European drought could see brewers upping prices by 5%

The Summer drought in Europe - reputed to be the worst for the past 100 years - has led to barley shortages across the continent which means that brewers (particularly Heineken and Carlsberg which are both heavily exposed to Western Europe for grain) may have to raise prices significantly.

Prices for the 2011 harvest are set to rise sharply which could contribute to a stronger rise in input costs in 2012 over and above the price rise expected this year following Russia’s imposition of a ban on all wheat exports last year.

And the UN has warned that high food commodity prices around the world show no signs of dropping.

It has only been three or four years since the last time raw materials costs put pressure on brewers to raise prices and while it’s hard to pin down, some analysts suggest a hike of four or five per cent by brewers is not out of the question to effectively balance input costs for barley. But implementing such a hike in such a depressed beer market as exists in Europe at present may prove more problematical.