The Smoke & Mirrors of Brewers Rises

Posted by:

The Smoke & Mirrors of Brewers Rises

percentagesThis article shows how a 3.3% rise in wholesale cost of beer can actually be a 5.8% rise at a time when inflation stands at 0.3% (January 2015).

In Early 2015 the major Brewers, Heineken and Molson Coors announced a wholesale rise of around £15 per barrel (36 gallons) on draught lagers and ales. The full wholesale price of an 11 gallon keg of 4% ABV lager was £152.06 before the rise and after the rise of £5.05 became £157.11, a rise of 3.3%. However, this is where the smoke and mirrors kicks in.

RCM Stocktaking know of no-one paying the full wholesale price of £2.14 inc vat per pint. (The exception may be a tenant on a nil or low rent). The average free of tie pub pays somewhere around £80 for an 11 gallon keg of 4% ABV lager and receives 40-50% of the rise back in increased discounts so their new price is £82.50, a rise of 3.1%.

So how does a 5.8% come about?

Government duty on an 11 gallon keg of 4% lager is £37.48 so the price the brewer receives is actually £80.00 -£37.48 = £42.52. If, as above this keg went up £2.50 this is a rise of 5.8% on £42.52. When the brewers rise is added to the wholesale cost including duty the rise is larger as a % of the ex-duty price.
Even an Enterprise tenant receiving a 3% rise faces a rise of 4.6% once duty is removed.

As can be seen from the above the subject is complicated and hopefully we’ve explained it clearly but I somehow doubt it!
RCM Stocktaking Solutions Ltd have been providing effective advice to the hospitality industry with tailored advice to improve profitability.

Associated article in the Morning Advertiser


About the Author:

Richard is the owner of RCM Stocktaking Solutions Ltd which provide Stock Auditing services to the licensed / restaurant / hospitality sector.