul 23, 2013 5:11PM
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We need to stop the speculation in all commodities. Only market users should be able to participate, not every Tom, Dick and Harry out there !!!!!!
Jul 23, 2013 4:49PM
Jul 23, 2013 4:38PM
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Just ask Ben and the Fed for free money like they are giving to the banks at near zero interest rates to help pay for the beer. Ben will bankrupt the country doing this free money for banks and we will all pay for this!!
Jul 23, 2013 5:30PM
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Corporatization has taken over. Maybe we need to eliminate Lobbying for our politics? Do you know why you wear a seatbelt? Do you know why in most states you wear a helmet on a bicycle or motorcycle? The answer is the same! Insurance companies bought politicians! This behavior runs rampant through our society. Imagine no lobby $$ in campaigns! How about the taxpayers funding election campaigns? Every candidate would have to work with the same amount of money!! Elections would be decided NOT by $$ but by worthiness of the candidate!! A TOTALLY NEW CONCEPT!!!
Jul 23, 2013 5:23PM
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Had to do a beer run!  What are we talking about?    MMMM BEER
Jul 23, 2013 4:39PM
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this is just another point to where big banks are running and ruining everything within their power. most didn't understand occupy wall st and the likes but this it in a nut shell. banks have unchecked power and the results of them using it with the government in their pockets is starting to be felt. the bad part is this is just one of the many small things they do(they hide the big moves with the fed) until all the small ones add up to something f*%#king big!.
Jul 23, 2013 5:17PM
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So why bother recycling? Throw everything in the trash, I pay for that too!
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