World: Of the world’s top four brewers, higher barley prices to affect the most Carlsberg - analysts

Higher commodity prices will increase food companies’ costs by 9 percent to 11 percent this year on average, potentially curbing profitability, Morgan Stanley said last week.

Most margin pressure will come in the first half as price increases trail cost inflation, London-based analyst Michael Steib said in a report. Brewers face “margin headwinds’” from higher prices for barley and packaging in 2011, he said.

Of brewers tracked by Steib, commodities “should have the highest impact” on Carlsberg A/S after last year’s drought in Russia, the analyst said. Russia banned all grain exports in August after a crop-wasting drought, boosting cereal prices. Carlsberg owns the largest Russian brewer and gets more than half its earnings from Eastern Europe.

Barley costs represent about 4.4 percent of sales at Carlsberg and SABMiller Plc, the brewer of Grolsch beer, according to Morgan Stanley. That compares with 4.6 percent at Heineken NV and 4.8 percent at the world’s biggest brewer AB InBev NV, according to Morgan Stanley. Aluminum, glass, paper and hops each account for a smaller part of costs.

06 April, 2011