The beer sector, at its most challenging moment

The hauliers’ strike and the war in Ukraine have hit the beer sector hard, just like the agri-food industry in general. The problem is no longer just that producers cannot ship the beer to their customers, increasing storage costs as we will see later on; but that even if they can ship it, they are not receiving the supplies they need for production.

This mainly affects small producers, artisans who don’t have large contracts with their raw material suppliers and have even less capacity to store a surplus for contingencies like the current one. What’s the point of taking on the fixed costs of keeping a factory open when you can’t even work?

It is not an isolated link; it is a problem that cuts across the entire supply chain. With the transport crisis, many small producers who had barely begun to climb out of the red after two years of the Covid-19 pandemic will be forced to close their businesses for good. Spain’s brewing fabric is not strong enough to withstand the current situation.

However, the root of the problem is not new. The rising cost of fuels, driven by the sanctions imposed by the European Union on Russia, is making a business model unsustainable in which electricity powers the entire process: from mashing to boiling to the cooling of the fermenters, not to mention the cost of storing both the final product and the raw materials, which have also increased in price in recent weeks.

In many cases, these microbreweries have taken on debt to build the facilities they work in, and will be unable to pay it off. If industry giants with greater financial muscle, such as Estrella Galicia or the Heineken-Cruzcampo group, have already raised the alarm and announced that they are preparing to halt production, what will happen to SMEs?

Europe is facing a scenario of stagflation (the combination of rising prices without wage increases, and economic stagnation or even recession) from which the beer sector will emerge badly hit. Associations such as Cerveceros de España are already warning of the consequences: “in mass retail, the blockage is significant, as deliveries to supermarket logistics platforms are being hindered”.

Following the chain, we find that beer accounts for “up to 25% of bar turnover, a figure that rises to 40% in the case of small hospitality businesses with fewer than 10 employees.” In addition, the association warns of the impact on employment across all the companies that make up the chain, including specialty shops.