Carlsberg to raise prices this year to cover rising costs

Danish brewer to increase prices by a 'high single-digit' percentage this year
Carlsberg to raise prices this year to cover rising costs

Carlsberg expects organic operating profit this year to change by between minus 5% and plus 5%, compared with 12% growth last year.

Danish brewer Carlsberg has warned a possible slowdown of beer consumption in Europe because of increased prices could dent profit growth this year.

Carlsberg expects organic operating profit this year to change by between minus 5% and plus 5%, compared with 12% growth last year.

"2023 will be another challenging year," chief executive Cees 't Hart said in a statement. 

"While beer historically has been a resilient consumer category, the higher prices in combination with generally high inflation may have a negative impact on beer consumption in some of our markets, particularly in Europe," he said.

Brewers have raised beer prices in response to rising energy and raw material costs. Carlsberg said its revenue per litre of beer sold grew 9% last year, and it would have to raise prices by a "high single-digit" percentage this year to cover rising costs.

This echoes comments by Nestlé last week about plans to raise prices of its food products further this year to offset higher production costs that it has yet to fully pass on to consumers.

Carlsberg, the Western brewer most exposed to Russia, said last year it expected a writedown of about 9.9 billion Danish crowns (€1.3bn) after announcing a sale of its business in the country as a consequence of Moscow's invasion of Ukraine.

Wholesale gas

Meanwhile, European wholesale gas fell, with Morgan Stanley seeing room for an even deeper retreat as healthy stockpiles ease a historic energy crisis. An ongoing cold spell is forecast to end soon and warmer weather likely to return next week. While gas reserves have declined in recent days, they remain well above the 10-year average and are providing a strong buffer for any increase in demand.

Traders are also waiting for news on the reopening of the Freeport plant in the US, formerly a major supplier to Europe before an explosion last summer closed shipments. 

Reduced consumption by industries, a mostly mild winter and steady inflows of liquefied natural gas, or LNG, have helped push prices down more than 25% this year, and they are hovering near levels seen before the Russian invasion of Ukraine.

Morgan Stanley cut its forecast for prices in the third quarter to €47 a megawatt-hour — last seen in August 2021 — compared with €64 estimated a month ago. It expects gas reserves, which are about 70% full, ending the winter season at 59%. That is double the levels of last year. 

Continental European gas prices for March were trading over 6% lower at  €54.50 a megawatt-hour on late Tuesday. The UK equivalent contract also fell by over 6%. 

The European gas market has turned around sharply. It has moved from fears of shortage last year, to potentially a position of glut later this year. 

Storage sites could be filled up months in advance if the continent doesn’t slow down purchases, Morgan Stanley said. That could result in too much gas floating around in the market.

Countries in “our European perimeter would reach 100% inventory fill as early as August if LNG imports continue at the current pace”, the bank said. 

• Reuters and Bloomberg

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