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The Smoke & Mirrors of Brewers Rises

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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

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About the Author:

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