By Rachel Clun
Inflation for most goods and services has been falling since late 2022 but over the same time, the price increases for beer have been going in the other direction. But while the price of beer has risen at its fastest rate in decades, Australian brewers aren’t raking in bumper profits.
“I think the public perception a little bit is that we’re getting rich selling beers, so why are we increasing our prices so much?” said independent brewery owner Casey Wagner. “But really, it’s just a direct correlation to what I’m having to pay.”
Casey Wagner, co-owner and head brewer at Westside Ale Works, said brewing has become tougher since COVID.Credit: Simon Schluter
Since September 2022, beer inflation has accelerated from 3.3 per cent to reach 7 per cent in the year to December 2023.
That’s more than double the average rate of beer inflation for the past decade – and the highest rate of inflation since the introduction of the GST at the turn of the century. Excluding the GST change, beer prices haven’t grown at such a steep rate since 1991.
Independent brewers say sharp price rises for key ingredients and energy prices, combined with pricier rent and higher transport costs, have all contributed to the post-pandemic price rises.
While that means a carton of pale ale or a pint of XPA now costs more at the bottle shop or pub, those brewers say most of the additional cost is being borne by the breweries, squeezing profit margins and making their business prospects more difficult.
Wagner, co-owner and head brewer at Westside Ale Works in South Melbourne, said the past few years had been tough.
“I’m lucky to break even most days, and I don’t currently pay myself a wage. I’m just trying to survive, hopefully better days down the road. But since COVID started, it’s been significantly harder,” he said.
Wages were Wagner’s largest cost, followed by the raw ingredients. While he has contracts for hops for the next few years, he doesn’t have similar grain contracts and was recently forced to switch grain providers when the price skyrocketed by 30 per cent.
Combined with the enormous disruption from the early years of the pandemic, Wagner said business had been tough – so much so that he had been forced to let go of an assistant brewer.
Casey Wagner, co-owner and head brewer at Westside Ale Works, says the past few years have been tough in the beer industry.Credit: Simon Schluter
Wagner said he regularly audited the prices of his beers and food offered at the brewery and made adjustments where needed, including through raising prices.
“I’ve definitely raised my prices for beer and food more in the last three years than ever before,” he said.
Richard Watkins, chair of the Independent Brewers Association, said the cost of making a beer has gone up by twice the rate of consumer beer prices since 2018.
“The retailers are putting pressure on the manufacturers to not put their prices up, which means that the breweries have to absorb all those extra costs,” Watkins said.
“All the brewers’ profitability has dropped considerably, to the point where, as we’ve seen, a lot of brewers they’ve actually not been able to meet their payments, meet their debts, and unfortunately have gone into voluntary administration.”
Paddy Ryan, production manager at White Bay Brewing Company in Balmain, Sydney, said the price pressures were coming from across the board – from raw ingredients, to wages, energy bills, excise and rent.
“Ukraine and Russia are obviously two the biggest producers of wheat and barley in the world, and that whole situation that’s going on there obviously affects us down here, even though it’s a fair distance away. It’s pushed up the price of grain quite a bit now over the last few years,” he said.
Beer excise makes up about 45 per cent of the cost of a beer, according to the Independent Brewers Association.
The brewers say that often the biannual increases in excise have to be absorbed by the companies because consumers can only tolerate so many price increases.
Production manager at White Bay Brewing Company, Paddy Ryan.Credit: Flavio Brancaleone
White Bay’s senior sales manager, Jackson Davy, said there was a disconnect between how much a beer should cost and what consumers expected to pay for it.
“What you end up having is this consumer expectation of a beer, or a schooner, always costing somewhere below $10,” he said. “That doesn’t change, but what it means is the venue makes less money and or the supplier makes less money in order to maintain that consumer expectation.”
Davy said in cases where it was impossible to price a schooner at $10, he had trialled promotions such as offering pints at schooner prices to encourage people to try something new.
“Obviously, times are incredibly tough. And I think drinking a beer at the pub is something culturally quite Australian,” he said.
“So having your wallet squeezed in order to enjoy something that feels culturally affiliated, I’m quite sympathetic to all that.”
Watkins, who is also the co-owner and head brewer of Canberra’s BentSpoke, said the year ahead for brewing and beer prices was uncertain.
“What we’re wondering is what’s going to happen with interest rates,” he said.
“[That] then dictates consumer spending and whether consumers will go back to buying the products that they want to consume, rather than the products that they’re having to buy because they can save some money.”
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