• Wed. Oct 5th, 2022

Friday Night Beer Blog – the economics of beer

ByStephanie M. Akbar

Sep 17, 2022

Happy Friday beer fans, come on in and have a cold beer with us!

The global economy has been under unusual stress for 2 and a half years now, since first the Covid pandemic and now the war in Ukraine. We’re seeing higher prices for almost everything, including beer, and for reasons you might not have thought of. Here are some loosely organized notes on things I’ve read recently.

– Not enough CO2? Too much carbon dioxide in the atmosphere could be Earth’s biggest problem, but there’s not enough to pressurize beer. Fermentation naturally produces CO2, but most small breweries haven’t invested in the equipment to capture and use it, so they must purchase CO2 to carbonate the beer and move it under pressure through the brewhouse. Industrial CO2 is a byproduct of the production of other industrial chemicals, so if there is less demand for those chemicals, there is less supply of CO2. CO2 demand is also on the rise due to Covid – some of the vaccines need to be kept on dry ice for transport.

– Not enough bottles? The Covid shutdowns shifted beer sales from bars and restaurants to package sales in stores, most dramatically in Europe where on-site sales were a much larger fraction than in the US. Belgian brewers (and probably others) are now struggling to get enough bottles. The price of glass is up because the price of energy is up and making glass uses a lot of heat, and because of the war they can’t buy bottles from Russia anymore. And it seems Belgian brewers still have attitudes toward canned beer that most Americans have overcome.

– Malt too? Russia and Ukraine are two of the four largest barley producers in the world. Neither will likely export as much this year as they did previously.

– It’s worse in Britain – The fighting in Ukraine and the resulting sanctions against Russia have driven up energy prices around the world and all of Europe will suffer, but the UK suffer even more. All types of businesses will have problems and the pubs are already seeing it happening.

Like thousands of pubs across Britain, the Red Lion and Sun fears financial ruin this winter as its energy costs rise, as business begins to recover from years of fallow from the COVID-19 pandemic.

Nestled in a leafy north London suburb, the pub’s annual energy bill is on track to more than quadruple this year from 16,000 pounds to 65,000 pounds ($76,000), said Frisco Group Director James Cuthbertson , who runs the pub along with two others in the capital and the south east of England.

‘We need to make £50,000 extra profit every year, even as profits come to a halt as consumers see their own prices rise at home,’ he said.

Quadruple?

Annual consumer price inflation for gas and electricity in the UK is expected to soar to an average of about 80% this year, compared to an average of 40% in the 19 countries that use the euro, according to an analysis by Deutsche Bank… Unlike other problems in the British economy, Brexit does not seem to be a major factor. So why are UK energy bills rising so much faster than in most European countries?

A broken market

As wholesale prices soared last year, 31 small UK energy companies – which traditionally offered competitive prices – went bankrupt, forcing millions of customers to switch to bigger suppliers and pay higher bills. high.

The way the UK government designed the energy market made it more likely, Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNN Business. Small businesses acted as brokers rather than providers of an essential public service.

“Many retail energy suppliers in the UK were not true energy producers. Instead, they bought electricity and gas on the wholesale market and then resold it to retail customers like households,” Gloystein said.

Who remembers the disaster in Texas a few winters ago? People paid crazy bills and people died because the Conservative government designed the electricity market to benefit suppliers, not consumers.

OK, it’s already late, I have to go. I drink a Hazy Little Thing. What are you drinking? Who brews?


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