Cost of national beer production gets up to 10% more expensive with Ukraine war

The traditional weekend beer can be more expensive for Brazilians. That’s because the war between Russia and Ukraine puts pressure on the prices of barley and malt, the main ingredients of the drink.

The two countries involved in the conflict account for nearly 30% of global barley exports. Russia is the third largest supplier of malt to Brazil, behind Argentina and Uruguay.

Even if the nations are not the main suppliers of Brazilian breweries, the lack of inputs in the international market causes a rise in prices.

Beer production in Brazil is the third largest in the world, according to data from the Ministry of Agriculture, Livestock and Supply (Mapa). The brewing industry’s revenue reaches R$ 77 billion, representing 2% of GDP.

According to Mapa data, in 2019, Brazil imported 671,000 tons of barley grains, ranking 11th among the world’s largest barley importers. It also imported 1.09 million tons of malt, ranking first among the largest malt importers.

The National Union of the Beer Industry (Sindicerv) points out that about 78% of the barley and 65% of the malt consumed in the country in 2021 are imported from other countries, including Russia and Ukraine.

Hops are almost entirely imported, mainly from Ethiopia. For the superintendent of Sindicerv, Luiz Nicolaewysk, the war will impact the cost of raw materials.

“It won’t be missing, but it will get more expensive. They are commodities and, in this moment of shortage, they inflate. We already have something around 10% increase in the price of these inputs”, points out Nicolaewysk.

Until February this year, beer inflation accumulated 8.39% in the last 12 months for consumption in households, according to IPCA data.

Paulo De Tarso Petroni, general director of the Brazilian Association of the Beer Industry (CervBrasil), says that the profit margin of the producers can be compromised by up to 30%, on average.

According to him, in addition to the inflation of the drink, other factors impact the cost of production of the entrepreneur, such as the increase in fuel prices and the value of the dollar.

The director-general of CervBrasil says that companies have avoided passing on the highs to customers. When they are passed on, according to him, it is not in an integral way and takes place in selected products or regions.

“As for the price of the drink, it should have an impact because of this strong increase in production inputs, cost increases, but we always have a buffer that is the purchasing capacity, that is, the availability of income for the final consumer” , declared.

“We have already faced here in Brazil, for a good couple of years, a deterioration in the Brazilian consumption capacity. So, it’s not much use for us to try to increase prices to pass on the costs that come from abroad because, in fact, the consumer does not absorb this”, added Petroni.

For small entrepreneurs, the impact should be even greater. The president of the Brazilian Association of Craft Beer (Abracerva), Gilberto Tarantino, highlighted the difficulties facing the scenario, which already added other barriers, such as the cost of fuel in transport.

“This impact will be huge, no doubt. It mainly harms smaller breweries, such as craft or independent. Today, we have around 1,300 productive breweries. We import in smaller volume, we don’t do 12-month contracts like bigger companies, and we have less negotiating power,” he said.

“Some are passing on the costs little by little, while the customer has opted for other brands”, said the president of Abracerva.

In commerce, the impact has not yet been felt by Brazilians. In the last 12 months of the Broad National Consumer Price Index (IPCA), beer increased by 5.97%.

According to the Brazilian Association of Bars and Restaurants (Abrasel), capitals such as Rio de Janeiro, São Paulo and Recife did not register the transfer of the increase in beer prices to consumers in the first two months of the year.