Pubs face £3 pint

Licensees facing above-inflation costs may be forced to add 20p to price of a pint

The pub trade is facing up to the prospect this year that the average price of a pint of beer will rise to £3 or more.

Licensees are already facing above-inflation increases in wholesale beer prices of brands owned by Scottish & Newcastle UK (S&NUK) and Coors.

S&NUK is increasing prices by 5.7%, while Coors announced a 4.5% rise and warned: "We will not rule out further increases in 2008 if they become necessary".

The rises come into effect on 11 February and are both expressed as duty-exclusive - S&NUK said the increase amounts to about 4.2% for the customer.

The brewers said the increases amount to 4p or 5p on a pint.

But AC Nielsen consultant Graham Page predicted pubs could be forced to add up to 20p to a pint this year after pubco increases, duty and VAT are factored in. He said it is "more and more likely" that a £3 pint would become the average in 2008.

S&NUK and Coors both cited above-inflation rises in costs, including energy, barley, metals and glass.

In a letter to customers, S&NUK stressed the rises were "fair and reasonable".

Coors' portfolio activation director David Wigham said: "We have taken a number of actions to try to mitigate these cost increases. Our price rise recognises this and also reflects the significant investment we are making in our brands in 2008 and beyond.

"Despite much higher cost increases than those experienced in previous years, we are taking a similar wholesale price increase to that taken

in 2007.

"We need to review our prices on a regular basis and will continue to do so. Given the high level of cost increases, we will not rule out further increases in 2008 if they become necessary."

Page said it was "inevitable" there would be further price increases from brewers this year.

He said the big national brewers were "struggling" and beer sales were likely to be down 7% or 8% in the

year to March 2008.

Page added: "The on-trade has really got to up its game if it wants to survive. Good operators will continue to do well. Unfortunately, there are going to be casualties. I think we'll see a couple of thousand fewer outlets over the next few years."

Analyst Mark Brumby of Blue Oar Securities said: "If the pub companies pass on these price increases to their tenants, the latter will be looking at trying to push through rises of some 13p a pint in the price of standard lager.

"In a very weak beer market with the consumer threatening to go on strike, the smoking ban biting and off-trade pricing to the consumer still bumping along at below cost, that may be more easily said than done."

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PUBs facing new delivery surcharges

Pubs face new surcharges for deliveries of lager in smaller containers.

S&NUK is adding 75p per 11-gallon container of lager under a new scheme to begin in the next few weeks. Last November, Carlsberg added surcharges of 90p per nine and

11-gallon keg and 50p per 18-gallon container.

S&NUK spokesman Nigel Pollard said:

"The charge reflects the delivery cost of small containers."

Carlsberg spokesman Gareth Roberts said: "The key reason is to cater for the additional cost in the supply chain when utilising smaller containers as against the larger containers.

"This is reflected in a lower container charge for a bigger unit. It also gives assistance against the increasing cost of keg loss within the industry, reported to be approximately £60m for small containers."

Coors has a long-standing charge of £1.50 on nine and 11-gallon containers.

The moves come against a background of talk by the British Beer & Pub Association of a "cash-neutral" keg deposit scheme, with hosts only paying if they fail to return kegs.

How licensees plan to respond

Punch lessee Nick Barrett expects to have one price rise after the Budget, when customers appreciate the reason. The licensee of the Gardeners Arms in Cheddar, Somerset, said: "We are approaching £3 a pint as it is. With the price increase in the Budget we expect it'll be £3 and above. How customers will take it I don't know."

Enterprise Inns host Paul Hubbard expects he will have one price rise after the Budget. He fears he may have to slap up to 30p on a pint this year. "Until we get the prices from Enterprise we don't know what we'll do," said the licensee of the Chafford Arms in Fordcombe, Kent. "It's not just beer prices; we have to consider things like energy and VAT."

Anthony Marshall of the True Lovers Knot in Tarrant Keyneston, Dorset, said he will put prices up once the new wholesale price hikes kick in, with a further duty rise added later. The Hall & Woodhouse tenant said the cost of beer is driving more of his customers towards wine. "I've had men come in here and order a bottle of wine - that never used to happen."