Although the longer days and warm weather are here to stay, soaring commodity prices have cast a dark cloud over Baltic brewers, many of whom have announced that they would have to raise the prices for their products by as much as 30 percent in order to stay afloat.
Summer is do or die for Baltic beer makers, who habitually pray for a long, hot season that will keep beer lovers running to the fridge for a cold ale. But this year is remarkably different. Skyrocketing food prices worldwide have wreaked havoc on the economics of brewing beer, which depends on the availability of affordable barley, malt and hops.
Peteris Linins, director of the Latvian Beer Producers Association, said Latvia's small breweries are struggling with soaring costs and are facing significant losses. Prices for malt and hops have tripled over the past year, he said. Labor and energy expenses have also increased.
Vladimirs Baskovs, director of Bauskas Alus, a brewery, told the Baltic News Service that the company was in the red and that it would raise its prices 7 's 8 percent in May. Higher costs of labor, energy and ingredients have pushed the brewery in the corner, though Baskovs expressed hope that the company would survive.
Tarmo Hoop, head of Estonia's A. Le Coq brewery, said that beer prices in Estonia would likely jump 30 percent this year due to higher excise taxes and ingredient costs.
"I can't say anything positive. Prices are rising. They've risen by half already, and another half awaits," Hoop was quoted by the Aripaev daily as saying.
"Excises rose by 32 percent. In Latvia and Lithuania the excise is lower, and this affects tourism," he said.
For brewers, 2008 is shaping up to be the second consecutive year of difficulties. Last year the Estonian beer market ticked down 1.4 percent to 128 million liters, while Latvia's breweries sold 133.8 million liters in 2007, a drop of 5 percent year-on-year.
Cardo Remmel, head of the Estonian Brewers Associated, was quoted earlier this year as saying that the beer market contracted last year due to the overall economic decline and fewer tourists. In fact, he said tourism had been the driving force behind beer sales since Estonia joined the EU in 2004.
In Hoop's words, "a price rise of 10 percent will not impact consumers much, but more than 10 percent will force consumers to change their drinking habits. And a rise of more than 30 percent will lead to a fall in consumption."
Indeed, a cursory survey of beer prices shows that some Russian and Ukrainian brands are cheaper than local varieties, and this could be where Baltic beer drinkers will drift to as summer progresses.
But not everyone in the industry is pessimistic. At Aldaris, Latvia's largest brewery, managers have predicted a brisk rise in sales thanks to a number of new products. Aldaris, which is controlled by Baltic Beverages Holding, posted revenues of 35.4 million lats in 2007, a rise of 26 percent year-on-year.
But as the Baltic economies cool, it would seem that hardship is inevitable. Hoop said restaurants and bars will suffer the most, since people will start to drink more at home. Dienas Bizness wrote in a recent article that the price for a pint of beer on Dome Square will be 2.5 lats (3.5 euros) this summer, which is approaching a level where tourists, and certainly locals, are certain to think twice before reaching into their wallets.
To be sure, the higher cost of drinking an ale on Riga's picturesque square is more the result of higher rents than global cereal prices, the paper explained.
When all is said and done, it is likely that many a restaurant or pub will be forced to shut down if summer sales are lackluster.
And if weather is bad, then the market is guaranteed a mass exodus, for breweries as well.
Linins suggested that the only way to improve brewers' financial situation would be to cut taxes charged to small producers. This, however, is unlikely to happen given the lobbying strength of the Baltics' big breweries.
