Investment bank Berenberg’s report estimated that barley represents about 20% of total cost of goods bought for the average brewer. Average barley prices have risen significantly over the past few months, mostly due to the heatwave in western and eastern Europe over the summer.
UK barley prices as of the end of August 2018 were up by about 37% year on year, having already been up about 12% year on year in 2017.
Data from the US Department of Agriculture stated that world barley stocks remain at their lowest levels since 1984, potentially giving further support to high price levels.
Production costs rise
The report predicted big brewers such as Heineken and Carlsberg are facing a rise in production costs of about 16%, going into next year.
This comes after AB InBev and Molson Coors announced beer prices would be raised to above inflation this year, making some beers and ciders up to 3.9% more expensive than 2017.
AB InBev, which produces Bass, Boddingtons, Budweiser, Corona and Stella Artois, said it would be increasing prices by 3.9% across its portfolio in January 2018.
A spokesperson said this reflected ongoing pressure on the beer industry and the UK economy. The spokesperson added: “We have communicated to our customers that from 1 February 2018 we will be increasing our wholesale price by 3.9% across our portfolio (excluding duty).
“We always look to keep any increases to a minimum for our customers, maintaining an increase lower than the retail price index (RPI), despite this having more than doubled last year.”
Minimum level
Molson Coors said it would increase its prices, with the average rise in the cost of its beers and ciders ranging between 3% and 3.2%.
A spokesperson said: “We are constantly working to manage the variety of different costs associated with the production and supply of our beers.
“The price increase has been kept to the minimum level required to enable us to continue to invest in our business and customers, and to deliver great customer service and well-supported beer brands.”