One part supply chain issues, one part labor shortage, a dash of the increased cost of packaging components, and a twist of pricier ingredients — and what do you have? A recipe for an inflation cocktail affecting the whole alcoholic beverage industry.
According to The Wall Street Journal report, consumers may soon start feeling the financial squeeze from every Lemon Drop as inflation continues through the U.S. While major alcoholic beverage manufacturers are currently taking the hit on their ingredients, transportation costs, and aluminum and glass packaging, alcoholic beverage manufacturers and distillers could soon pass on this price hike to the consumer.
Prices for all items are up 5% as compared to last May. Fed Chairman Jay Powell is on record saying that while the U.S. economy was experiencing some rising inflation, he primarily attributes it to “transitory supply effects,” per Marketplace.
Essentially, people are excited to get out of their homes and buy stuff again, despite a recession. All of that increased demand makes it hard for retailers to keep up with keeping products on their shelves — especially if problems are distributing the product to the store and there aren’t workers to put it out on the sales floor.
So it makes sense that the same issues plaguing standard brick and mortar retailers are hitting the alcoholic beverage industry too.
Considering that some alcohol distributors are seeing a 6% increase in customer spending in bars in June, that would undoubtedly strain current alcohol production and distribution efforts. Despite that strain, the decision to raise prices isn’t an easy one.
“It’s hard to pass it on to the customer because once you reset your price, you’re locked into it,” Cris Stellar, a liquor distiller, said in a quote for The Wall Street Journal. “You have to decide, is this temporary or permanent and how much you can absorb.”
Chairman Powell and other policy wonks seem to agree that this rise in consumer pricing for most areas of the U.S. economy is temporary.
But in the months to come, when you’re out at that socially distanced happy hour, you may have to consult your budget before getting that second round.