Rising costs in essential materials are making it impossible for small independent breweries to bounce back after covid.
That’s the view of SIBA, the Society of Independent Brewers, which is highlighting widespread closures in 2020 and around a decade’s worth of industry growth lost.
Brewers are reporting price rises of 73% for CO2, 57% for brewery energy, 20% for beer cans, 22% for cardboard packing, as well as an average 17% increase in vehicle fuel costs.
SIBA chief executive, James Calder, said: “Increasing costs of brewery supply services, such as water, energy, and CO2, are being seen at the same time as the prices of cardboard, glass bottles, cans, and even yeast go up, making it incredibly difficult for the small breweries who survived the pandemic to fully recover.
“Even where pubs have already increased prices, this has not been passed on to brewers, and whilst nobody wants to see the price of a pint rise to an unappealing level, what we really don’t want to see are widespread brewery closures that will see consumer choice plummet.”
He added: “The total number of breweries in the UK fell for the first time in over a decade in 2020, and that figure is likely to drop even further by the end of 2021, leading to job losses and a reduction in availability of quality local beers in some areas of the country.
“If the government doesn’t begin to back rather than burden small breweries with tax rises, then we’re headed towards a time-bomb of brewery closures in the new year.
“The chancellor needs to provide significant breathing room and support at tomorrow’s Budget, otherwise many communities will lose their local pint.”
CO2 is one of the biggest increasing costs being reported by brewers, with an average increase of 73%, but some breweries are seeing prices soar by as much as 215% alongside up to four week delays in supply. Other brewery essentials, such as cardboard packaging, are up on average 23%, all of which eats into the slim margins made by small breweries on the beer they sell.
James said: “Some of the larger increases, such as the huge triple-digit surcharges we’re seeing on CO2, are likely to be a short-term spike, but the supplier companies expect an increase of around 10 to 20% to be permanent, which joins the list of increases brewers are seeing on everything from workforce to water supply.”
One brewery in Lancashire has seen its water supply costs rise by 220% over the last six months, a huge increase for a brewing business, which will need to use an average of six pints of water to make each pint of beer.
For medium or larger craft breweries, or those which run pubs and taprooms which employ a number of staff, the recently announced rises in the national minimum wage and National Insurance contributions for more than 2 million people will put a further burden on businesses.
Roy Allkin, who owns Boss Brewing, in Swansea, and who is also SIBA’s national chairman, said: “As a nation, we all want to get back to work and back to some kind of normality, and as the cost of living rises employees need to be treated fairly and have wages which reflect inflation.
SIBA chief executive, James Calder
“But these changes cannot be viewed in isolation and come as part of a whole host of cost increases for small breweries. Many brewing businesses are reaching breaking point, and where businesses close, many thousands of local jobs across the UK will be lost.”
Roy added: “Many local hauliers have introduced fuel surcharges and we have seen our own haulage and delivery costs rise by 30%. Some will even restrict service during busy periods, which causes further issues. In short, it is a complex situation where breweries are seeing reduced service and support for a heavily increased price.”
Mondo Brewing, in Battersea, South West London, has reported cost increases of 10 to 40% on everything from petrol to packaging. Its co-founder and director, Todd Matteson, said: “After a tough year of lockdowns, business has picked up substantially, which has been welcomed.
“However, we’re faced with rising costs and longer lead times across the board, with cardboard, haulage, and energy, among many other things. And to top it all off, the CO2 shortage is wreaking havoc on all of us.
“All of these things combined are putting a great deal of pressure on the brewing industry, especially for the craft breweries, and will ultimately result in higher prices to the consumer.”
With the Budget just around the corner it remains to be seen what other costs will rise or fall for breweries. Duty on draught beer is expected to fall as part of an alcohol duty shake-up, but beer tax may rise for many small breweries as part of feared negative changes to small breweries relief — something which SIBA has campaigned strongly against.
