The Cost of a Beer in the Czech Republic is Expected to Continue Rising

News that the average price of beer in restaurants and pubs in Prague had hit 64 crowns in July came as little surprise to anyone in the city that enjoys a drink.

Beer prices have been ticking up steadily for years now, a trend that accelerated since the cost-of-living crisis kicked in last year.

And this is expected to continue as VAT hikes, labour and hop shortages, and elevated inflation conspire to push the price past 70 crowns, compounding the misery of the hard-up Czech beer drinker and threatening to further sour the mood of the people.

The Association of Small and Medium Enterprises and Tradesmen of the Czech Republic (AMSP) said on August 31 that, based on data from cash register systems, the average price of a half-litre of 12-degree beer in restaurants and pubs in Prague in July was 64 crowns, up 9 per cent from the year before.

Across the whole of Czechia, the average price in July was 54 crowns compared with 50 crowns a year earlier. A decade ago, the average price was 30 crowns.

At the heart of the rise is that the cost of producing beer has simply become more expensive – inputs from the hops and the grain, to the labour and energy, to the packaging and transport have all increased markedly since the start of 2022.

With restaurants and bars now having to pay the country’s largest brewer, Pilsner Urquell, 59 crowns (including VAT) a litre for its beer (29.5 per half litre), owners have a choice of either narrowing their margins or passing on the whole rise to the consumer. So far, it seems to be the former.

If the price of beer were to reflect previous profit margins, the customer would be charged nearer 90 crowns per half litre, more in line with the 3.50-4.00 euros customers pay in other European capitals like Berlin, Brussels or Paris.

This suggests further price rises are in the offing. On August 31, Pilsner Urquell said it would be raising the price of most of its products by an average of 5.7 per cent from October 1, the Czech News Agency reported.

Then there is the planned VAT hike on draught beer to 21 per cent from 10 per cent that the government announced in May as part of its fiscal reform package to come into effect from January 1, 2024.

This has been bitterly opposed by groups like the AMSP as well as the Association of Breweries and Malthouses, which worry about the effect this will have on the already-suffering restaurant and bar trade.

They cite figures that show in 2022 the proportion of beer consumed in restaurants and bars fell to 31 per cent of the total, down from about 50 per cent in 2009, as punters stay home and drink more.

However, Agriculture Minister Marek Vyborny has argued that there’s little evidence to suggest beer prices will rise over 70 crowns, as food prices have begun falling. Thus, with the government not seemingly minded to change course, the question is what the struggling consumer in small towns and villages across the Czech Republic will make of this.