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Drinkflation: Cost of beer production soars 62% in two years

The biggest cost increase in beer production comes from gasoline

Attention beer inflation! The cost of producing beer will increase by 62% in two years, and inflation will continue to loom as the price of making your pint increases

  • Barley and malt spot prices are up 104% and 87%, respectively, since August 2020
  • Wheat prices are also up 39%, while aluminum prices are up 37%.
  • Biggest rise in gasoline – up 138% while spot rice prices fell 1%
  • The average price of a pint of lager in the UK has risen by 8% over the last two years to £4.09

Beer drinkers will pay even more at the bar as a new ‘Beer Index’ reveals a huge increase in the input cost of a pint over the past two years.

According to a study by the investment platform eToro, the cost of the raw materials required to produce, package and transport beer has increased by 62 percent since August 2020.

The rate of price growth far outstripped the 12 percent rise in the UK consumer price index over the same period.

The biggest cost increase in beer production comes from gasoline

The biggest cost increase in beer production comes from gasoline

The average price of a pint of lager has risen 8 per cent to £4.09 over the past two years, according to the latest figures from the Office for National Statistics.

But analysts at eToro say the new index suggests drinkers can expect even bigger price hikes in the coming months as the cost of beer production continues to rise.

Barley and malt spot prices are up 104 percent and 87 percent, respectively, since August 2020. Wheat prices are also up 39 percent.

This is largely thanks to the disruptions caused by the war, with Russia and Ukraine responsible for supplying up to 30 percent of world barley exports, according to Rabobank.

Ships carrying Ukrainian grain and other products were allowed to leave the country’s Black Sea ports for the first time since the war began in late July. Since then, prices have fallen from previous highs.

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However, climate change is also responsible for the increase in global prices of many staple foods, as extreme weather conditions lead to crop failures worldwide.

For example, according to a report by Defra, UK wheat yields fell by 40 percent in 2020 as a result of heavy rains and droughts.

Need a strong drink?  Raw material prices for beer production have skyrocketed

Need a strong drink? Raw material prices for beer production have skyrocketed

The largest cost increase in beer production is the gasoline used by the machinery used to make the beer ingredients and to transport the product.

Gasoline spot prices have risen 138 percent over the past two years.

Again, this is partly due to the war in Ukraine and the limited supply of crude oil from Russia and fears of further supply disruptions.

Only the price of rice, which is used in combination with barley and malt to lighten beer, has remained more or less stable, down 1 percent.

This is believed to be because supply has outstripped demand every year since 2007, leading to large inventories.

Even beer can packaging has become more expensive to source, with aluminum spot prices up 37 percent.

Ben Laidler, Global Markets Analyst at eToro said: “This might be an unfortunate timing as Oktoberfest starts in a couple of weeks and the World Cup starts in November.

“One winner will be the helmsman, with VAT and beer tax accounting for around a third of the cost of a pint and all alcohol sales bringing in an estimated £450 in tax per household.”

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