Wellington bars are hiking prices, saying they have no choice but to pass rising costs on to drinkers.



Hospitality New Zealand claims New Zealand's bars and restaurants have had a "guts full'' of being caught between penny pinching consumers and price hikes from major breweries.



It says many small businesses no longer have the capacity to absorb the latest price hikes from the country's two major liquor producers.



DB is hiking the price of ready-to-drinks by 4 per cent, beer and cider by 3 per cent, and tap products by 1 per cent, effective next month.



Lion Breweries alerted customers last week that it would be raising its prices. The company also came under fire last year after press reports claimed its flagship beverage, Steinlager, costs three times as much in New Zealand as it does in the UK or the US.



Wellington's Mac's Brew Bar manager Kevin McAree said the hospitality industry had to pass on price increases to consumers, because expenses like insurance and wages had risen in recent years.

"You cannot absorb increases in anyway shape or form.

"If a business doesn't pass on the increase from the base source, ie your supplier, you wouldn't be in business very long … you would be going backwards."

The Wellington bar would put up the price of its drinks in line with the announced price increases, he said.

"Of course people don't want to pay more, naturally, especially seeing it's a luxury item and most people have a limited amount to spend in a bar restaurant or café, which means they are going to get less of it.

"You just have to smile and give them as good a service as you can and make them feel a bit better."



Hospitality New Zealand president Adam Cunningham said the industry had "certainly had a guts full of taking the flak for price increases that we don't initiate, don't like and are unable to control".



Failing to pass on these costs would result in many businesses going under, Cunningham said, which would hit the local hospitality economy but have little impact on the large players, as consumers would likely buy direct from super markets.



DB has justified these costs, saying it's facing margin pressures itself, with increased raw material, production, packaging and distribution prices.



The company "is experiencing increasing material costs as well as significant pressure on fuel, energy and utility costs,'' said chief executive Brian Blake when the price hikes were announced last month.



"It's certainly regrettable that these rising costs have to be passed on to customers but unfortunately it's unavoidable.''



According to the latest figures from Statistics New Zealand, food and drink costs at restaurants and ready-to-eat establishments are already on the rise, with prices up 0.2 percent in January compared to the previous month.



By comparison, the headline food price index was unchanged in January versus that of December.



In December, new entrant into the tap beer segment, Independent Liquor, accused DB of discounting keg prices in order block its licensed Carlsberg and Kingfisher brands from entering the market.



DB is wholly owned by Singapore-based Asia Pacific Breweries - the maker of Tiger beer. Lion Breweries is a subsidiary of Lion Nathan, an Australian company listed on the Australian Stock Exchange.