Fears drink prices will skyrocket in Australia

First petrol soared, then supermarkets announced they were raising grocery prices to cover surging costs, now there there are fears drink prices will be next to rise.

Europe and the United States have already seen steep hikes at bars and bottle shops. Drinkers face paying £6 ($11) for a pint of lager in London and $US10 ($13.80) in New York.

In Australia, retailers have been warned to expect significant and continuous price rises from their suppliers for the remainder of the calendar year as the war in Ukraine and fresh lockdowns in China batter the world’s supply chains.

Inflationary pressures have also been mounting over the past 12 months as the pandemic continues to drive up the cost of everything from raw commodities to packaging, pallets and shipping costs.

The National Australia Bank’s latest index of business conditions showed purchase costs and labour costs rose at the fastest pace in the history of the survey, which in turn is pushing up retail prices.

The Australian Food and Grocery Council said last week that their manufacturer and supplier members were facing increases in costs of up to 700% since the pandemic began and are warning some of that will need to flow through to consumers.

Those price pressures are beginning to be reflected in business results. Endeavour Group released its Q3 FY22 results last week, delivering $2,728 million in total sales in Q3 FY22, 2.1% lower than the same quarter last year. The fall was attributed to the timing of Easter, bad weather, rising business costs and COVID-19.

Endeavour Group Managing Director and CEO Steve Donohue said: “These results are once again delivered within the context of an uncertain operating environment with extreme weather events, ongoing supply chain disruptions and growing inflationary pressures creating new challenges.”

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The group’s hotels division rebounded, with revenue up 3.8% to $405 million, as people returned to venues following COVID-19 restrictions easing. 

However, Donohue said red meat prices had been climbing and the hotels business had reluctantly passed price increases through to customers.

“We’ve had to put up our steak prices by $1 or $2 which we don’t like doing,” he said.

He admitted drinks prices were also on the rise, but not by a considerable margin as yet.

At a virtual supplier forum last month, Donohue said the retailer was holding off on cost increases for as long as possible. 

“Like everybody, we are experiencing pressure in the supply chain and that manifests in both impact on availability and costs,” Donohue said. “Together, we have managed to wade through the availability challenge, and we are genuinely grateful for everybody’s efforts in trying to put stock on shelves and moving through the supply chain, but it’s costing more than ever before.

“What we have done is try to hone in on exactly how much it is costing us at the moment, and therefore what the cost increases for us look like. One of our intentions is to try to continue to hold that cost which we view as an investment in trying to facilitate stock movement for suppliers for as long as we can, but we’re also going to start sharing that information with suppliers to give everybody some visibility on what it is costing at the moment to move things around.”

Hospitality prices under pressure in Australia

Experts are predicting Australia will follow the US in seeing menu price rises due to inflation. In the US, a recent report showed menu prices at full-service restaurants had jumped 8% since March last year.

Restaurant and Catering Association chief executive officer Wes Lambert told Yahoo! Finance Australian hospitality businesses were “feeling the squeeze from the increasing cost of doing business”.

He said restaurants, cafes and other venues were under pressure from higher wage bills and rising costs of food and beverages.

“Supply issues, inflation, fuel cost surges, and relentless rises in rent and wages/superannuation risk the recovery of the industry most affected by COVID,” Lambert said.

“Ultimately, this means that menu prices will likely increase as businesses try to break even or even to make a small profit.”

New Zealand inflation slams alcohol industry

Across the Tasman, the NZ Alcohol Beverages Council (NZABC) has warned consumers will most likely be the ones to foot the $84 million bill for their favourite beer, wine or spirit due to the historic rise in inflation announced last week.

There was a 6.9% rise in the Consumer Price Index (CPI), which is used to increase the excise tax on alcohol. At $1.2 billion currently, this works out to be an additional $84 million of excise tax that producers and hospitality businesses say they are in no position to absorb.

“Businesses are already absorbing many increased costs – transport, fuel, cost of goods and services, regulatory and compliance costs, and excise tax,” said Bridget MacDonald, NZABC’s Executive Director.

“Shipping costs have trebled, aluminium has doubled, and minimum wage increases are being passed on through the supply chain. There comes a tipping point where the pressure of rising costs mean it’s no longer viable for a business to absorb those mounting costs, and they must consider passing some or all on to customers. Customers can’t outpace inflation either; they are also keeping an eye on expenses and tightening their belts.”

Prices for adult beverages are on the rise across the board. According to Stuff NZ, picking up a dozen beers from the supermarket would have set consumers back $20.83 in 2019, but now costs $21.74.

The cost of a 400ml glass bought at a bar has increased from $6.63 to $7.27, while a three-litre cask of wine was $24.54 and now costs $27.22.

European drinkers hit with price hikes

Heineken said last week it would put up beer prices for European consumers because it expected “significant” rises in its costs.

“We see more macroeconomic uncertainty and expect significant additional inflationary headwinds putting further pressure on our cost base. We will take additional actions including pricing to manage these challenges,” said Dolf van den Brink, chief executive.

Van den Brink noted in February: “In my 24 years in the business I’ve never seen anything like it, not even close,” Van den Brink said. “Across the board we are faced with crazy increases. There’s no model that can handle this kind of inflation. It’s kind of off the charts. So it’s anybody’s guess … what the impact is going to be on volumes due to all these price increases.”

Sales surge in hotels, but alcohol spending drops

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