Breweries facing 'tsunami' of operating costs

To tackle the “tsunami” of rising costs, brewers and trade bodies alike have called for a VAT cut to on-trade alcohol, a re-introduction of the alcohol duty freeze, extended energy bills support beyond April 2023, implementation of a new draught duty rate and a reformation of business rates.

The Campaign For Real Ale (CAMRA) chair Nik Antona said: “Our pubs and breweries are facing a perfect storm of shortages and price rises, threatening their very survival.

“Not only are energy costs skyrocketing, but the cost of everyday products ranging from CO2 to cleaning supplies are also going through the roof, provided you can get a hold of them in the first place.

“This is creating a perfect storm for the sector and ultimately the consumer, who will either be faced with price hikes at the bar or the closure of their beloved local.”

Furthermore, Society of Independent Brewers (SIBA) head of comms Neil Walker explained while many breweries would like to introduce measures to reduce energy costs and consumption, access to funding, particularly for smaller breweries, does not always permit this.

Tsunami of costs 

Walker said: “Small independent breweries are energy intensive businesses and while they are always looking for ways to improve their efficiency, the recent increases have seen bills go from on average representing 4% of turnover to over 10%.

“For some energy bills have skyrocketed by 400% which along with other pressures such as CO2 prices, raw materials, and transport, is threatening their future.

“Many breweries want to introduce measures to reduce their energy use by installing green technology bur do not always have access to funding to do so, they would greatly benefit from Government polices to help them make this move.”

In addition, former SIBA chairman and owner of Rooster Brewery in Harrogate, North Yorkshire, Ian Fozard, said constantly fluctuating costs have made future planning difficult for the sector.

Fozard explained Roosters had seen its CO2 costs quadruple over the contract price in September and, while they had since reduced, malt prices have continued to increase.

He said: “All industries have been suffering from costs inflation, in particularly energy costs, but our sector is facing a tsunami of additional costs.

Difficult market 

“We don't know exactly yet, but the indications from my maltster are the price could go up by as much as a third, though some breweries are telling me higher than that.

“The other uncertainty is what's happening in the pub market. There's a number of pubs closing and that must have an impact on the amount of beer being bought.

“You've got the [rising costs] uncertainty at the one end [and], depending on who you sell too, you might not be able to sell as much beer next year.

“Then you have to decide can we pass some of those costs on in a difficult market for pubs? It's a dilemma without a doubt, it makes planning tricky to put it mildly.”

This comes as last month Suffolk based operator James Pickard​, licensee of the Green Dragon pub and brewery and Bungay said the brewing sector was being “hit from all angles” after the businesses suppliers unexpectedly put their prices up for a second time in Q3 2022.

Fozard added: “We have to just hope that as many of us can get through this as soon as possible.”