Beer brewers are burdened by high costs – is beer becoming more expensive now?

Dusseldorf It initially sounds like good news for brewers: Germans are drinking more beer again. Pubs and restaurants are open again without restrictions. Folk festivals and festivals are taking place again. A lot of sun in summer and autumn increased the desire for draft beer in particular. According to the latest figures from the Federal Statistical Office, German brewers sold 7.2 billion liters of beer (excluding alcohol-free) domestically in 2022 – four percent more than in the previous year.

But the situation for brewers is more tense than these figures would suggest. “The recovery has done the industry good after two pitch-black years,” says Guido Mockel. He leads Germany’s largest private brewery group Radeberger. “However, a return to the pre-crisis level is not in sight.”

Last year, domestic sales by German brewers were still five percent below the pre-Corona level of 2019. And according to Mockel, 2023 will also be extremely demanding for the industry – with massive cost pressure, constantly growing overcapacities and an uncertain energy supply next winter.

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Not only energy, everything to do with beer has become significantly more expensive: brewing malt cost 90 percent more in November than a year earlier. Beer kegs were 60 percent more expensive, new glass 70 percent and crown caps even 120 percent, according to calculations by the German Brewers’ Association.

Although most breweries have increased their prices across the board, they have not been able to pass on all of the additional costs. The margins in the industry have therefore fallen significantly. Many manufacturers are now being forced to raise prices for the second time in twelve months.

Brewing beer is an energy guzzler

Most recently, Stefan Fritsche from the Berlin-Brandenburg Brewery Association warned of a nightmare scenario for German beer drinkers: If the brewers and restaurateurs were to pass on their additional costs, half a liter of beer in the pub would have to cost 7.50 euros at the end of the year, according to the association’s deputy spokesman.

Market expert Hermann Josef Walschebauer, on the other hand, considers such demands to be “excessively excessive” despite the cost increases. But he also sees the brewers as having a responsibility to strategically realign themselves. Only those who master purchasing, sustainability and brand management will survive in times of high costs and reluctance to buy.

“Corona has accelerated the downward trend in the industry. The pandemic crisis showed which breweries can manage beer and which cannot,” says Walschebauer. The number of German breweries had shrunk to 1512 in 2021, according to the German Brewers’ Association. Breweries that are unable to enforce higher prices are particularly affected.

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Above all, the high energy costs, which have risen massively since the beginning of the Ukraine war, are a burden on the industry. “Beer brewing is an energy guzzler,” states Walschebauer. Small breweries in particular that have not invested in energy efficiency are now at a disadvantage.

Even carbon dioxide, which is needed to tighten the barrels and fill them into bottles, costs about 90 percent more than a year ago. At times it was even almost sold out on the market. Because the production of artificial fertilizers from expensive natural gas became unprofitable, the by-product CO2 was also missing. Bad for brewers who do not collect and use their fermentation carbon dioxide. Individual companies such as the Apoldaer brewery in Thuringia even had to temporarily stop production in the autumn.

Three out of four beer crates are special offers

Even if the brewers can push through higher prices in the trade. You risk that the Germans’ thirst for beer will wane. Because when it comes to beer, the Germans have not only been bargain hunters since inflation. According to market researcher GfK, three out of four crates of beer are sold as specials in this country. In 2003, only one in four cases was sold at a sale. Consumers have become more and more accustomed to promotions.

With this, brewers push sales, but hardly earn anything. “The trade plays the brewers off against each other and promotes price dumping,” says Walschebauer. The box of 20 with 0.5 liter bottles of beer cost less than ten euros in the November campaign. On average, it was 3.46 euros cheaper than the normal price.

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“The price pressure is passed on from premium brands to the lower price segments, which suffer particularly,” observes the industry expert. The large Swabian brewery Oettinger also had to cut production sharply. The plant in Gotha was recently sold to a competitor, Paulaner, who probably wants to mainly produce soda there. Oettinger itself is also discontinuing eight of its beers, such as Bock and Urtyp.

Binding brewery in Frankfurt

The Radeberger Gruppe will close the traditional brewery until October.

(Photo: IMAGO/brennweiteffm)

Consolidation on the German beer market is progressing inexorably. A number of regional beer brands have already disappeared. The Palatinate brewery Bischoff went bankrupt. An investor was not found. The Hessian private brewery Pfungstädter from 1831 is also on the verge of collapse. Apartments are now to be built on the brewery site.

Non-alcoholic and light beer in trend

Even market leader Radeberger, a subsidiary of the Bielefeld Oetker Group, felt compelled to give up the traditional Binding brewery. The company at the Frankfurt headquarters with 150 employees will be closed by October. He is said to have been underutilized for a long time. The brands are to be brewed at other locations.

Veltins boss Michael Huber

The private brewery defies the beer doldrums. In 2022 it brewed more beer than ever in its almost 200-year history.

(Photo: picture alliance/dpa)

“We are adapting our capacities to the changing market with foresight,” explains the Radeberger boss. For industry expert Walschebauer, the closure is a sign that the Oetker Group has neglected to maintain the traditional brands Binding and Henniger. “Corporations like AB Inbev (Diebels, Hasseröder) or Oetker don’t really master the brand management of regional beers,” he says. “Consumers sense this and migrate.”

But there are certainly segments in the German beer market that are growing. Canned beer is currently making a comeback, reports Warsteiner and Veltins. This is also due to the comeback of festivals. Alcohol-free beer is also trendy. Radeberger (Jever Fun) is the largest provider in Germany. Beer without alcohol increased by more than 15 percent at the market leader compared to the pre-crisis year 2019.

After the hype about wheat beer, light beer is now the order of the day. The Helle Pülleken from Veltins, for example, was a growth driver for the Sauerland region with a plus of over 25 percent. Warsteiner calls its new light beer brand Oberbräu a “complete success”. The Oberdorfer Helles was also a volume driver for Radeberger.

The Veltins private brewery shows that it is still possible to grow strongly even in a difficult environment. In 2022, the Sauerland region bottled more beer than ever before in its almost 200-year history – 336 million liters correspond to an increase of 8.4 percent over the previous year. Sales increased even more by almost 16 percent to 419 million euros. “We are satisfied, but by no means euphoric,” says Chief Representative Michael Huber.

Because Veltins also has to contend with additional costs in the tens of millions. And the Sauerland region also sees little room for maneuver when it comes to prices. “Consumers’ worry and savings reflex remains imponderable,” says Huber.

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