Heineken Price Going Up as Barley Harvests Down; China Drinks More Beer

Heineken, a Dutch brewer which sells beer in over 170 countries, has reported that increasing costs of supplies are affecting its bottom line in several ways. The cost of aluminum, used for packaging, is rising along with energy costs, and due to a "disastrous" Australian barley harvest, the cost and availability of their major raw material is also rising. According to The Australian, the company plans to pass along some of these cost increases to customers. Heineken also mentioned that competition for agricultural products from the biofuels industry as various governments mandate their use is affecting their costs.

On the Heineken website, the company says that there are only four ingredients in their brewing process: water, barley, hops and yeast. Each ingredient lends characteristics to the product's unique taste. Beer manufacturers in the Czech Republic are in fact lobbying for a European Union directive to declare their product, made with local ingredients, as uniquely entitled to the name "Èeské pivo", just as Champagne is produced only in a specific region of France. If their request is granted, their current harvest, also poor, would have produced a reduced beer output in a country currently with the world's highest per capita beer consumption. Costs are also rising for Czech beers this year, but only in larger quantities, so that customers will not notice when purchasing half-liter bottles, according to the Prague Post.

The beer market is growing worldwide, adding further pressure to the barley market: Asia is a growing beer market, and barley is also produced in countries such Nepal and Tibet, considered an autonomous region by China, where the Chinese have been testing new types of barley, and harvests are increasing significantly, according to The People's Daily. China has been importing barley from Australia, but Asian beer is often brewed with different, rice-based malting ingredients, so Australia has recently been testing a new type of barley designed to meet Asian needs. Barley, traditionally seen as a food grain in China according to one Chinese industry executive, is increasingly being imported specifically for the brewing industry. Australia supplies approximately 60% of China's malting barley imports, according to the COFCO executive.

According to Agriculture and Agri-Food Canada, "China is the largest producer and consumer of beer and importer of malting barley in the world" alongside Australia and the European Union. This market is expected to continue increasing significantly, but China is also developing domestic resources, and in the longer term will be less of a factor. Australia's new barley crop development is aimed not only at China, but at other Asian markets where consumption is growing.

Heineken's profit grew 12.7% last year, according to the Financial Times, on sales of €11.8bn.

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