Made in Italy breweries, the cost of raw materials eliminates margins

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After so many alarms and complaints about the effects of the wave of increases in the prices of agricultural raw materials, the energy costs of packaging and transport, there is now the risk of moving on to concrete effects. And one of the first agri-food sectors that risks paying the price is the beer sector. A product that has managed to achieve positive results in recent years, even during the pandemic when there was an increase in sales especially in large-scale distribution and consumption, at least in Italy, within the home. Results that have allowed made in Italy breweries to overcome the pandemic emergency, relying on their own strength. But now the noose constituted by the escalation of costs added to the prospect (this entirely linked to the beer sector alone while for other food sectors there has been discussion in view of the Maneuver of a possible tax relief) of an increase in excise duties, they really risk to bring the sector to its knees, putting turnover and employment at risk.

This is what emerged from the analysis by Osservatorio Birra with the presentation of the 6th Report «The creation of shared value in the beer sector in Italy», created by Althesys. “In a year and a half, from 2021 to the first half of 2022 – reads the Observatory’s analysis – the prices of strategic raw materials such as corn and barley malt have grown by 80 and 95%; those of packaging and materials doubled, especially glass; even quadrupled those of electricity. In 2022, with the same sales values ​​compared to 2021, for breweries the impact of raw material and energy costs on the value of production increased by +50%. We are talking about an increase of 20 percentage points, even higher than the margins of the sector in 2021 (17.1%)».

Operating losses for one in two breweries

According to Osservatorio Birra, rising costs and a reduction in the purchasing power of Italians risk eliminating that “beer phenomenon” which in ten years has made this drink the center of Italian gastronomy and social life. “A 5% drop in sector revenues – they explain to Osservatorio Birra – conceivable on the basis of a classic dynamic that sees a possible decrease in demand in price increases, would lead to operational losses for at least one out of 2 breweries (48% ). Those same companies which, in the last 4 years, have never stopped investing (250 million euros between plants and human resources) and which have come out on their own from the two most difficult years ever”. An already complex scenario to which a new increase in excise duties on beer risks adding up, thus casting a shadow not only on the 2022 accounts but also on next year. All conditions that risk putting a strategic sector of Italian food in serious difficulty, a supply chain that according to Osservatorio Birra and Althesys generated 9.4 billion euros of shared value in 2021, which corresponds to half a percentage point (0.53%) of our GDP and 5% of the funds provided for by the PNRR. “Beer – they explain to Osservatorio Birra – has not only brought wealth to those who produce it. If anything, the opposite is more true: only 2% of the 9.4 billion of shared value is ‘retained’ by the breweries, the rest is distributed to workers in the supply chain and to the State. And in fact, every euro of beer sold has generated 6.4 along the entire supply chain. The downstream phases benefited above all from this (distribution and sale, with 7,341 million euros), while beer brought a substantial contribution to the state coffers: 4,206 million euros between VAT, taxes and contributions on income and labour. Furthermore, the beer supply chain has distributed 2,348 million euros in wages, giving work to over 95,000 families, with a value of about 30 employees for each production employee”. This value multiplier effect, which grows with each step in the supply chain, unfortunately also holds true in reverse. In other words, if the producers, who represent a small part of the shared value that beer brings to the country, enter a crisis, the whole supply chain will suffer. In particular, the sector of consumption away from home, ie restaurants, pizzerias, pubs and bars, where beer, by virtue of its large margins, constitutes a fundamental part of the turnover. This is confirmed by the managers and owners of the Italian establishments themselves, whom Osservatorio Birra interviewed a few months ago: for 64.5% of establishments, beer today represents more than 25% of the business, and in the 5-year forecasts the share of who will depend half of the proceeds from beer will go from the current 16.7% to the expected 30.2%.