Soaring prices create headaches for German brewers

Germany’s Veltins brewery was already struggling with pandemic-induced rises in ingredient and transport costs over the past year, but a spike in energy prices triggered by the invasion of Ukraine by Russia threatens to be a bitter pill for the company.

“Energy is the most important factor for the German beer industry and gas plays an important role in it,” says Ulrich Biene, public relations manager at Veltins.

One of Germany’s top-selling beer brands, Veltins had to raise prices by one euro per case – its first increase in three years. And further increases could be considered, if costs continue to rise.

The new price is based on “last fall’s values,” but additional wartime increases have not yet been factored in, says Biene.

“We have seen a cost explosion over the past 15 months” unprecedented in decades, he added.

The private brewery based in the charming town of Grevenstein isn’t the only one having to raise its prices.

Several of its competitors, including Radeberger, Krombacher and Bitburger, pass their higher costs onto consumers.

“There’s hardly any area where vendors aren’t raising prices or fighting rising costs,” says Biene, estimating a four-fold increase in prices since the start of 2020.

– Fifth ingredient –

Up to 20,000 hectoliters of beer are brewed, bottled and shipped daily from the bulky gray factory, nestled in a green valley in western Germany.

The cost of malt purchased by Veltins – one of the four legally permitted ingredients for brewing beer in Germany, along with water, hops and yeast – has risen by around 70% in just over a year.

Not only are the ingredients more expensive. Logistics costs increased as drivers for beer deliveries became scarce, as did pallets to pack them, the nails of which were often supplied from Ukraine.

First and foremost, energy is the fifth hidden ingredient in Veltins beer, used to heat the brewing vats and power the filling machinery.

The brewer expects the cost of gas to increase by more than 400% since the start of 2021, as renewed demand with the easing of the pandemic coupled with tensions with Russia have pushed prices up.

Ending deliveries of Russian gas, which Germany relies on to meet much of its energy needs, would likely mean “significant limits on production”, Biene said.

– “Justifiable” –

Instead of easing towards the start of the year as policymakers had expected, high inflation kicked into high gear with the Russian invasion of Ukraine, sending the price of oil soaring. energy and further aggravating supply problems.

In March, prices rose at their fastest pace since German reunification in 1990, rising 7.3% year-on-year.

New figures for April are expected to be released on Thursday on hopes the rate could be even higher, putting additional pressure on consumers and businesses.

The rise in beer prices has not gone unnoticed for Bernhard Jung, 57, a resident of the traditional brewing town of Krombach, 36 kilometers (23 miles) south-west of Grevenstein.

The local brand’s price has also risen over the past month, an increase he says is “justifiable”.

“I’m surprised the breweries didn’t raise the cost sooner, given the huge energy costs,” he told AFP outside a drinks market.

The “cost of each item is a bit higher,” says Karin Mueller, 81, who just finished her weekly shopping with her husband Willibald, 83.

At their home in the nearby town, they have noticed the rising cost of fuel oil, with Karin adding that she “wears a coat” indoors and keeps the thermostat low.

Rising energy costs have been the main driver of high inflation in Germany for decades.

Gasoline and diesel prices have also risen, a phenomenon noted by university administrator Hanna Siebel, 35.

She claims to have noticed that “people weren’t driving as fast anymore” on their way to work to save fuel.

The government recently responded to mounting price pressure by agreeing a €5 billion ($5.3 billion) support package for businesses to help them cope with rising oil costs. energy.

Households will also benefit from assistance to cope with the increase in their bills.

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