Drinks suppliers hoping to increase prices in 2013 can expect tough negotiations with supermarket buyers - despite the fact that the retail price of some best-selling lines is actually cheaper than in 2008.
Producers are warning that wholesale prices need to rise due to continuing cost of goods inflation - but with overall volume sales down in all drinks categories this year [Nielsen 52 w/e 13 October 2012], buyers are expecting to put up a major fight.
Players including Heineken and Molson Coors say margins are being squeezed by rising costs and duty, with some predicting above-inflation price increases in 2013.
But a supermarket drinks buyer claimed commodity costs have actually eased. “For brewers to come in with price rises in a declining market feels short-sighted and without real rationale given some of the commodity decreases,” he added.
While the disastrous UK wheat crop has contributed to a big spike in wheat commodities this year, the price of malting barley is up just 1% year-on-year [HGCA]. And the cost of many packaging commodities have also fallen.
But producers defended their stance: “It’s not a question of calling out one particular input cost component,” said one.
“We are dealing with a net increase in the total cost of production and distribution that is greater than inflation.”
Nigel Tordoff, director of off-premise at Molson Coors, added: “It’s an extremely competitive market and we’re looking to grow, so we’re not going to put through increases unnecessarily.”
While leading alcoholic drinks brands are experiencing a decline, volume sales of own-label booze are up 10.3% year-on-year to account for 21.5% of the market [Kantar Worldpanel 52 w/e 8 July 2012].