No stopping now: price of tobacco and alcohol to rise

As a result of inflation and special taxes, we have to dig deeper into our wallets for a bottle of beer or a pack of cigarettes in the upcoming months. Let’s see what level of price rise we can expect this summer.

It is not only food prices that will rise due to the inflation and war concerns. The price of beer and tobacco will also increase because of the special taxes that came into force on 1 July. As the Hungarian news portal Index reports, brewers and restaurant owners say they had no other option but to raise prices because it is the only way to maintain quality. However, consumers will pay the price for this decision. Still, they do not yet know how much the price increase will be.

On 1 July, the tax has increased to EUR 4,4 (~ HUF 1,800) per hectolitre for large-scale beer, depending on the actual alcoholic content of the drink. Until the last day of June, this amount was EUR 2,95 (~HUF 1620), which means an increase of roughly 10 percent.

Will we consume less beer?

According to one expert, Hungarian consumers are particularly price-sensitive: they either buy less or look for cheaper products as a result of a price increase. For classic summer products such as ice cream, Hungarian consumers are not really holding back, it still remains popular in the families’ shopping baskets. However, in the case of beer, the situation is different. If it becomes significantly more expensive, shoppers will certainly look at the price more closely than usual or decide against buying the product – reported by the Hungarian news portal Pénzcentrum.

Some beer companies, however, hope that Hungarian beer consumers will continue to be open to quality and speciality beers, and the favourable weather is also a reason for optimism. According to an expert, restaurant or bar managers cannot afford not to incorporate the brewery increases into their own prices. Otherwise, it would result in significant losses for the business. Still, it is important to highlight that the expected increase in industrial prices does not necessarily mean that this will be passed on to consumers by every trader. Restaurant and breweries will be cautious about raising prices, as any price increase will have a negative impact on consumer sentiment.

Will we consume less tobacco?

Smokers have had to face another major price hike in recent days which is in line with the European Union’s expectations. As a result, certain cigarette brands cost more than EUR 4,88 (~ HUF 2,000) a pack. Needless to say, it has never been so expensive to smoke in Hungary. Still, further increase can be expected in the upcoming months due to the special tax that also affects tobacco products. Manufacturers are likely to charge consumers the increased costs that this will entail.

According to the expert, the majority of smokers will prefer to buy plain tobacco and cigarette papers instead of packaged cigarettes and roll their own cigarettes. This trend is clearly visible with every price increase. Additionally, with every price rise, it is increasingly clear that smokers can obtain cigarettes illegally if they are cheaper – and they always are. However, consumers are not likely to quit smoking because of the price increase, so they turn to illegally imported products.

What’s next?!

The central bank’s announcement last week gives no reason for optimism. Inflation will only start to ease in the autumn and it will take another year and a half to reach the central bank’s target. According to experts, the 10 percent price increase is only an additional factor due to which people become more price sensitive. Another important factor is that the inflation is expected to push up food prices.