How big a headache for the industry is the rise in production costs - and do you think these will translate into higher retail prices?

21 March, 2008

Paul Burton, joint managing director, InterContinental Brands

" The drinks industry has not seen anything like it for

25 years.

Manufacturers are reluctant to absorb the costs and

retailers to accept the costs and push retail prices up in turn. Given the magnitude of the raw material increases I think they will turn into moderately higher retail prices.

"If increases are only


and provided manufacturers continue to invest, I do not see

there will be an adverse impact for brands such as ICB's."

Chris Carr, managing director, Merrydown

"More a migraine than a headache. There is no doubt

prices will rise and these do have to be passed on to the consumer but I

believe cider still represents good value and people will still

buy and enjoy it."

John Mills, Gaymers

"We have long-term commitments with about 75 apple growers so we have long contracts - up to 30 years - and we invested in those many years ago. We're in better shape on supply than many of our competitors but we do have a gap until 2009-10 which means we have to import some concentrate.

Juice prices have tripled, sugar has nearly doubled in the past year, and oil-based products like PET and shrink wrap and fuel costs have increased a lot as well. Our costs have gone up by about 8%.

"We've been pushing price increases of between 5 and 8% through on our brands since January.

We're trying to offset cost increases by being more efficient and looking at cost saving measures, like lightweight glass. "

Glenn Asquith, Aston Manor

"We have seen huge increases, especially on raw materials over the last 18 months. Taking into account that it already costs three times more to produce cider than beer, this is a serious issue. I believe that imminent further increases are unlikely and costs seem to be less volatile at the moment. These increases will definitely translate into higher retails, but I do not see this as a big issue, as certain retailers are simply selling some of their ciders too cheaply."

Simon Russell, NACM

"It is a big headache. Cider already has markedly higher costs of production than for the equivalent volume of beer - one of the many reasons for a different duty structure. In addition, the relatively small scale of the industry and the distinct lack of control cidermakers can exert over the retail price of their products make it an issue of great concern to cidermakers."

Rod Marsh, National Collection of Cider & Perry

"We are seeing price increases, some substantial, in the craft sector, but cider has always been a comparatively cheap product, and as long as quality is perceived to be good and improving, any increase in retail price does not deter consumers. Indeed at the top end of the market customers seem positively reassured to be spending anything between £7 and £12 on a bottle of cider or perry - the Stella syndrome, I suppose."

Scott Fairbairn, Magners

"While consumers will always seek good value, we believe

price promotions have no place in the premium sector and that consumers make their purchasing based on many factors, of which price is just one. Product quality and brand perception are just as important.

"Cider spent many years as an ailing category precisely because the product image had been devalued by heavy discounting. The revival of the cider category can be attributed to the creation of the premium category, which Magners has invested in heavily. We always advise retailers to maintain and further drive value into the sector and not to erode its potential through price promotions."

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