Why is Modelo more expensive?

Answered by Tom Adger

Modelo, the maker of popular beer brands such as Corona and Modelo, has announced that they will be raising prices by up to 2 percent this year. This increase in price can be attributed to several factors, including a shortage of glass, inflation-fueled rise in commodity prices, and supply chain bottlenecks. In this response, I will explore each of these factors and explain why they have led to an increase in the price of Modelo beer.

Firstly, the shortage of glass has played a significant role in the price hike. Glass is a crucial component in the production of beer bottles, and any disruption in the supply of glass can have a direct impact on the cost of production. The shortage of glass could be due to various reasons, such as increased demand for glass bottles across industries or supply chain challenges faced by glass manufacturers. Whatever the cause may be, the scarcity of glass has forced Modelo to pay higher prices for this essential material, which in turn has contributed to the increase in the price of their beers.

Secondly, inflation has also played a part in the rising cost of Modelo beers. In recent times, there has been a general increase in the price of commodities, including raw materials used in the brewing process. Factors such as rising energy costs, transportation expenses, and fluctuations in currency exchange rates all contribute to the overall increase in the cost of production. As a result, Modelo, like many other companies, has been forced to pass on these increased costs to the consumers through higher product prices.

Furthermore, supply chain bottlenecks have exacerbated the situation. The COVID-19 pandemic has disrupted global supply chains, leading to delays and inefficiencies in the delivery of goods and services. This includes the transportation of raw materials needed for beer production. With supply chain disruptions, companies like Modelo are faced with higher costs associated with alternative transportation methods, storage, and inventory management. These additional expenses are ultimately reflected in the increased prices of their products.

It is important to note that these factors are not unique to Modelo alone. The entire beer industry, and indeed many other industries, are facing similar challenges. The shortage of glass, inflation, and supply chain bottlenecks have become widespread issues that are impacting companies across the board. Therefore, it is no surprise that Modelo has had to raise their prices in order to maintain profitability and sustain their operations in this challenging environment.

The increase in the price of Modelo beers can be attributed to a combination of factors including a shortage of glass, inflation-fueled rise in commodity prices, and supply chain bottlenecks. These challenges have led to increased production costs for Modelo, which they have passed on to consumers through higher prices. While it may be disappointing for beer enthusiasts to see the price of their favorite beverages rise, it is important to understand the external factors at play and the need for companies like Modelo to adjust their prices in order to remain viable in a challenging business environment.