Beer cost rise to have 'significant negative effect' on 'battered sector'

18-Feb-2022 - Last updated on 21-Feb-2022 at 11:34 GMT

Rising beer costs will have a “significant negative effect on pubs": hospitality sector "battered and beleaguered" (Credit: Getty/ Nastasic)

Rising beer costs will have a “significant negative effect on pubs” as Heineken UK has “created the precedent” for increases while the sector faces “record levels of debt”, according to a number of voices across the sector.

This comes after Heineken UK announced it will increase its beer prices as the company expects to be “significantly impacted by inflation and supply chain pressures” this year.

British Beer & Pub Association chief executive Emma McClarkin said: “The inflation figures published yesterday by the ONS highlight further steep financial challenges the pub and brewing sector are facing following another devastating winter.

“Rising inflation coincides with the sector experiencing record levels of debt and facing increased costs across the board from energy through to raw materials, as well as supply chain difficulties.”

While Heineken UK has not confirmed how much its price increase could be, the global company stated it expected a “stable to modest” improvement in operating profit margin (BEIA) for 2022 and an “input cost per hectolitre (BEIA) increase in the mid-teens”, offset through pricing in absolute terms with the potential to lead to “softer beer consumption.”

Another major blow

Licensee of the Unruly Pig in Bromeswell, Suffolk, Brendan Padfield said: “As if the slings and arrows of the pandemic closures were not enough for our sector, here is yet another major blow.

“This will surely be the first of other similar announcements from other brewers; Heineken have created the precedent so others will follow suit.

“What sometimes bewilders me is the public know from their supermarket visits the UK has the highest rate of inflation in 30 years, they also should know Brexit and Covid have created acute labour shortages resulting in galloping wage inflation, significantly adding to our operating costs, yet I still receive comments from some customers querying why we have had to increase our prices.

“There seems sometimes to be a peculiar disconnect between the likes of Heineken increasing their prices and the knock-on effect on what was already a battered and beleaguered hospitality sector as a whole.”

This comes after inflation hit an all-time high in January due to an increase in energy prices, food, and fuel with the cost of living set to continue rising faster than wages, potentially exceeding 7% this year.

Significant negative effect

UKHospitality chief executive Kate Nicholls said: “Rising beer production costs will inevitably have a significant negative effect on pubs and restaurants – not forgetting the likes of bars and nightclubs – which will have to pay more for their stock.

“It’s yet another cost increase among many faced by the Covid-ravaged hospitality industry.

“Businesses in the sector are being hit hard by soaring costs for energy, labour and food, while many might not survive April’s triple-whammy of VAT, rent and business rates increases.

“Indeed, through our #VATsEnough campaign, UKHospitality is urging the Government to keep VAT at 12.5% for hospitality and tourism. It’ll be vital if thousands of businesses, suffering depleted cash reserves and crippling debt, are to help our sector lead the UK’s wider economic recovery.”