2023 could begin with price hikes for drinkers across Britain, after Heineken UK confirmed it will be increasing the prices of some of the country’s best-loved pints.
The international drinks giant, which owns brands including Fosters, John Smith’s and Strongbow, has passed on double-digit percentage price rises to pubs and bars across England, Scotland and Wales. These will come into force from 16 January 2023.
While major chains may choose to not pass these increases onto their customers, independents up and down Britain may be forced to do so as the hospitality industry grapples with soaring costs and falling footfall.
Heineken UK said its move was necessary as it faces a slew of cost increases on “critical inputs”, particularly energy. Everything from the ingredients used to make beer, to the materials used in cans and bottles has soared in price, it said.
But the Campaign for Real Ale (CAMRA) described Heineken’s move as “another nail in the coffin” for many pubs. The entire pub sector has been hit by energy bill hikes, labour shortages and falling demand as a result of the cost of living crisis.
One village pub told NationalWorld the Heineken price hikes could force it to close as it had no margin left and, therefore, would have to pass on significant price hikes to drinkers at a time when people’s paypackets are struggling to keep up with record inflation.
‘Unprecedented cost increases’
Pubs and bars across Great Britain were informed of Heineken UK’s price hike through wholesalers in the middle of December. In a letter that was widely shared on social media, major alcoholic drinks wholesaler Small Beer Ltd told its customers it would have to pass on price rises of between 15% and 17% on Heineken UK’s brands - the third major price rise Heineken had implemented in 11 months.
The letter said: “Part of us here [sic] feels duty bound to apologise to you for this terrible news. But I hope that you understand that we had nothing to do with this decision, we passionately disagree with it, and we have tried everything to get them to reverse it, but with no success.
“We feel that as a national brewer in the UK, they have a responsibility and moral obligation to help support and preserve the On Trade [pubs, bars nightclubs, hotels and restaurants] - a point that seems to have been totally forgotten in the name of profit this time around with the size of this rise.”
NationalWorld contacted Small Beer Ltd for further comment but received no reply.
In response to the letter, Heineken said the price rises had been brought about by large increases in its operating costs. It suggested that it had tried to absorb these additional costs, but the scale of the hikes had forced them to raise the prices of its products.
“Like many UK manufacturers, Heineken UK is facing unprecedented cost increases on a number of critical inputs used to make beer and cider. This is predominantly driven by the significant rise in energy prices, which is also having a dramatic impact on the costs of other goods including glass, aluminium and malted barley,” a spokesperson told NationalWorld.
“Whilst we have undertaken initiatives to increase our efficiency and reduce cost volatility, the scale of these input cost increases means we have no choice but to change the wholesale price of our products to our customers. We appreciate these are challenging times, and we are committed to working with our customers to support a strong and sustainable category going forward.”
Many brewers have faced major price hikes fuelled by the war in Ukraine. International knock-on impacts of Vladimir Putin’s invasion of Russia’s neighbour have included soaring food prices and a major hike to the cost of CO2 - a gas that gives beers and ciders their bubbles.
Heineken has passed on these higher costs despite enjoying a positive start to 2022. In its half-year results for January to June 2022, Heineken UK’s parent company Heineken N.V. saw operating profits climb 20.6% year-on-year to more than €2 billion (£1.8 billion) off the back of revenues of €16.4 billion (£14.4 billion).
Its CEO and chair Dolf van den Brink said it meant operating profits were “now firmly ahead of 2019” - the last year of regular trading before the Covid pandemic hit.
In its latest accounts for the 2021 calendar year, which it filed at Companies House, Heineken’s UK subsidiary recorded operating profits of £145 million off revenues of just under £2.1 billion. It previously recorded an operating loss of £183 million in 2020 off sales of £1.9 billion.
Pubs face ‘incredibly difficult winter’
The price hikes come at a challenging time for the hospitality sector. Pubs in particular have struggled since the Covid pandemic, with around 600 establishments closing since March 2020.
These pubs joined the more than 7,000 locals that have closed since 2012. The remaining 40,000 UK pubs have had to grapple with a major inflation crisis largely caused by the Russia-Ukraine war.
Energy prices have rocketed, with hospitality businesses facing major anxiety as the government reviews the energy bills support scheme for firms announced during Liz Truss’s brief stint as Prime Minister. In December 2022, industry body UKHospitality urged the government to extend its support beyond March 2023 “to help businesses survive”.
Staff shortages have also hurt the sector, with UKHospitality reporting that 32% of its members had reduced their opening hours as a result of struggling to find enough workers.
Reacting to Heineken’s price hikes within this context, CAMRA’s chief executive Tom Stainer said: "Pubs are facing an incredibly difficult winter. Not only have the price of many goods skyrocketed, making the cost of running their business more unaffordable than ever before, but also their customers are feeling the pinch, leading to less footfall.
“Heineken’s price hike is unsurprising in the current climate as they seek to recuperate their own costs, but it is another nail in the coffin for many pubs already under severe pressure. I’d encourage everyone who can to go out and support their locals over the festive period and beyond to do so because once a pub is gone it is gone forever.”
‘We can’t carry on like this’
One such pub facing an uncertain future in the face of further price hikes is the Queen’s Head in Kirkby La Thorpe, Lincolnshire.
Located in the small village, which is just over a mile outside the town of Sleaford, the independent gastropub reopened in 2021 following an extensive renovation. Speaking to NationalWorld, its front of house managerJess Pope said the pub was already losing £2,000 a week and suggested it would struggle to stay in business if the current climate persists.
She said Heineken’s price rise would add roughly 85p to pints as the pub “has no margin left” to absorb any hikes.
“We didn’t want to be over £5 a pint in a small village pub, but that’s now impossible. Customers just don’t get it when what was a £4 pint a year ago is now £5.60,” Ms Pope said.
“I’m not sure how we can explain to customers that a pint is going to be over £6 now. We can’t even add 5% more [to pints] to cover our cost increases as it’s already taking the piss out of our customers. So, we end up with fewer customers because of the rises.”
Ms Pope said the Queen’s Head had already seen footfall drop. She added that the pub’s pints could no longer compete with supermarkets, where prices are now much cheaper than in pubs.