FAQs for Price Increases - September 2022

Beer & Cider

Q -What costs are impacting Beer prices?

A - Raw material.

·The barley price has doubled since 2021. There are two reasons for that, affecting the two most high-volume barley exporting regions of the world. Firstly the 2021 harvest in North America was really poor, driven by poor weather. This has damaged inventory since Autumn 2021. Secondly we have the war in Ukraine preventing exports from the Black Sea since February 2022.

·Hops. The two most significant costs in hop production are labour (for crop husbandry and harvest) and fuel for hop drying. For 2022 growers have also been faced with 12% increase in wage costs, fuel increases approaching 100% so far, and significant increases in the cost of fertilisers, chemicals, packing.

·Aluminium. The demand for aluminium cans has increased dramatically in recent years. More breweries have opted to distribute their products in aluminium over glass alternatives due to the cost and ease of packaging. As a result, the supply of aluminium cans couldn't keep up with the demand. A shortage always leads to a price hike.

Q - What about cider?

A - The extreme weather events seen in the UK during 2021 have affected many varieties of cider apple. We saw the frostiest April since records began, a colder than average May - followed by extreme downpours. That all resulted in a shortage of juice going to the fermenters.

Q - Other factors that are resulting in increased costs?

·Inflation. UK inflation hit a 40 year high last month and could reach 13% in October.

·Then we have rocketing energy costs. It takes a lot of power to run a mash tun.

·Freight costs have increased two-fold. Driven by oil prices, but a number of other distribution costs have risen as well.

·Packaging. Packaging makes up about 25 to 30% of the cost price of beer, and glass packaging, glass bottles, use about 25% of their cost in energy, so with gas prices going 10 times higher now than they were two years ago, that has a massive impact on brewer's costs.

Soft Drinks

Q - I've heard there are a number of issues in the Soft Drinks category is that correct?

A- The soft drinks market has had to face a lot of challenges over the last few months. Global unrest, as well as material and freight shortages, has had a dramatic effect on the supply chain of both ingredients and raw materials.

Q -What costs are impacting Soft Drinks?

A - The industry has incurred worldwide shortages of materials, in part to do with demand, but also the ongoing war in Ukraine. Glass has been something that most suppliers have had issues with, due to how much of this was being produced in the Ukraine. Suppliers are having to move production to other locations such as Turkey, and glass suppliers that are picking up this demand can name their price. We have also started to see shortages on Aluminium in the last few weeks, again due to supply and surging costs. The surging cost of materials and ingredients due to worldwide pressures have led to a lot of soft drinks suppliers implementing more than one price increase during this year

Q - Increases in the costs of Glass, card and fuel affect manufacturers in many categories. What costs specific to Soft Drinks are affected?

A - The huge volatility in global prices of fruit commodities have directly affected Soft Drinks. Prices of apple, cherry, elderflower and peach for example have been up to three times higher than they were 18 months ago.

Q - As well as cost increases there are shortages as well?

A - Along with many UK On Trade customers we are on allocation with several suppliers for glass and aluminium products. However, it isn't just glass and aluminium creating issues for soft drinks suppliers. A lack of lorry drivers and shipping containers have created bottlenecks at many of the world's major ports. This has lengthened lead times and made forward planning a major issue, especially for the global producers like Coca Cola.

Q - Did the hot UK summer play a part?

A - Provisional figures show the summer of 2022, covering June, July and August, had an average temperature of 17.1C, tying with 2018 to be the warmest UK Summer on record.

The extremely hot summer weather that we have experienced has lifted demand enormously. Water suppliers are out of stock due to such high demand with forecasts being rapidly altered to incorporate additional production.

Q - Are there any other issues these problems have created?

A - With shortages affecting most products, this has added restrictions to us running promotional activities as suppliers do not have the extra products to give away.

It also makes it very hard to confirm Christmas and FIFA World Cup promotions (e.g. Coca Cola are a sponsor of the World Cup).

Spirits

Q - Why haven't my Spirit prices risen in the same way as some of the other products?

A - The Spirits industry has also faced inflationary cost increases due to global financial head winds and unrest in the world. The production of many spirits mean that they are left for multiple years to mature within casks. This has, by its very nature, effectively 'locked in time' the cost of those liquids. It has therefore been possible for producers to graduate price increases.

Q - Will Spirits prices increase in the coming months?

A - Unfortunately, the Spirits industry will not be able to offset rising costs in packaging and freight for much longer. We expect to see producers looking to increase costs in the months leading up to Christmas, and beyond.

Wine

Q - What cost pressures has the Wine category faced recently??

A- The wine category has had to face a lot of challenges over the last few months. Global unrest, as well as material and freight shortages, has had a dramatic effect on the supply chain particularly on costs of raw materials, i.e. glass and cardboard as well as freight.

Q -What costs are impacting wine?

A - The industry has incurred worldwide shortages of materials, in part to do with demand, but also the ongoing war in Ukraine. Glass has been something that most suppliers have had issues with, due to how much of this was being produced in the Ukraine. We have started to see shortages of smaller bottles 37.5cl and 187ml in the last few weeks which may impact on our ability to supply these sizes. A worldwide shortage of containers and trucks and staff shortages as well as increased fuel costs have heavily impacted our freight costs which are currently stable only for one month at a time. All of these costs due to worldwide pressures have led many suppliers implementing more than one price increase during this year

Q - Increases in the costs of Glass, card and fuel affect manufacturers in many categories. What costs specific to wine are affected?

A - Heavily impacting wine are the glass costs, since it's the only packaging format. Also of specific challenge to wine are freight costs, as so much of our wine range is bought directly in from the various wine producing areas of the world.

Q - As well as cost increases there are shortages as well?

A - Poor harvests in 2021 due to late spring frosts have resulted in shortages this year in some white wines like NZ Sauvignon Blanc and Picpoul. Thankfully we have been able to source great alternatives from other areas. A lack of lorry drivers and shipping containers have created bottlenecks at many of the world's major ports. This has lengthened lead times and made forward planning a major issue. Average Order à Delivery times from countries like Argentina and Australia have increased from 12 weeks to over 20 weeks.

Q - Did the hot summer play a part?

A - The extreme heat this summer in Europe means that the harvest will be earlier than normal by a few weeks and the lack of rainfall means that the grape are much smaller which will is likely to mean shortages in some areas and this will hit stock availability in 2023.

Call the sales office on 01747 827030 or email ten/ratcen//selas

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