Thursday, September 27, 2007

“Stuff” Rising

Not that I would know this from personal experience, mind you, but Coors—at least in one part of the country—has raised the deposit on their beer kegs from $12 to $30.

The obvious problem for Coors, which followed recent moves by Anheuser Bush, is that low-tech beer kegs are made of high-tech stainless steel, the price of which is flying. Consequently, even hung-over thieves could do the calculation that the $150 replacement cost of an item sitting in their garage was more than ten-times the deposit.

So now the ratio is only five times.

Whether the near-tripling in the deposit charge solves the Mystery of the Disappearing Kegs, time will tell. As percentage price increases go, however, it ranks right up there at the top of the list of price hikes currently excluded from the “Ex-food and energy” calculations of the Federal Reserve Board, who presumably drink more sophisticated elixirs than cold brew anyway.

Still, the fact that prices on all manner of stuff—to use a highly technical economic term—are going up, credit squeeze or not, is no new news to anybody who actually consumes the stuff.

A casual glance at my Bloomberg confirms this:

Wheat Rises to Record as Ukraine Limits Exports,” reads one story in the top news page.

Also rising is the cost of the war in Iraq: “Pentagon Seeks $190 Billion for Iraq in 2008, Most Since Conflict Started,” reads a second headline on the Bloomie.

There’s even bad news for Coors’ own keg costs: “Vale, Rio, BHP May Win a 30 Percent Increase in Iron Ore Prices Next Year,” reads a third headline.

But weep not for Coors and its brethren.

Australian wine and beer giant Foster’s Group is raising prices—and they’re sticking. As Foster’s CEO told Dow Jones recently,

“We put our prices up across the board in August between 4% and 11%....Those prices have stuck and competitors have followed. That’s a pretty good sign.”

Indeed. Stuff rises.

Jeff Matthews
I Am Not Making This Up

© 2007 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


John said...

The local Spaghetti Warehouse raised their price on the Wednesday lunch special - Salad, bread, spaghetti, tea - from $4.99 to $5.99.

First price increase in 12 years....

whydibuy said...

From the CBC....Higher food prices are on the way in a "unprecidented" cost environment, executives of George Weston( tsx : WN ) warned. "We are announcing a price increase here shortly across the board that will take place sometime at the end of Sept. or early in Oct." said Gary Prince, head of the weston foods U.S. segment of the big bakery operator and food processor, which also owns 62% of Loblaw Cos. (tsx : l )Canada's largest supermarket chain. " what we are experiencing is unprecedented times as an industry ; 6-7 per bushel wheat and 80 per barrel oil, and this must be met with unprecedented action, and I think the industry is trying to deal with it", Prince said. And in the face of such anecdotes, the long bonds once again rise, continueing their recovery back to where they were before the fed rate cut and their 3 day swoon.

Anonymous said...

Jeff: I bet I can name one item of "stuff" whose prices aren't rising - DVD's.

Let me briefly explain. The other day I was at my local Wal-Mart Neighborhood Market where they have a DVD rack selling all sorts of new movies for $5. In the spirit of your mantra, I am not making that up.

I bet at that price point, the DVD's are selling briskly. I wonder, however, if this is just another nail in the coffin for Blockbuster and its balance sheet?

I could be wrong, though....