Price war flattens beer profits

The price war for packaged beer has become so intense that between them, brewers and supermarkets missed out on a whopping $66 million in the past year, DB Breweries says.

The two big brewing companies DB and Lion are now planning price rises this year of five percent and up to 10 per cent respectively.

Despite significant inflationary pressures, primarily raw material costs and wages, the price of supermarket stocked beer has stayed stagnant for well over a decade, with DB’s promotional price range for mainstream beer the same today as it was 15 years ago.

In theory, a brewer needs to increase its price by a percentage that recovers input cost increases and protects existing margins, but at present input costs are rising much quicker than selling price increases.

Mr Blake estimates that raw material costs for malt, sugar, glass and aluminum have risen between 10 percent and 70 percent in the past year alone, while rival Lion has pencilled in a seven percent cost increase for 2009.

DB’s beer prices went up by 5.5 percent in July, partly due to the annual excise tax increase, although many supermarkets absorbed the rise.

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