– High energy prices pose challenges for brewers, and the consequences of the pandemic are not yet over: According to observers, consumers must adapt to higher beer prices.
Coronavirus restrictions on dining have been lifted and beer garden season can begin. Brewers celebrate German Beer Day on April 23. But this year there is no talk of a celebration atmosphere either.
“The year 505 after the Purity Law was established will go down in brewing industry history as a cost boost,” says Michael Huber, chief representative of Veltins brewery, adding, “For many regional brewers, the pressure in the beads is greater than in the teapot”. According to industry watchers, consumers are facing long-announced retail beer price increases that do not react to recent developments.
Unprecedented price increases
As in many other sectors of the economy, concerns about skyrocketing energy prices and a potential gas supply disruption are having a ripple effect among suppliers. “Unfortunately, we are used to delivery bottlenecks and cost increases – the Corona crisis has already hit the brewing industry hard.
But what is happening right now goes beyond all dimensions: We are seeing unprecedented price increases for raw materials, packaging, energy and logistics,” says Holger Eichele, General Manager of the German Brewers Association. Especially for maltmaking and new glass, the purchase prices of new supply contracts or, in some cases, also plummeted with the clauses of existing contracts.
“Everyone is busy with themselves,” says “Inside” magazine editor Niklas Other, describing the unrest in the brewing industry. Especially the many small brewers without long-term supply contracts and price hedging would have trouble staying afloat on the cost wave. For them, raw materials are no longer readily available.
The demand crisis caused by the restrictions on restaurants has become a supply crisis and, above all, a cost crisis. In recent decades, the vast majority of brewers have switched their brewing boilers to gas. There is great concern that a gas supply outage could immediately bring beer production to a standstill because brewers are not part of the critical infrastructure.
Russia was seen as a growth market
Russia had become the second largest sales market for German beer abroad after Italy and was considered one of the most promising growth markets in the German beer industry. According to the German Brewers Association, around 2 million hectoliters of beer were exported to Russia last year. That’s almost 13 percent of German beer exports.
Eichele estimates that exports to Russia have come to a near standstill. “Russian export stopped for a variety of reasons,” says Other. The big brewers, for example, deliberately avoided doing it themselves because of the war, and exports were no longer possible due to the massive devaluation of the ruble or transportation problems.
“We immediately stopped all investments in the Russian market at the beginning of the Ukraine war. We also stopped exporting our products to Russia completely,” says Axel Dahm, spokesman for the management of the Bitburger brewery group.
Until further notice, all business relations in Germany and abroad with Russian partners or companies with Russian participation are suspended. It is about “supporting the current sanctions policy with our resources,” Dahm said. Other breweries, such as Erdinger Weißbräu and Krombacher, also stated that they had stopped exporting beer to Russia since the beginning of the war. The Radeberger Group has also stopped exporting to Russia.
The post-pandemic valley has not bottomed out
The German Brewers Association is currently hesitant to forecast how much beer German breweries will sell at home and abroad this year. “We drove through a wall of smoke at high speed,” describes CEO Eichele.
Unfortunately, the hope that the bottom has been reached after sales declines during the pandemic has not yet been fulfilled for many companies. In gastronomy, which is important for the draft beer business, it is observed that the number of diners is increasing again. However, brewers and restaurateurs are still a long way from their pre-pandemic level.
According to industry watchers, retail beer prices will start to move after Easter for several brands. However, this is only about the price increases that several major brewers had already announced in the fall. “These are currently rolling out in retail and will no doubt be visible to consumers after Easter as well,” says market researcher Marcus Strobl of NielsenIQ.
The Easter business was promoted in many places in supermarkets and beverage stores with price campaigns, describes Another. He estimates that a case of beer with 20 half-litre bottles could be around €1 more expensive for the big Pilsner brands. However, the price increase must be moderate to less than ten percent of the normal price.