Beer Price Rises — Why Are Australian’s Taking This Well?

It may be cliche to say it, but us Australian’s love our beer. We love it so much, we’re ranked 4th in the world for beer consumption, consuming 109.9 litres of beer per year per person. Yes, that figure includes babies, old people, devout Christians/Muslims, and recovering alcoholics. Why is it that beer price rises have caused little outrage among the public, press, and politicians? The great poker machine heist (the legalisation of poker machines in any alcohol serving venue) was sold as an offering to pubs to keep beer prices down. Yet, in the last 10 years, beer prices have risen at a rate of 16% per year. Compare that to milk (17% PA), bread (9%) and eggs (14%) It may look like beer is part of the norm, but considering the ease of importing, the product differentiating, and the lack of sensitive legislation (all the mentioned products went through a deregulation phase that increased produce prices), its clear beer shouldn’t be seeing the type of inflation it is, not without some kind of variable.

To figure out the cause, we must first look at the world markets. Not only does beer go through the standard free trade import/export before the selection is stacked on bottle shop shelves, ingredients are also impervious to fluctuations in agriculture prices. It’s not to far fetched for a flood throughout Eastern Europe to cause a $3 price rise in a case of very Australian beer, like XXXX. Global hops acreage last year was barely half of what it was way back in 1996. The yield is just 63% of what it was a decade ago. Money quote:

He said the brewery has contracts that ensure it will have a sufficient supply of barley malt and hops, but prices are up sharply.

Climate change may be one factor. An Australian drought that some experts blame on global warming has cut that country’s barley production in half, while European floods earlier this year led to sharply lower yields of hops there.

In addition, some farmers have switched to growing corn, which commands a higher price because of its use in alternative fuels, cutting the acreage devoted to barley and hops.

Maybe it’ll get better? Nope:

“I’m guessing, at a minimum, at least a 10 percent jump in beer prices for the average consumer before the end of the year,” said Terry Butler, brewmaster at central Washington’s Snipes Mountain.

Another side of the bottle label with raw ingredient price rises is the reduction of aggressive discounting. Beer makers whom face rising costs because of raw product expenses don’t need an illegal price collusion to figure out close competitors are feeling the same pain. With little incentive to discount, most companies simply stick to steady mark ups, with no relief for the consumer.

Worst of all, small brewery’s, referred to as ’boutiques’ will probably see the worst of it:

Small brewers from Australia to Oregon face the daunting prospect of tweaking their recipes or experimenting less with new brews thanks to a worldwide shortage of one key beer ingredient and rising prices for others.

As a large beer fan myself, it sucks to see the market work so efficiently. I retain my optimism in the long run, however. If high hops and barley prices encourage more farmers to devote land to those very crops, prices will begin to stabilise, and hopefully a revival in the micro-brew industry will be forged.