As costs spiral brewing industry warns of ‘business closures time-bomb’ in the New Year
The Society of Independent Brewers (SIBA) say that rising costs in essential materials such as fuel, CO2, energy, bottles, cans and packaging are making it impossible for many small independent breweries to bounce back from Covid lockdown and social distancing measures which hit the pub and brewing industry harder than most.
Reports from SIBA highlight widespread closures in 2020 and around a decade’s worth of industry growth lost, with brewery numbers in the UK slipping back considerably thanks to closures caused by Covid – a trend which has continued in 2021. Costs are rising across the board for brewers, with businesses reporting price increases in supplies such as CO2 (up 73%), brewery energy (57%), beer cans (up 20%), cardboard packaging (up 22%), as well as an average of 17% increase in vehicle fuel costs.
“Increasing costs of brewery supply services such as water, energy, and CO2 are being seen at the same time as the price of cardboard, glass bottles, cans and even yeast – 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.” James Calder, Chief Executive Society of Independent Brewers.
“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.” James added.
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 4 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.
“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 10-20% to be permanent, which joins the list of increases brewers are seeing on everything from workforce to water supply.” Said James Calder.
One brewery in Lancashire has seen its water supply costs rise by 220% over the last 6 months, a huge increase for a brewing business which will need to use an average of 6 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 over 2 million people will put a further burden on businesses. Roy Allkin, who owns Boss Brewing in Swansea and is SIBA’s National Chairman, says:
“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, 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 also highlighted the additional costs on fuel and haulage that are being passed on to small businesses such as brewers, “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, have reported cost increases of 10-40% on everything from petrol to packaging. Todd Matteson, Mondo Brewing Co-Founder & Director, commented:
“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, with duty on draught beer 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 have campaigned strongly against.