German drinks makers suffer as energy crisis hits carbon dioxide supplies

A shortage of carbon dioxide is causing German drinks manufacturers to cut production and warn of bankruptcies, in the latest sign of how Europe’s energy crisis is sending shockwaves through the region’s economy.

“More and more of the companies in the beverage industry that depend on the availability of CO₂ are having to significantly reduce their production or stop it altogether,” Holger Eichele, head of the German brewers’ association, told the Financial Times. “For many of the companies affected, this has dramatic consequences.”

The gas is an important raw material for beverage companies because it is used to add fizz to carbonated drinks and to fill and empty beer bottles, kegs and tanks without it foaming or suffering taste effects through contact with air.

The shortage of CO₂ — a byproduct of ammonia production — has been worsening for months as record gas prices prompt the fertiliser industry to reduce output.

But it was aggravated in Germany when the country’s largest producer of ammonia and urea — SKW Piesteritz — halted output two weeks ago in response to a new levy that will push gas prices even higher.

That caused suppliers of CO₂ to the food and drinks industry to declare “force majeure” as they failed to deliver regular orders, leaving many drinks makers racing to find alternative supplies.

Eichele said only 30-40 per cent of usual CO₂ supplies were available on the German market and that these were “at immense cost”. The price of CO₂ has shot up to almost €3,500 per tonne from €100 per tonne a year ago.

“We receive new cries for help from the industry every day,” he said, urging the government to “take short-term measures to ensure a preferential supply of affordable carbon dioxide for food and beverage production to the critical infrastructure of the food industry”.

The German brewers’ association, along with trade bodies representing makers of fruit juice, mineral water and wholesale beverages, published a joint statement on Friday warning that “without rapid government intervention and without effective aid, hundreds of companies and thousands of employees will lose their livelihoods in the German beverage industry”.

They said it was “usually impossible” for drinks makers to pass on their higher costs because of the negotiating power of large supermarket chains and the squeeze on consumer spending from soaring energy bills.

The trade bodies also warned that the closure of the Piesteritz plant had hit them in other ways by causing a shortage of AdBlue, an important ingredient for diesel fuel, causing its price to surge and pushing up costs for road haulage operators.

“The scarcity of resources, raw materials and materials — for example AdBlue — is taking on threatening proportions,” they said. “Companies in the transport industry have already cancelled countless orders that have become unprofitable and temporarily shut down parts of the fleet.”

Eichele said CO₂ shortages were hitting smaller breweries hardest, as the biggest ones often capture excess gas produced during the brewing process and reuse it. He also said there was no risk of the crisis causing flat beer, adding: “Soft drink producers such as Coke need CO₂ to make their product fizz — our beer fizzes automatically.”

The Piesteritz plant is in the process of restarting production after seeking government aid and warning this week that it “fears for the international competitiveness of Germany as a business location under these conditions”.

Wholesale gas prices in Europe have fallen 44 per cent from a record high last month but at €190 per megawatt hour they remain almost six times higher than a year ago.

This has prompted some energy-intensive manufacturers to cut output or even shut it down, causing a 2.3 per cent drop in eurozone industrial production between June and July — its biggest monthly fall since the pandemic hit in 2020.