Beer prices set to rise as costs grow

20 August, 2010

Rising barley prices could put more pressure on beer prices, it has been warned.

But UK brewers say the escalating price of raw materials is likely to be less of a problem than the forthcoming increases in duty and VAT.

Barley prices have been hit by poor grain harvests in Russia, which have led to an export ban that has in turn created inflation elsewhere.

A spokesman for the British Beer & Pub Association said: “The current upward pressure on grain prices will have some effect. But at this stage it’s difficult to quantify and, to some extent, brewers are partially protected by factors such as long-term fixed contracts, buying ahead on the futures market and hedging against short-term spikes such as this.

“However, raw materials are anywhere between 3% and 10% of the price of beer compared with tax, which is over 30%.

“While unwelcome, this price movement is dwarfed by the planned 2% above inflation beer tax increase on the horizon. What this situation should say to government is that when the pressure is on, don’t make it worse.”?Ian Clay, managing director of specialist beer importer James Clay, said: “A lot of the big grain users tend to hedge, like we tend to do on currency, so the effect is softened a little.

“With the duty increases and everything else, the market isn’t ready for big price increases. Brewers have to be aware that if prices are too high people aren’t going to drink their beers.”?Ann Binns, co-owner of Southampton beer retailer Bitter Virtue, said beer prices would be affected by the barley crisis.

“We went through a phase a couple of years ago when both the hops and barley crops were bad,” she said. “That had a serious effect throughout the industry. It will depend on how much of the crop is taken up by the major brewers but there’s not a lot you can do about it.”

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