Given recent inflation and rising input costs across the board—from packaging to fuel to barley malt—you might think it’s a no-brainer that beer prices need to go up, too.
However, that’s not necessarily the message that independent brewers are hearing from experts and industry veterans. In fact, they are pointing to the advantages that could come from holding prices right where they are—to the extent possible, as each brewery faces its own unique situation.
For context, the reasons behind higher costs are many:
- Global, pandemic-fueled, supply-chain problems have had ongoing domino effects, now further exacerbated by Russia’s invasion of Ukraine. A global index of supply-chain pressures compiled by the Federal Reserve Bank of New York found that pressures eased for a few months until March and then worsened in April—likely because of the war and Chinese COVID-19 lockdown measures. The CEO of FreightWaves, which specializes in supply-chain data and analysis, argues that “supply chains are never returning to ‘normal,’” citing higher energy costs and geopolitical risk among the reasons for continued disruption. Ultimately, this means that brewers should not see the costs and availability of raw materials return to what they were before 2020.
- Another effect of the war in Ukraine is its impact on agriculture and the grain market. Russia and Ukraine normally account for more than a quarter of global barley and wheat exports. Besides wartime obstructions to shipping, there are reports that the Russian army has mined millions of acres of Ukrainian farmland, making it difficult to return production to what it was anytime soon. North America’s poor barley harvest in 2021 adds further price pressure on barley as a global commodity, even if growers are cautiously optimistic about supply later this year. However, analysts say that weather concerns in France and North America have interfered with timely planting, and that may lead to supply issues going into next year.
- Inflation is an ongoing problem, and it’s a global one, interconnected with multiple issues. In the United States, inflation eased slightly in April, increasing only 0.3 percent compared to a 1.2 percent jump in prices the previous month. Yet the consumer price index was still at a 40-year high, up 8.3 percent over the previous year, amid fears that it could continue to spiral.