Global Brewers Could See 5-10% Drop in Can Costs for 2020
Global brewers are in line for lower input costs as a result of declines in the previously-high price for the aluminium used to make cans, according to an analyst.
The past year has seen "significant" falls in aluminium prices, Bernstein's Trevor Stirling said today. With companies typically hedging the cost of the metal packaging about a year in advance, 2020 should see a 5%-to-10% decline in can costs, Stirling has forecast.
Aluminium accounts for about half the total cost of a can, according to the analyst.
Stirling said brewers in the U.S., Western Europe and Japan are set to benefit most from the fall in can costs, as they use the packaging more than companies in developing markets, where glass is preferred. The analyst added that Western Europe brewers will likely see the least pressure on costs in 2020 because of the can tailwinds, as well as a "very strong" barley harvest in the north-east of the continent.
Malting barley prices for the 2019 crop were down 25% on the previous year, with a 15% decrease for malt, Stirling added. The U.S. is in line for a 5-to-10% decline in malting barley prices.
Despite the rosy outlook for input costs, Stirling warned that brewers will compete with wage inflation and potentially-higher energy and glass prices in 2020. In the past two years, global brewers have flagged high aluminium prices as a drag on profits. In the US, the increase was blamed by some companies on import tariffs on the metal implemented by the U.S. Government in 2018.