Heineken Warns Beer Prices Will Rise Thanks to High Inflation

by TK Sanders
heineken-warns-beer-prices-will-rise-thanks-high-inflation

Beer manufacturer Heineken recently warned customers to expect price increases, as the company faces “crazy” bumps in the cost of raw goods, energy, and transportation.

The international beer brewer said its own operating costs would increase about 15 percent thanks to “off the charts” inflation. Unfortunately, Heineken must pass those costs on to the consumer in order to stay fiscally competitive.

Dolf van den Brink said in an interview that Heineken had to raise prices in this overly-saturated cash economy.

“In my 24 years in the business I’ve never seen anything like it, not even close,” he said. “Across the board we face crazy increases. There’s no Heineken model that can handle this kind of inflation. It’s kind of off the charts.”

Heineken experienced record sales numbers, but inflation could slow consumption

Alcohol consumption spiked during the pandemic as more people stayed home than ever before. But with the drastic inflation and subsequent price increases across the board for all products, alcohol manufacturers worry that consumption will dip. Anytime unnatural pricing begins unnaturally affecting consumption of a product, the entire industry lags behind. Furthermore, all aspects of the economy that the aforementioned lagging industry trades with daily will also lag behind. Such is the early beginnings of an economic recession.

Heineken already admitted to hefty price increases in Europe — an average bump of 4.3 percent to stay competitive with reopening bars and pubs. Beer consumption continued to rise in 2021 by about 5 percent in the UK; though that indicator could reverse itself if customers experience too much sticker shock.

Overall, Heineken reported an 11.3 percent increase in sales to €21.9bn (£18.4bn) in 2021. Its net profit jumped by 80 percent to €2bn. Reduced COVID restrictions in Europe helped buoy the industry toward a 6.2 percent rise in consumption across the board.

Again, though, the whole house of cards could crash down if consumption dips significantly. Besides price increases, new waves of COVID or governmental interference in the economy could also negatively affect consumption.

Van den Brink said Heineken produced a “strong set of results” despite inflation in “a challenging and fast-changing environment.”

“Looking ahead, although the speed of recovery remains uncertain and we face significant inflationary challenges, we are encouraged by the strong performance of our business.”

Inflation in the UK reached the highest percent increase in three decades

The Office for National Statistics (ONS) said the consumer prices index (CPI) measure of inflation increased for the 13th consecutive month to 5.5 percent in January. Clothing, footwear, and furniture prices (among others) drive the index.

With the CPI predicted to hit more than 7 percent in April, the latest increase is expected to further pressure the government to determine solutions. The Bank of England (like the Federal Reserve) also faces scrutiny to raise interest rates, which would encourage less debt-based spending and more cash saving.

Outsider.com