As there can be so many factors that can influence the markets, analysts and investors alike often look for specific clues that can help indicate economic trends. One perhaps unexpected indicator is the price of beer – a common product easily compared throughout different regions, whose manufacture and supply includes a variety of foundational market assets.
eToro’s Beer Index is a simple weighted index based on a basket of six commodities needed for producing and selling beer: wheat, barley, rice, malt, aluminum (for cans) and gasoline (for transportation and farming). What can the Beer Index tell us about what’s happening in the markets?
A bitter one to swallow
Looking at the prices of these commodities required for the production, packaging and transportation of beer, we can see that they have soared – with more ‘drinkflation’ ahead likely. The price of making your pint has risen by 62 per cent in the past two years, with the war in Ukraine playing a significant role in the costs brewers are currently facing.
Gasoline, which is required for farming the ingredients of beer as well as for its transportation, has seen the biggest price increase of any item in the beer basket, with its cost jumping 138 per cent, largely thanks to the war in Ukraine and the restricted supply of crude oil coming from Russia.
Barley and malt costs have also skyrocketed, rising 104 per cent and 87 per cent respectively in the same period, also largely thanks to disruption caused by the war, with Russia and Ukraine thought to supply as much as 30 per cent of the world’s barley exports.
Rice is the only commodity in the Beer Index to have dropped in price in the past two years, falling by 1 per cent since mid-August 2020. The stable price of the crop, used as adjunct in combination with barley malt to lighten beer, is thought to be down to supply outstripping demand every year since 2007, leading to large stockpiles.
| Commodity | Base = 100
(August 20th 2020) |
Indexed price
(August 19th 2021) |
Indexed price
(August 18th 2022) |
| Barley | 100 | 157 | 204 |
| Aluminum | 100 | 146 | 137 |
| Gasoline | 100 | 179 | 238 |
| Rice | 100 | 97 | 99 |
| Wheat | 100 | 128 | 139 |
| Malt | 100 | 128 | 187 |
| eToro Beer Index | 100 | 134 | 162 |
Spot prices taken on the third Thursday of August each year. Equal-weighted across the six commodities.
What about Australia?
Australians pay the fourth highest tax on beer globally, and this year it grew by another 4 per cent after the ATO raised its alcohol excise – meaning it could cost the consumer around $15 for a beer. A tough pill to swallow, given the price of alcohol has already risen by 10 per cent in the last 5 years. But our Beer Index tells us that stronger price pressures are brewing, and stiffer price rises could lie ahead.
The rate of price growth dramatically outpaces the 10 per cent rise in the Australian consumer price index (CPI) over the same period, indicating there is likely to be some price pain to come for beer drinkers as brewers look for ways to offset their costs.
This could be unfortunate timing with Oktoberfest, the Melbourne Cup and the World Cup just around the corner. Whether you’re buying at the pub or the bottle shop, a cold brew is going to cost Aussies more this spring.