At the national pub awards in Dublin’s Mansion House on Wednesday night, Heineken was on everyone’s lips. But the assembled publicans were less likely to be drinking the lager than talking about it, with the price hikes announced earlier this month the subject of many conversations.
There was talk of a boycott of sorts with some suggesting they would – at the very least – be removing some of the more niche brands brewed by Heineken, including Orchard Thieves cider and Island’s Edge stout. There was less talk about dispensing with the taps that provide the brewer’s flagship lager. It is not hard to see why.
Publicans are finely attuned to the demands of their customers and know that such is the loyalty of the Irish drinking public to particular brands, that Heineken, which is routinely ordered by more than a third of Irish lager drinkers on a night out, could not simply be taken off the menu without complaints.
Heineken knows that too which is – industry sources say – why it was able to roll out a price hike that could add 25-50 cent to the price of a pint, taking the average price to more than €6 from the start of next month, without fear of the consequences.
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The brewer blamed “significant increases in the cost of energy, packaging and raw materials” for the price hikes and told publicans that its “malt costs had climbed by 120 per cent while diesel costs were up 67 per cent”.
Many people in the trade aren’t buying it.
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Mike McMahon runs Mother Mac’s pub in Limerick city and is fuming at the price increase being “shoved down our throats”. He says the increase will heap even more pressure on a business that has been hit hard by the cost-of-living crisis on multiple fronts.
“To put it in pub terms, my electricity bill was five pints every day last year and now it is 33 pints every day,” he says. “And we are paying the price even when we shut the doors because we have to keep the fridges and the beer coolant and delivery systems on so there is no way to make savings. On top of that, our customers have less money in their pockets so that is another challenge.”
But, he says, the increase announced by Heineken is particularly galling. “It has been shoved down our throats and we have been told to take it or leave it. It is happening whether we want it or not and we have no choice but to pass it on.”
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He struggles to understand the logic of it, especially as the small artisan producers he does business with have absorbed the cost increases they face while Heineken, one of the largest brewers in the world, has just imposed “one of the largest single increases in more than 20 years”.
He says about 100 microbreweries around Ireland “have had to look at what people can afford, what disposable income is out there and then take a hit themselves while the large multinationals don’t take the hit, they just put up their prices maybe because they are not so involved with the markets they serve”.
He believes his customer will “100 per cent think twice about whether or not they can afford a night in a pub with increases like this”.
He suggests there may be “a huge opportunity for the small brewers to step up to the mark”.
“In an era of rising prices, I would like to see a lot more focus on locally brewed beer, it is a quality product and was seen as more expensive but in the context of what is happening now, the price gap is smaller and I would love to see family-run businesses benefiting. We will be focused more on them and look to move away from the multinationals,” he says.
Elliot Hughes is the managing director of the Porterhouse Brew Co – one of Ireland’s micro-brewing pioneers – and he says that while people have been talking to him about turning away from Heineken in light of the price increase, it is unlikely to happen.
“We are creatures of habit,” he says. He believes the big players in brewing in Ireland can effectively do what they want when it comes to pricing such is their dominance across the market.
“In the UK no one brewery has nearly the same market share as two or three breweries have in Ireland which means that over there any major price increases are met with substitution with competitive brands. I don’t think in Ireland we have the same choices for consumers to move brands.”
Companies such as Heineken have more bargaining power which means publicans, retailers and, ultimately, the public have little choice but to accept price increases
— Elliot Hughes, managing director of the Porterhouse Brew Co
He points out that smaller brewing companies are under the very same pressures when it comes to input costs but have to be far more careful when considering price hikes. “Our two biggest input costs in brewing are energy and barley – or other grains – and they have been hit hardest when it comes to rising costs but we don’t have the same sort of market share or power that some of the big guys do.”
He says companies such as Heineken have more bargaining power which means publicans, retailers and, ultimately, the public have little choice but to accept price increases.
He adds that craft brewers have had to take many of the input cost increases “on the chin” or risk being delisted from bars and retail outlets. “We have worked very, very hard to get our products into bars, off-licences and supermarkets and with a price increase, we’re more susceptible to those products being removed.”
Craft beers have no more than 5 per cent of the total drinks market in Ireland, he says, which means “it is very easy to remove Porterhouse from the shelves if the price goes up but if you are SuperValu or Tesco or whatever, you are not going to remove Heineken”.
Publicans are extremely angry and the timing is terrible because of the pressure they are under with soaring bills and trying to recover two years of the pandemic
— Paul Clancy, chief executive of the Vintners’ Federation of Ireland
Absorbing cost increases is likely to get much harder for Porterhouse in the months ahead. It has been insulated from higher energy costs in recent months because it has been on a fixed contract with its supplier. That will finish at the end of this year with Hughes anticipating an eight-fold increase in energy costs.
“We’re preparing for quite a grim January, February and March but we are aware of what is coming down the line and trying to be ready for it,” he says.
Paul Moynihan owns a pub carrying his name in Donard, Co Wicklow and is also preparing for a hard winter ahead.
He admits being shocked by the scale of the price hike. “The timing is completely wrong, our customers are under pressure, we are under pressure. And while Heineken says they are under pressure, their profits look okay but they have power because they control around 40 per cent of the market,” he says.
Moynihan says this winter “is all about survival. Looking at the bills you think Jesus. But you can’t just lie down, you have to battle through, batten down the hatches and get through the winter and the months ahead.”
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Paul Clancy is the chief executive of the Vintners’ Federation of Ireland, an umbrella group representing the Irish pub trade.
He says “publicans are extremely angry and the timing is terrible because of the pressure they are under with soaring bills and trying to recover two years of the pandemic”.
According to Clancy, the increase is about three times what might have been expected “in normal times” and suggests that the price increase will be “a knock-out punch for some of our members”.
