Cereal costs hit European brewers

27 August, 2008
Page 5 
European drinks producers are facing spiralling raw material costs, raising fears that export prices may have to rise.

Adverse weather conditions have affected cereal crops in northern Europe, and the shortfall could add to a rising cost base that has already seen significant pressure on packaging materials such as glass and aluminium.

SAB Miller's Czech subsidiary Plzensky Prazdroj said the cost of Czech barley and hops was reaching "unsustainable levels", and that a beer price rise of 6 to 8 per cent would result later in the year.

Managing director Mike Short said: "A ton of Czech malting barley is approaching double last year's price.

"To maintain current beer prices any brewer would have to compromise quality.

"I would be shocked i f the current situation in raw materials doesn't have a similar impact on beer prices right across Europe."

British producers have also been predicting similar prices after floods in June and July devastated large parts of the farming industry.

David Wigham, portfolio activation director at US brewer Coors' UK subsidiary, said: "The global supply and demand for cereal stocks was already creating upward pressure on prices before this year's floods. In many cases prices are now double the level paid by buyers for the 2006 harvest.

"The brewing industry is experienc ing significant raw materials cost rises, which will ultimately need to be passed on to customers."

Wychwood Brewery managing director Rupert Thompson also said he expected prices to increase. "There's no way that the brewers are going to be able to absorb it," he said, "and consumers are expecting it, as they are with other categories like bread and milk. If beer didn't go up it would look very odd."

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