Breweries in the UK and elsewhere may be forced to raise their beer price due to soaring costs of raw materials and energy. This summer’s heatwave in Europe has especially affected the price of barley and hence malt (inside.beer, 6.7.2018) which accounts for about 20 percent of the total product costs, says Javier Gonzalez Lastra, beverage analyst at Berenberg Bank in a recent report on the industry.
As of the end of August, UK barley prices are already 37 percent higher than last year and world barley stocks are at their lowest level since 1984, according to the US Department of Agriculture. Although there will be no shortage in malt, the price of the main ingredient of beer has to follow the price of the barley, which will increase costs of brewers.
The study predicts that international brewing groups, such as Carlsberg or Heineken, are facing higher production costs of around 16 percent next year, which needs to be passed on to the consumers in the medium term.
Other major brewers, like AB InBev and Molson Coors, have already at the beginning of the year raised prices for some of their beers and ciders by 3.9 percent or 3.0 to 3.2 percent respectively. It seems unlikely that they will start a second round of price increases this year.
Brigid Simmonds, the chief executive of the British Beer and Pub Association, is also hesitant in predicting further price increases, saying that it is still too early to determine the long term effect of the hot weather and its effect on beer prices. “Weather conditions, whether good or bad, can have a positive and negative impact on yields, which can influence pricing,” she told the Guardian. “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.”
Still, the markets are interconnected and if world barley prices rise, the price of UK barley and malt will also rise, notwithstanding any self-sufficiency, says an unnamed insider of the industry.