Beer price HIKE warning: Heineken issues update on soaring costs to hit drinkers

Inflation rates discussed by Interactive Investor experts

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Heineken revealed it expects its production costs are set to increase further this year with energy and transport key factors pushing up overheads. The brewer, who also owns brands such as Strongbow and Amstel, said it would try to “offset” these costs through price increases, although it admitted this may lead to “softer beer consumption.” Heineken Chief Executive Dolf van den Brink said: “These kind of price increases and inflation, I think we have not seen in a generation. The big unknown is how this will affect the more developed markets that have not seen this kind of pricing before.”

The warning comes after the founder of Cobra beer, Lord Bilimoria, warned of price increases at the brewer, blaming a “vicious cycle” of cost increases.

Meanwhile Danish brewer Carlsberg also revealed it would need to raise prices this year, with concern this could dent sales.

No firm has given an exact figure however UK brewer Adnams recently told they expected pubs and breweries to see price increases in line with inflation of five to seven percent.

With figures from the British Beer and Pub Association putting the average price of a pint at £4.07 this would add 28p to each pint at a seven percent increase.

In practice pubs may round this up further with recent reports of pubs increasing prices by up to 50p per pint already.

Heineken’s warning also comes as the wider levels of price increases in the UK were laid bare today.

Data from the Office for National Statistics found inflation had climbed to 5.5 percent, getting steadily nearer the Bank of England’s prediction of a 7.25 percent peak in spring.

Currently the strain on household finances looks only set to intensify with April seeing a hike in National Insurance and an increase in Ofgem’s energy price cap, adding hundreds of pounds to energy bills.

Despite citing “significant inflationary challenges” Heineken’s results have been greeted broadly positively by investors.

Beer volumes grew throughout the year as spending on beer increased following the pandemic delivering an 80.2 percent increase in net profits.

In particular sales of Heineken’s premium brands as well as non-alcoholic products have seen strong growth.

Matt Brizman, equity analyst at Hargreaves Lansdown, commented: “Consumers seem to be brushing aside inflation concerns and sticking to the more premium brands – that’s where Heineken should be able to bump up prices without too much of an impact on volumes.

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“Focusing on today’s results, Heineken delivered some pretty good numbers with all regions beating the company’s forecast in the second half.”

Heineken’s share price rose 1.1 percent following the announcement with the board proposing a final dividend of 81p (€0.96) to shareholders.

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