German brewers are threatened with a malt price increase for ongoing contracts of over 30 euros per ton (31 USD/t) from October. This equates to a price increase of 4-8% for already concluded procurement contracts depending on the initial price level.
Last week the German Federal Cabinet passed a limited gas security surcharge based on Section 26 of the Energy Security Act in order to secure the heat and energy supply in the coming winter. The regulation is expected to come into force in mid-August 2022 and will come into effect on October 1, 2022. It ends on April 1, 2024.
The aim is to prevent insolvencies and supply failures in the gas supply in the energy crisis triggered by the Russian attack on Ukraine and thus to maintain security of supply for the citizens and the economy.
The costs for the malt are essentially influenced by raw material and energy costs. Both are usually fixed with upstream suppliers when a malt contract is concluded. Therefore the price is usually secured for the delivery period of a contract, which normally spans a year.
However, the gas procurement levy that has now been decided by the German federal government, gives gas suppliers the opportunity to pass on a gas price increase to their customers, even with existing contracts for a limited time span of 6 months. Maltsters will therefore also invoke §313 BGB, which regulates the cessation of the business basis and offers the malthouses the opportunity to pass on the price increase to their customers, i.e. the breweries
German Vice Chancellor and Federal Economics and Climate Protection Minister Robert Habeck emphasized: “The temporary levy is a consequence of the crisis caused by Russia. It is not an easy step, but it is necessary to secure the heat and energy supply in private households and in the economy. The costs are distributed as solidary as possible: the affected gas importers bear all the costs alone for the replacement procurement until October. Then these are distributed evenly over many shoulders. The affected gas importers bear 10 percent of the costs themselves for the period of the levy.”
According to initial reports, the increase is expected to be between 1.5 and 5 euro cents per kilowatt hour of gas. With an average heat requirement of 650 kWh per ton of malt produced, this results in an additional load of up to EUR 32.5 (USD 33.5) per ton of malt.
With current malt prices of around EUR 800 per ton (excluding freight), the share of malt of the beer price is currently around EUR 13 per hectoliter. The new levy will therefore affect the price of beer by about EUR 0.50 more per hectoliter.
This does not take into account that newly concluded malt contracts for 2023 and beyond will be much more expensive than this year, since gas alone is around eight times more expensive than before the crisis. Other factors such as barley, electricity, logistics are also driving prices up.
Brewers are therefore well advised to start talking to their customers now in order to prepare them for further beer price increases this and next year. It should also not be forgotten that in addition to the malt prices, almost all other cost factors in the brewery have risen, in particular packaging, logistics and of course also the brewery’s own energy.
The gas surcharge will be 2.419 euro cents per kilowatt hour of gas from October. This was announced today by the responsible Trading Hub Europe GmbH.If gas suppliers pass on this amount to their customers from autumn, this means additional costs of around EUR 16 (USD 16.25) per ton of malt, given an average heat requirement of 650 kWh per ton of malt.