Scottish & Newcastle's Willie Crawshay raises prospect of price increases way above inflation
Two major brewers have warned the trade to expect big increases in beer prices to offset surging costs and the impact of the poor summer trade.
The warnings from Scottish & Newcastle UK (S&NUK) and Carlsberg are the strongest indications yet that pubs are set for some of the highest increases ever when the annual rise in wholesale prices is introduced at the start of next year.
I believe the prospect of suppliers wholly absorbing these extraordinary input cost price increases is unrealisticWillie CrawshayS&NUK
Speaking exclusively to the MA, S&NUK's managing director of regional sales Willie Crawshay predicted beer prices will increase "way above the rate of inflation" for the first part of 2008.
Crawshay believes brewers will find new ways to cover costs, suggesting others may follow the lead of Carlsberg and introduce additional charges for pubs like delivery supplement charges.
Rising prices
Crawshay said: "Beer and cider are essentially made from agricultural commodities. Add to this, the energy, wages, water, packaging, aluminium, glass and fuel necessary to bring beer and cider to the bar or the aisle - and you have a recipe that is highly sensitive to market forces and seasonal fluctuations.
"None of us in the industry today will have witnessed the levels of rampant inflation that we are now experiencing on these commodities.
"Across the globe, prices for cereal grains have risen by up to 80% over the last year, driven by disastrous harvests and emerging demands such as biofuel. The price of crude oil is at an all-time high and spot prices for aluminium have risen by around 14%."
Poor summer
Crawshay questioned what this all means for an on-trade still reeling from smoking bans, the worst summer in recent memory and the possibility of all four of our home countries failing to qualify for Euro 2008.
"The answer, I think, will come in the early part of next year when most major suppliers review their wholesale prices and begin the process of communicating this to our respective customers.
"We are all facing a far more challenging backdrop in 2008 and I believe the prospect of suppliers wholly absorbing these extraordinary input cost price increases is unrealistic.
"Personally, I expect to see producers continue to seek to recover costs in different ways, other than wholesale prices increases.
"I would not be surprised to see these increases running way above inflation in the first part of 2008.
"Whatever the outcome, it's going to be a rocky ride in 2008 and I doubt we will be able to count on much help from outside the industry."
Carlsberg said in a recent financial statement: "Increases in input costs will continue to necessitate increases in selling prices for beer across markets."
The Danish brewer said its gross margin was 50.6%, down 1.1% on last year.
"This was due to rising raw material prices, which in the short-term could only partly be offset by higher selling prices."