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Cost of beer production soars 62% in two years spelling ‘drinkflation’ ahead 

Cost of beer production soars 62% in two years

THE COST of the commodities required for the production, packaging and transportation of beer has risen by 62% in the past two years, according to the first ever Beer Index from social investing platform eToro. 

The rate of price growth dramatically outpaces the 12% rise in the UK consumer price index (CPI) over the same period, indicating there is likely to be some price pain to come for beer drinkers as brewers look for ways to offset their costs.

eToro’s ‘Beer Index’ (simple weighted index) is based on current spot prices of a basket of six commodities needed for producing and selling beer – wheat, barley, rice, malt, aluminum (for cans) and gasoline (for transportation and farming). Since August 20th 2020, the Beer Index has risen by 62%, with the war in Ukraine playing a significant role in the costs brewers are currently facing.

Ben Laidler, Global Market Analyst at eToro, said: “The average price of a pint has risen by 8% over the past two years to £4.09, four percentage points behind the broader consumer inflation rise. But our Beer Index tells us that stronger price pressures are brewing and stiffer price rises could lie ahead.”

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“This could be unfortunate timing with the Oktoberfest starting in a couple of weeks and the football World Cup kicking off in November. One winner will be the tax man, with VAT and beer duty making up around a third of the cost of a pint, and overall alcohol sales pulling in an estimated £450 of tax per household.”

Gasoline – required for farming the ingredients of beer as well as for the transportation of the product – has seen the biggest price rise of any item in the beer basket, with its cost jumping 138%, largely thanks to the war in Ukraine and the restricted supply of crude oil coming from Russia.

Barley and malt costs have also skyrocketed, rising 104% and 87% respectively in the same period, also largely thanks to disruption caused by the war, with Russia and Ukraine thought to supply as much as 30% of the world’s barley exports.

Rice is the only commodity in the Beer Index to have dropped in price in the past two years, falling by 1% since mid-August 2020. The stable price of the crop – which is used as adjunct in combination with barley malt to lighten beer – is thought to be down to supply outstripping demand every year since 2007, leading to large stockpiles.

CommodityBase = 100(August 20th 2020)Indexed price(August 19th 2021)Indexed price(August 18th 2022)
eToro Beer Index100134162

Spot prices taken on the third Thursday of August each year. Equal-weighted across the six commodities.

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