S&N predicts input costs will increase by 8.5% in 2008

The news came as S&N reported profits of �444m for 2007, unchanged on 2006, with UK profits down 8% because of the smoking ban and poor summer weather.

The UK's largest brewer, whose brands include Foster's and John Smith's, has agreed to be bought by Carlsberg and Heineken for �7.8bn ($15.3bn).

Separately, Danish firm Carlsberg saw its annual profits rise sharply.

Carlsberg said 2007's net profit reached 2.3bn Danish kroner (�233m), up from 1.88bn kroner the year before.

Although Carlsberg's results beat forecasts, it also highlighted rising costs as a concern.

"The marked increase in raw material prices will make 2008 a challenging year, so it will be more important that ever to focus on value growth in sales and efficiency in the organisation," said Carlsberg chief executive Jorgen Rasmussen.

Cider growth

S&N said its planned price increases were needed to counter higher input costs, which it forecast would rise by 8.5% in 2008. It also said it would begin moves to cut costs.

Performance in Western Europe was poor in 2007, after "unprecedented poor weather" across key markets, but the firm predicted the situation would improve in 2008.

On the plus side, while the UK beer market shrank in 2007, the volume of cider sales increased by more than 15% during the period.

Under the terms of the sale of S&N, Heineken will take over the firm's UK business, while Carlsberg will get its overseas assets, including S&N's stake in Baltic Beverages Holding (BBH) which will give it full control of the brewer of the Baltika beer brand.