Economics of the mad house
According to the weekly trade newspaper the Morning Advertiser (18 March), Molson Coors will raise pub prices of its beer by 7 pence a pint with immediate effect. With brilliant timing, this comes just two weeks before the government's Budget, when Chancellor Alistair Darling is expected to increase beer duty by 5%.
Molson Coors' decision has been driven by its need to tackle the problem of wafer-thin margins. The group brews a mighty 6.8 million barrels a year but its profits amount to just one penny a pint.
The reason for Molson Coors' parlous profits situation is that it sells beer to supermarkets at enormous discounts. The prices are sometimes so low that beer is sold as a loss leader, cheaper than bottled water. The supermarkets have the big brewers over a barrel: when Molson Coors raised the price of Carling to Tesco in March 2009, the supermarket group promptly de-listed the brand. It lasted just six weeks: Carling was soon back on Tesco shelves and we can guess who blinked first, brewer or retailer.
And as always it's the battered pub and pub customers who pay the price for this economic lunacy. Instead of facing down the supermarkets and forcing them to pay realistic prices for beer, Molson Coors makes pub drinkers pay a heavy price for draught beer.
It's worth comparing a global giant such as Molson Coors with a successful regional like Fuller's of west London. Fuller's brews 200,000 barrels a year -- as Molson Coors would say, "we spill more beer than Fuller's makes". Yet the family-owned brewery had to warn the Stock Exchange earlier this year that its profit figures for the previous year would be higher than expected as a result of its success.
Will the global giants learn the economic facts of life or will one of them eventually go out business, a victim of supermarket greed?