As Chinese Beer Prices Surge, CPI Is Set To Pass 6%; Here Comes Shrinkage

Tyler Durden's picture

Yesterday we reported that China just hiked its fuel prices for only the second time in 2011. Now, again courtesy of Business China, we find that something far more important to the Chinese population is about to surge in price: beer. "The National Development and Reform Commission (NDRC), China’s top economic planner, has hauled in representatives from China’s four largest beer makers (China Resources Snow Breweries Co. Ltd., Tsingtao Brewery Co. Ltd., Beijing Yanjing Brewery Co. Ltd. and the China unit of Belgian Anheuser-Busch InBev NV ) for talks over their price hikes, as it looks to tackle public concerns over soaring inflation. " Since February, the cost of beer production has risen by RMB 94 per ton, which explains the beer makers’ unanimous price hikes,” the person said. Since January, CR Snow Breweries, China’s largest brewer by volume, has raised prices by more than 10% in Sichuan, Liaoning and Anhui provinces, where it enjoys a dominant position in the market. Tsingtao Brewery also hiked prices of several products in the following months by an average of 10%, the company announced earlier." This follows news from the China Securities Journal that Chinese CPI, which recently dipped again below 5%, is about to have a breakaway month in March. "Chinese consumer prices are likely to rise more
than 5% year-on-year in each month in the second quarter and the
inflation rate may even surpass 6% in some months,
the official China
Securities Journal warned in a front page editorial published Wednesday." And while energy is energy is a major component of Chinese CPI, it is food that is the main variable: as was discussed previously on Zero Hedge, whereas food is merely 7.8% of total CPI, in China it is about 30% (this is before the recent CPI weighting adjustment). Which means a desperate China is now forced to resort to that ultimately last ditch attempt at covering surging prices- Shrinkage "Resigned to rising raw materials prices, brewers are figuring out new ways to offset higher costs. “One way of countering the costs is to reduce beer capacity by as much as 100 milliliters for a 660-ml bottle,” said the head of a local beer company." Surely, the dumb local peasantry will never figure this cheap trick out.

More from Business China:

Since January, CR Snow Breweries, China’s largest brewer by volume, has raised prices by more than 10% in Sichuan, Liaoning and Anhui provinces, where it enjoys a dominant position in the market.

Tsingtao Brewery also hiked prices of several products in the following months by an average of 10%, the company announced earlier.

The beer maker is considering another 5% hike for its core products this month, according to several industry analysts and market watchers.

“Costs of raw materials have been rising since the second half of last year, and then the cost of labor also went up by almost 30% since the beginning of this year,” said an industry insider.

The NDRC said it understood the position of beer makers given their rising costs, but said gains in liquor prices were inappropriate as liquor makers’ production costs had not risen by as much as those of brewers. The commission urged both beer and liquor makers to stabilize prices.

Prompted by rising inflation in China - the consumer price index (CPI) might have risen above 5% in March according to some analysts – government bodies are trying to take measures to contain or bring prices down. The central government is targeting a 4% increase in the CPI this year.

Chinese media have been reporting that many manufacturers, P&G and Unilever included, are planning to increase the prices of cleaning and personal care items by 10% on average from April.

Questions have been raised by commentators as to whether some leading industry players are colluding to raise prices.

Consumer goods makers and food and drink enterprises have been invited by the NDRC to discuss putting off their price hikes.

Next up: booze subsidies, import tarriffs and Chuck Shumer going apeshit over Budweiser layoffs. In the meantime, the Jasmine Revolution is drinking its last afforadble shots of rice vodka before it gathers the courage to known on the doors of the politburo.