Price relationships along the Czech beer value chain

Purpose. The purpose of this study is to determine the dynamics of price transmission within the Czech beer value chain, examining how producer, wholesale, retail, and export prices interact over time. The study focuses on identifying the primary drivers of price formation and determine the extent to which price shocks are absorbed or passed through different stages of the supply chain. Methodology / approach. This study uses the Johansen cointegration technique and a Vector Error Correction Model (VECM) to investigate both long-term and short-term price relationships across the Czech beer value chain. Using monthly data from January 2012 to December 2024, the analysis begins with unit root testing via the Augmented Dickey-Fuller method. Upon confirmation of non-stationarity, cointegration analysis identifies the presence of stable long-term relationships. Then, the VECM framework is applied to assess the elasticity of price transmission and the speed of adjustment to deviations from equilibrium. Results. VECM results indicate that wholesale prices have the strongest influence on the equilibrium of the value chain, serving as the central driver of price formation. In contrast, retail and producer prices adjust only slowly to deviations from this equilibrium, and export prices show a divergent trend, likely shaped by global market conditions. The short-run coefficients are statistically insignificant, suggesting that price adjustments are mainly determined by long-term dynamics. Overall, the price transmission process is sluggish, with limited responsiveness to short-term shocks. While producers traditionally set baseline prices, the Czech beer market shows signs of downstream influence. Originality / scientific novelty. This study provides the first comprehensive analysis of vertical price transmission in the Czech beer value chain, addressing a critical gap in agri-food economics literature, given the significant economic impact of the beer industry. The methodological application of cointegration and VECM offers new insight into pricing dynamics in transition economies. The methodology establishes a new framework for analysing price dynamics in transitional economies with strong cultural product associations. Practical value / implications. The slow pace of price adjustment signals potential vulnerabilities in the supply chain, suggesting that both producers and regulators should be prepared for delayed impacts from policy changes, such as VAT reforms or input cost shocks. This means that what happens in the Czech market (like tax changes or local consumption shifts) does not always allow us to predict what will happen with export prices.