eToro: End of drinkflation not yet in sight

The elated mood at the reopening of the catering industry this year was quickly tempered. An evening of drinks turned out to be heavy on the wallet. After the shock at the pump, there was the shock at the counter. The eToro Beer Index shows that this price increase does not come out of the blue. In the current situation, beer consists of a particularly unfortunate combination of ingredients, which means that the price increase for the popular drink is much higher than the average price increase. The beer drinker is therefore hit harder by inflation than the chocolate lover. A vase in the catering industry has now surpassed a Tony’s bar in price. There is drinking inflation.

The costs for the raw materials, packaging and transport of beer have increased by no less than 62% in the past two years, this cost inflation is significantly higher than the increase in the Dutch consumer price index (CPI) in the same period. To calculate the Beer Index, eToro looks at the spot prices of the raw materials that beer producers need – from barley and malt, to aluminum and gasoline. The persistently high raw material prices do not paint a rosy picture. The expectation is that there is more bad news in store for beer drinkers.

“The average cost of raw materials for beer production has increased by 62% over the past two years. The index shows that there is significant price pressure and that more price increases are ahead. With the upcoming Oktoberfest and the World Cup football, this is unfortunate timing for beer lovers.

For the treasury, on the other hand, the price increase is a windfall. The tax authorities will be able to collect considerably more excise duties, as VAT and excise duties account for about a third of the cost of a beer. If the Netherlands makes it to the final in Qatar, part of the purchasing power repair may be paid from the revelry,” said eToro market analyst Jean Paul van Oudheusden.

The price of gasoline – which is needed to grow the ingredients of beer and to transport the product – has risen the most at 138%, largely due to the war in Ukraine and the limited supply of crude oil from Russia.

Barley and malt costs are also skyrocketing, rising 104% and 87% respectively over the same period. Here too, this is mainly caused by the disruption of the market as a result of the Russian invasion of Ukraine. Both countries together account for an estimated 30% of world barley exports.

Rice is the only commodity in the Beer Index whose price has fallen in the last two years, with a 1% decline since mid-August 2020. The stable price of the crop – which is used as an adjuvant in combination with barley malt to lighten beer – is due to the large stocks that have been built up in recent years.

The data used to build the Beer Index comes from Refinitiv: Aluminum (99.7% LME Cash, US$/MT), Barley (MPLS Terminal prices, US$/Bushel), Gasoline (Regular Unleaded, FOB NYH, US $/Gallon), Malt (2RS Average EU FOB Antwerp Crop, EUR/MT), Rice (Processed, US$/50KG), Wheat (No.2 Soft Red, US$/Bushel).

The article is in Dutch

Tags: eToro drinkflation sight

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