Brewers braced for soaring costs in 2007

Dutch brewer Grolsch warned Tuesday that the entire brewing industry would be hit by "steep increases"​ in prices for malt and hops this year. The firm's warning reveals the extent of concern in the industry about the danger cost increases pose to profit margins in 2007. A large part of that danger is down to supply shortages, and Grolsch said there was not enough quality or quantity of material available. Adverse weather conditions around the globe have led to a series of bad harvests, notably for barley, according to Mark Hastings, spokesperson for the British Beer and Pub Association. He said UK brewers' costs had risen by as much as 30 per cent on average. "It wasn't a good barley harvest in the UK [in 2006] because conditions were too extreme. We had an exceptionally hot summer, which led to shortages of water, and the winter crop suffered from excessive frost." ​ Britain's spring barley production dropped 10 per cent to 2.7m tones last year, according to the National Farmers Union, although mainly due to fewer plantings. Winter barley production also dropped 7.5 per cent to 2.3m tones. Hops, another vital ingredient for brewers, also struggled against extreme weather in Europe last year. The problems have damaged confidence in the global supply chain, and Hop Products Australia told ABC News​ it would look to new sourcing arrangements with China and Thailand instead of Europe. Pressure on supplies for brewers is expected to be made worse by more rises to energy costs, Grolsch warned this week. Mark Hastings said: "For transport of raw materials and beer to and from breweries, there's quite a high uplift." ​ The stark predictions for 2007 mean brewers will have to remain vigilant on opportunities for cost savings. "I don't think there's anything you can do with this level of increase,"​ said Hastings, who added brewers would have to absorb some of the costs but may also try to pass some on to consumers.