Beer and spirits prices have soared almost 10% in the wake of commodity cost rises, duty and VAT hikes and weakened sterling as predicted by The Grocer in January.

The retail price of spirits shot up 9.7% in the year to July and beer leapt 9.5%, according to ONS Consumer Price Index data. Wine prices increased 6.3% over the period.

Experts forecast in January that the price of a pint of beer could rise by as much as 10% or 30p as soaring costs of barley, duty and VAT hikes hit the industry (‘Beer prices to rocket as cost hikes hit industry’, 22 January, p4).

According to the Wilson Drinks Report, the combination of duty and VAT hikes implemented earlier this year were to blame for up to 60% of the increase in the price of beer and spirits.

Its analysis showed VAT and duty on a 70cl bottle of £15 vodka was responsible for 5.7 points of the 9.7% increase. On a 12-pack of 4% abv lager, they contributed 5.3 points to the 9.5% increase.

Weakened sterling had also taken its toll, said Wilson Drinks Report MD Tim Wilson, with New World wine importers facing a 15% to 30% depreciation in the pound compared with two years ago.

Mintec data shows the alcohol industry’s key commodities have rocketed in the past 12 months, with barley malt up 35%, rice up 48%, glass up 6% and aluminium up 2%. Crude oil and diesel prices have risen 34% and 35% respectively over the same period.

The government’s decision in March to allow the beer duty escalator to rise higher than 7.2% had put additional pressure on the industry, said outgoing AB InBev president Stuart MacFarlane.

“This is on top of increased costs of raw materials including barley, malt and fuel, which the government seems to have ignored when setting its tax limits,” he said, echoing his warnings in January that suppliers were facing higher cost inputs.

“Retailers set the price seen by consumers. All these factors continue to push prices up. The government can do more to ease the burden and protect a market that is already in ­decline.”

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