Brewers will raise prices - or reduce size of packs
If they can’t push through price hikes, brewers will reduce bottle or pack sizes, claim drinks experts.
This week, Stella Artois and Budweiser brewer AB InBev said rising raw materials and energy costs meant it would have to pass on a 7.8% price increase across its UK portfolio from 2 January 2012 a move expected to be replicated by other brewers in the coming months.
“This is the smallest increase we are able to deliver and maintain our business on a sustainable footing,” claimed outgoing AB InBev UK president Stuart MacFarlane.
However, industry experts said retailers were likely to balk at the price rises in the current economic climate and that, in some cases, the brewer might have to reduce the number of units in its high-volume multipacks or the size of individual bottles and cans instead.
“AB InBev, in its various guises, has been a master of this in the past,” said Tim Wilson, managing director of market analysts Wilson Drinks Report. “The consumer is used to buying 12 cans or bottles for £10 or two cases for £16 and the retailers like these mechanics, so they’ll try and keep that going,” he said, adding that the 284ml bottle format could be reduced to 275ml or even 265ml.
Nielsen analyst Stewart Blunt also predicted a reduction in pack size and that other brewers would follow AB InBev’s lead on price increases.
Heineken UK managing director Stefan Orlowski said it was battling cost inflation “significantly above RPI” and that “in reviewing our pricing plans for the coming year, it will be necessary for us to reflect these upward pressures”.
Smaller brewers adopted a similar line. “No-one will change prices before Christmas, but in January we would welcome this and do something similar,” said one source, adding that AB InBev’s move would lead to challenges with Tesco and its Big Price Drop initiative.
“I think they’ll refuse to accept the increase point blank,” he said. “AB InBev has fought back with value engineering in the past couple of years and they’ll do it again if they’re denied an increase.”