Pubs and suppliers need 'better communication'

On top of inflation ​and rising gas and electricity​ costs, licensee of the Green Dragon pub and brewery in Bungay, James Pickard, stated one of his suppliers, namely AB InBev, had recently announced an additional “surprising” increase to its prices for this year.

He said: “It's certainly not the case we would typically have price increases twice during the year.

“We're being hit from all angles at the moment with increased energy costs [and] increasing costs from our suppliers.

“I know breweries do put their prices up periodically, but my understanding is AB InBev typically put prices up once per year in Q1, so to get another pricing increase at this stage of the year was surprising.”

Pickard added the pub uses Great Yarmouth-based distributor Lacons, which he has been in communication with regarding the rising costs.

The operator claimed after negotiations with Lacons he was able to reduce the increase from 14% to 9%, having already negotiated an increase of 13% down to 11% earlier this year.

Sad state of affairs ​

According to Pickard, this has resulted in combined cost increases of as much as 19% since the start of 2022, with previous price rises for the Green Dragon, which has been in operation since 1991, having been recorded as much less.

The licensee asserted in Q1 2020 the cost of Stella went up by 4.9% and Becks increased by 2.2%, while in Q1 2021 both brands went up by 2.7%, rising to 9% for Stella and 13% for Becks by Q1 2022 before being further increased in Q3 2022.

While the Green Dragon benefits from having its own on-site brewery, Pickard stated despite the venue selling a lot of its own beer​, continued price increases have forced the pub to increase the cost of a pint from £3.60 to £4.20 and could mean it would have to charge more than five pounds a pint in the future.

Pickard added: “If we were to try and keep our gross profit margins, we're talking about adding 60p on a pint, [which] is an extremely important matter in terms of how do we manage that, how much do we absorb, how much of it can our customers take?

“The cost-of-living crisis is well publicised at the moment as customers are struggling and we want to do what we can to support them. We want to keep the heating on over winter to be somewhere for our regulars to come and get warm, if necessary, it’s a pretty sad state of affairs.”

Additionally, Pickard stated he understood suppliers need to look after their profit margins as well, but better communication between distributors and pub customers or holding off price increases would help operators understand price increases better and support those who are struggling.

He said: “If AB InBev turn out to be losing money hand over fist, it would be a challenge for them as well, but my understanding is they are operating fairly profitably at the moment.

Hubs of the community ​

“There are all sorts of things they could do to support smaller pubs [such as] give them a better price and hold off on price increases for a short period, that would go a long way. They could look at bulk group buying arrangements, or direct investment in some of the businesses that are turning over a lot of their beer.

“We’ve sold something like 200 kegs of Becks in the past 12 months, we're shifting a lot of AB InBev products, they could look at what they can do to sustain the viability of businesses that are actually selling their beer.

“It wouldn't take much for them to look at day-to-day chats, they can speak to landlords across the country, they can speak to the people actually selling their beer and find out what challenges they have.”

Furthermore, Pickard added without support and unless “something changes”, small businesses will “disappear” from the nation’s high streets.

“[Pubs] serve as hubs of the community [and they] will disappear. It might not happen overnight, but they will slowly close ​one by one and we'll notice these places missing from our towns, I can't really see any other outcome from it.”

A spokesperson for Budweiser Brewing Group (BBG), which is part of AB InBev, said like many businesses the distributor had seen "unprecedented" increases in commodity and fuel costs over recent months but supporting pubs, bars, and restaurants was a "key business priority".

Furthermore, BBG called for a "simple, across the board" lower beer tax rate in order to "yield the greatest benefit to the sector" as well as tax incentives for sustainability initiatives.

The spokesperson added: "From barley to glass to fuel, our input costs have skyrocketed. In addition, the payments we make to recyclers for our packaging (PRNs) has gone up by around 400%. 

"We have not seen inflationary pressures like this for 40 years. Amid these pressures, beer is so heavily taxed – a price increase from suppliers ends up being a very small increase to the consumer, as the majority of the cost of beer to consumers comes from tax. 

"We have rolled out a number of initiatives over the past few years donating to businesses and hospitality workers including Save Pub Life, Stella Tips and Stella Please and are fully focused on driving foot fall to pubs through marketing campaigns, social campaigns and other initiatives.”