World: Biggest brewers facing around 16% rise in production costs - report

Beer drinkers could be forced to swallow even higher prices next year as the brewing industry is rocked by the soaring costs of ingredients, The Guardian reported on September 11.

The price of barley has risen sharply after the summer heatwave scorched harvests across Europe, but other costs, such as energy, are also rising. Even the price of the aluminium used to make beer cans rose by 8% this year, on top of a more than 20% hike in 2017.

The report from analysts at the investment bank Berenberg predicts the world’s biggest brewers, such as Heineken and Carlsberg, are facing a rise in production costs of around 16% going into 2019.

The Berenberg analyst Javier Gonzalez Lastra said barley represented an estimated 20% of total costs of goods sold for the average brewer. “Average barley prices have increased significantly in the past few months, mostly due to the heat wave in western and eastern Europe over the summer,” he said.

At the end of August, UK barley prices were up 37% year-on-year, while in France they were up 23%. The report also cites US Department of Agriculture data which puts world barley stocks at their lowest levels since 1984.

The price of buying a pint has been rising steadily in recent years. The average pub price for a pint of bitter broke through the £3 mark to hit £3.05 in 2017 and has already increased by another penny this year.

For lager the pint is £3.65, a 7p increase on 2017, according to British Beer & Pub Association data.

However, Brigid Simmonds, the chief executive of the British Beer and Pub Association, said it was too early to assess how the hot weather would affect malting barley harvests in the UK. “Weather conditions, whether good or bad, can have a positive and negative impact on yields, which can influence pricing,” she said.

“This is something we are keeping a close eye on, however it is worth also bearing in mind that the UK is a net exporter of malting barley and in that sense we enjoy a degree of self-sufficiency.”

Rupert Thompson, the managing director of the Hogs Back Brewery, in Surrey, said he was worried about the outlook. “We hear that prices are going up significantly. These sorts of issues affect us particularly heavily because we don’t own a pub estate. If you can’t push up [wholesale] beer prices you are in real trouble.”

11 September, 2018