Breweries still under high cost pressure

Inflation and weak consumer sentiment hit the industry

21-Jun-2023 - Germany

The brewing industry continues to be under massive cost pressure. Even though energy prices have stabilized and are declining at a high level, and supply bottlenecks have recently become less frequent, costs still represent an immense burden. According to a survey by the German Brewers' Association, the 1,500 German breweries continue to be confronted with drastically increased prices for almost all raw materials, supplies and other inputs. For example, the cost of glass bottles has gone up by up to 140 percent since the beginning of 2022, and for brewing malt by as much as 150 percent. In addition to price jumps for materials such as crown corks or labels, rising labor costs are also causing problems for the companies (see chart).

"The challenges facing the brewing industry are immense, and there is no reason to sound the all-clear," says Holger Eichele, CEO of the German Brewers Association (DBB), looking ahead to the second half of the year. The industry is still suffering from the bitter losses during the Corona crisis, when draft beer was unsaleable for months. The skyrocketing costs since the beginning of the pandemic had further aggravated the situation for the ailing companies. Even if the prices of individual raw materials and supplies have recently left their highs, this does not mean that the pressure on the farms is easing, he said. Prices are still far above the pre-crisis level, Eichele emphasizes.

From the brewing industry's point of view, it has only been possible to implement some of the price increases that are urgently needed. This is also clear from a look at the statistics: producer prices, i.e. the prices at which breweries sell their beer to retailers or restaurants in Germany, have only increased by 7.3 percent since April 2022, according to the Federal Statistical Office. By comparison, producer prices across all food and beverages increased by 12.9 percent in the same period.

Against this backdrop, the industry association reacts with incomprehension to pronouncements by individual retail groups that claim to suppliers that the costs of raw materials in food production have now fallen sharply. "Like almost all food and beverage producers, breweries continue to face massive burdens due to persistently high and rising costs," Eichele said. "No one should be surprised that we, too, are calling for partnership in this difficult situation."

According to the Brewers Association, it will be years before the industry can hope for a recovery in view of cost pressures and the economy, especially since geopolitical risks to the economy have, if anything, increased recently. Rising prices and interest rates as a result of inflation and the current weak consumer climate - domestic beer sales accumulated up to April 2023 are down 4.7 percent on the previous year - would have further exacerbated the problem for companies.

Note: This article has been translated using a computer system without human intervention. LUMITOS offers these automatic translations to present a wider range of current news. Since this article has been translated with automatic translation, it is possible that it contains errors in vocabulary, syntax or grammar. The original article in German can be found here.

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