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Beer is becoming more expensive: breweries pass on higher costs to customers

2022-05-16T12:38:39.072Z


After two years of pandemic, Germany's beer brewers are hoping for full beer gardens again. But rising prices for grain, glass and pallets are a cause for concern - as is the view of autumn. The industry is in a state of emergency.


The consequences of the pandemic and the Ukraine war are exacerbating the trend: beer consumption in Germany has been falling for 40 years.

Photo: Marc Müller/ dpa

Delivery bottlenecks and cost increases have already hit the brewing industry hard during the Corona crisis.

Since the beginning of the pandemic, 40 breweries in Germany have had to close.

Now the ever-increasing raw material prices are causing great concern in the industry.

"What's happening right now is beyond all dimensions," says Holger Eichele, general manager of the German Brewers' Association.

"We are seeing unprecedented price increases for raw materials, packaging, energy and logistics."

Food in particular is currently driving up inflation.

Food prices rose by 29.81 percent in April 2022 compared to the same month last year.

The reason for this, in addition to bottlenecks caused by the corona pandemic, is also the war in Ukraine and the associated sanctions against Russia.

The country is considered Europe's granary and the world's largest exporter of sunflower oil.

As a result, the prices for vegetable oils in Germany in particular have recently risen massively.

Inflation is also evident in the breweries.

"The costs are completely out of control," says Managing Director Eichele.

Especially for brewing malt and new glass, the purchase prices would shoot through the roof.

The price for transport pallets has also doubled within a year.

An end to this development is not yet in sight.

"We are currently driving through a wall of smoke at high speed. Neither the further political developments in Europe nor the course of the corona pandemic in autumn and winter are in any way predictable," said Eichele.

Beer consumption has been falling in Germany for decades

The consequences of the pandemic and the Ukraine war are also exacerbating a trend that has been preoccupying breweries for decades: beer consumption in Germany has been falling for 40 years.

While it was still 146 liters per capita in 1980, Germans now drink less than 95 liters a year.

The drastic cost increases would now have to be passed on to the prices - so the after-work beer could become significantly more expensive in the future due to cost pressure.

According to the Brauer-Bund, malt as an important brewing raw material has become more expensive by up to 60 percent.

The increases in electricity and gas were even more extreme.

Big brands like Krombacher, Veltins and Bitburger have already announced price increases.

The federal government is now hoping for support for retailers.

"The dominant trading groups cannot simply look the other way when their suppliers are exposed to excessive cost increases that threaten their existence," said Eichele.

The industry was significantly more confident at the beginning of the year after the relaxed corona regulations and increasing number of major events and open catering trade.

Landlords and brewers had expected a real boost after the corona loosening that had been decided.

But now, in addition to the sales, the costs are also increasing in an extreme way.

Breweries focus on major events

"The last two years marked by the pandemic have been tough for the entire industry," a spokeswoman for the Warsteiner brewery told

manager magazin

.

The brewery's sales in Germany and abroad fell slightly by 1.1 percent in 2021, but developed better than the overall market.

The main reason for this is the international business of the brewery.

Due to the closed gastronomy there was an increased price war in the trade.

This year, however, Warsteiner expects an upswing again through major events such as Germany's largest electronic music festival Parookaville or the nearby Kaltenberger Knights' Tournament on a castle complex.

The current energy supply and supply chain situation is a massive concern for the company.

"No one currently has a crystal ball to look into the future. We have all learned over the past two years that there is either no planning security or that issues can arise at any time that require great flexibility from people and companies," says Das Company.

That will not change in the next twelve months either.

The Krombacher brewery from North Rhine-Westphalia has not yet returned to the level of the pre-pandemic times either.

Compared to the previous year, however, the current financial year has been selling much more satisfactorily.

The weather conditions in spring and summer are now decisive for the industry.

And the possible effects of the war in Ukraine cannot be reliably predicted either.

"Overall, the lack of ability to plan was and is one of the biggest challenges for us as a company in the current situation, especially with a view to the further course of the corona pandemic and possible developments or aggravation in autumn," said the spokesman.

"In general, we are pleased

Consumption index collapses

However, Eichele from the German Brewers' Association still sees gastronomy and events at risk.

"Many consumers have to limit themselves elsewhere because of high fuel prices and skyrocketing heating costs," he says.

The sharp rise in the cost of living would lead to more and more bookings being cancelled, especially in domestic tourism as well as for visits to restaurants and events.

"We can see that the hospitality industry is slowly working its way out of the crisis, but we are still a long way from normalization," says Eichele.

The GfK consumer climate index had already fallen by 15.7 points for April, and even minus 26.5 points are forecast for May.

"This is a historic low that is leaving clear signs of slowing down in our industry as well as in the hospitality industry."

Against this background, it is not surprising that the ifo business index for the brewing industry has also crashed, says Eichele.

From 14.5 points in the third quarter of 2021 to a minus of 8.8 points in the first quarter of this year.

In March, two-thirds of the breweries called the business situation "satisfactory", but a third complained about the poor situation.

The sharply rising energy, food prices and personnel costs are also reflected in the hospitality industry.

According to DEHOGA, in March restaurateurs and hoteliers recorded sales losses of almost 28 percent compared to March 2019.

"For a successful restart, the hospitality industry needs planning security and reliable perspectives - unfortunately there is no sign of that," says Eichele.

Breweries demand uniform regulations

The Bitburger brewery demands more planning security.

"Basically, we would like to see reliable and uniform regulations from politicians - especially for the partners in the catering and hotel industry who have been badly affected by the pandemic - that enable the various sectors to plan better," says the company.

The company is concerned about the cost and price increases in all areas triggered by the war in the Ukraine, but is confident because Bitburger has "always taken conservative and, above all, quality-oriented precautions" with regard to raw material purchases.

It sounds similar on the Weser in Bremen.

The Beck's brand, which belongs to the Belgian brewery group ABInbev, expects growth of 1.6 percentage points this year.

"The revival of major events will make an additional positive contribution," the company is certain.

The company still has to monitor political and pandemic developments.

"Overall, however, we are confident," the company said.

The aim is to find a balance between growth in emerging segments, such as the premium segment, and increases in raw material prices.

After all, the industry has a clear glimmer of hope: while according to the ifo Institute, around 42 percent of the companies still recorded a minus in their books in February, more than half of the breweries were able to report increasing demand again in March.

Short-time work is also only available in a few companies.

Source: spiegel

All news articles on 2022-05-16

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