The Czech Republic: Beer prices bubble up in 2023 with further increases expected

The cost of enjoying a pint of 12-degree beer in Prague surged in July, with average prices hitting CZK 64.30, compared to last year's CZK 58.80. However, this might only be the beginning, as the impending value-added tax (VAT) hike on draft beer could potentially drive prices beyond CZK 70 next year, Expats.cz reported on August 31.

Luboš Kastner, a spokesperson for the Association of Small and Medium-sized Enterprises, shared these concerning insights earlier this week with CNN Prima. Nationwide, the average beer price reached CZK 54 in July, a sharp rise from last year's CZK 49.80, indicating an increase of over 8 percent.

The Czech government's recovery plan includes transitioning draft beer from a 10 percent VAT to the standard 21-percent rate. Had the average July prices remained stable, the new VAT rate would have likely pushed the national average to around CZK 59 for a pint starting from the new year.

Kastner's criticism of the VAT changes, especially in comparison to the absence of a consumption tax on still wines, raises concerns about the future of many small businesses, particularly in rural areas. To mitigate potential fallout, the Association of Small and Medium Enterprises proposes a one-year postponement of the VAT modifications.

Kastner forecasts an even steeper rise for Prague, with prices potentially surpassing CZK 70. Nevertheless, Minister of Agriculture Marek Výborný contends that there's no evidence supporting beer prices surpassing CZK 70, citing falling food prices in line with inflation trends. In contrast, Kastner notes a consistent monthly uptick in beer prices.

Breweries could significantly impact beer prices as they typically adjust them during the autumn season. Last year, major breweries like Plzeňský Prazdroj, Staropramen, and Budějovický Budvar raised prices by varying margins due to escalating energy costs.

Amidst these concerns, the ongoing hop harvest in Žatec provides a glimmer of hope. This year's harvest is projected to yield 6,000 tons, a substantial improvement from the previous year's 4,500. However, it falls short of the exceptional 8,306 tons reaped two years ago. Nonetheless, Výborný maintains that the harvest's average performance isn't likely to negatively impact beer prices.

Tomáš Maier, an economist from the Faculty of Business Economics at the Czech University of Life Sciences, notes that agricultural commodities like barley and hops contribute minimally to beer's final price, constituting only about one percent for major breweries.

In response, Minister Výborný announces discussions on the taxation of still wines, aiming to introduce proposals that avoid administrative burdens. However, these changes won't be part of the current rehabilitation package. The People's Party advocates maintaining a zero consumption tax on non-sparkling wines, in contrast to their stance during negotiations on a prior consolidation package.

31 August, 2023