Albania: Rising costs, declining sales lead to shrinking beer consumption

Surge in raw material prices has increased the costs of Albania’s brewers by 30%. In the market, beer prices have risen by 7-10%. The increase in the price of beer has reduced consumption by about 10%, the Albanian Daily News reported on June 4.

Due to lower prices in the market, Italian imported beer has expanded its market share, replacing Albanian products.

The president of the Albanian Beer Producers Association says rising costs, declining sales and a lack of supportive policies are calling for the industry to go bankrupt. Imports in 2021 were 21% higher than domestic production.

After the recovery of the sector in 2021, Albanian beer producers are suffering the wave of rising prices of raw materials. Domestic beer selling prices have risen 7 to 10%.

The rise in prices has been driven by an increase in production costs which are now 30 to 50% higher than last year. Leading companies claim that from the beginning of this year, they are paying 50% more for electricity than in 2021.

Glass has also risen in price by 70%, other materials such as barley and packaging cardboard have risen by 30% each in foreign markets. According to producers, for the period January-April, consumption has shrunk due to rising prices. Domestic beer has been replaced by imported beer, mainly Italian beer Peroni, which is gaining a lot of ground due to the low selling price.

Companies say that in order to amortize rising production costs they are forced to raise beer prices again, jeopardizing competitiveness. On the other hand, we are before the tourist season, where the demand for finished products always doubles, but the forecasts of local companies are not optimistic about the performance of beer consumption in the summer months.

For the period January-April, domestic beer production has increased by 17% compared to years, according to Customs data. Production performance in January, February (12.5% increase) and March (19.5% increase) continued to be higher than in 2021, while in April there was a contraction of production, about 15% less than last year.

The President of the Association of Albanian Beer Producers and the administrator of Stela beer, Stefan Pinguli stated for the Monitor that as a whole, the sector is suffering from the increase in the price of raw materials. According to him, the increase in raw materials has boosted the cost of domestic production by 30% over the years. Pinguli underlined that if this situation continues, the yield of production is put in real danger. To dampen rising costs, producers have raised prices, while warning of another 10% increase in domestic beer.

"Raw material prices have risen 50% more, including doubling the price of energy, oil over 30%, packaging materials.

“Their growth occurred during the pandemic period, but with the start of the Russia-Ukraine war there was another increase of them, especially in livestock products. This has forced us as producers to increase the prices of beer products by 10%. Another increase of 5 to 10% is forecast in the coming months, as companies find it impossible to amortize costs."

High production costs are also a concern for Elbar beer producers. From November 2020, Elbar beer began to be produced in Albania. Previously, the product was imported from Greece, while the packaging was performed by Agna Group. The managers of the company ALFA sha told the Monitor that the increase in costs from the increase of raw materials is over 30%.

"This year there is a high increase in the production cost of beer, due to the increase in the price of raw materials. Specifically, the price of energy has increased from 11 ALL per kW to 20 ALL per kW. Among other raw materials, the highest increase was recorded in glass over 70%, in barley over 30%. In foreign markets, there has been an increase in packaging materials for cans.

“The change for this case is not reflected in the costs of the company, due to the 2-year contract we had with suppliers. After its completion another cost is expected to be added. In this situation, to amortize the high cost increase, we have been forced to raise prices by 6 to 7%. Rising prices have reduced consumption. For the period January-April, consumption has been 7% less compared to years," company executives told the Monitor.

In this situation, according to the head of the Albanian Beer Producers Association, it is necessary for the government to adopt supportive fiscal policies. "Purchasing power has been hit hard by rising prices and this is expected to lead to an average reduction in consumption of 10 to 15%.

But this situation affects the profitability of production. With costs rising 30% and sales falling 10%, with no compensation from the state, these are the industry's calls for bankruptcy. The state should not only index its interests, but also the interests of producers, who have invested over the years to consolidate them.

Stela beer administrator, Stefan Pinguli emphasizes that the beer industry is in trouble and domestic production is being replaced by cheap brands of Italian beers.

"Foreign beers, mainly Italian, are entering the country, at a cheaper price than locally produced beers. I do not think that the reduction of the import price has been influenced by their smuggling, but these companies are selling in Albania products with cheaper prices of pandemic stock goods. The situation is hurting the industry, as domestic production is being replaced by cheap imported beer," he said.

Other producers claimed that the weight of Italian imported beer Peroni is increasing in the market, due to the cheap price. "If a large can of beer of our company is sold for 78 lek, a can of Peroni is for sale for 48 lek (30% cheaper). Italian beer is gaining a lot of ground in the Albanian market, due to its cheaper price. This happens because in Italy, producers are not affected by the increase in the price of electricity," affirmed one of the Albanian beer producers.

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