The Question For Government Is: What Beer Industry Does It Want To See In The Future?
If the federal government does not act now on common sense reforms – our local independent brewing businesses will continue to close, and the cost of a pint will be out of reach for many Australian consumers.
The Independent Brewers Association (IBA) has called on government to adopt common sense reforms to ensure Australia’s vibrant independent brewing industry is not squeezed out of the market in favour of large multinational businesses.
This week saw excise rates increase again, with almost $7.00 from a twelve pack of mid-strength locally crafted beer now going to excise tax. In an environment where small breweries simply cannot keep absorbing costs – the Federal Government are the only ones that have the power to provide immediate relief.
On behalf of the over 600+ independent breweries throughout Australia, the Independent Brewers Association (IBA) has put forward six proposals that will provide the greatest support to the sector with three that would provide immediate relief by reducing the regulatory burden – even on a temporary basis:
- Freezing indexation of alcohol excise for a period of 2 years.
- The excise remission cap of $350,000 that was introduced in July 2021, should be indexed in line with inflation.
- Extending terms for repayment of excise debts that were deferred during the covid years.
Independent Breweries Contribute to the Economy
The 600+ independent breweries throughout Australia who are overwhelmingly small to medium business that exist in big cities and small communities throughout Australia – employ locals and give back to their communities.
Our member breweries provide tourism destinations and support the agricultural sector through local malted barley and hops. Profits stay in Australia and are repurposed back in the business to facilitate continued investment and to provide important jobs for locals.
The independent brewing industry contributes:
- Approximately $1.93 billion annually to the national economy;
- Much needed employment opportunities in regional and rural Australia. We employ 35,000 Australians, 10,000 directly and over 25,000 indirectly in the agricultural, manufacturing, distribution and hospitality industries;
- Small independent craft breweries employ 51% of the whole brewing industry.
Independent breweries simply cannot keep absorbing costs rather than passing them on to the consumer.
In the illustrative example below, between 2018 and 2023, the overall cost to the brewery of producing an IPA increased by 23.33 percent – almost a quarter, while the recommended retail price for the beer rose by just 11.25 percent. In other words, the cost of making a carton of IPA has gone up by twice as much as the cost to the consumer.
In an industry in which margins have always been tight, it's an unsustainable position, and one that has sharpened focus on key obstacles the industry has been trying, often unsuccessfully, to overcome since the craft beer revolution first took hold.
Independent Breweries Need an Equitable Playing Field
The unequal alcohol taxation regime is making small breweries unviable. Excise accounts for around 45 percent of the ‘cost’ to an independent brewery for the production of an IPA.
The current excise framework ensures the unequal treatment of the producers of different types of alcoholic beverages. Since the early 1980s, the retail wine price index has fallen by more than one-third relative to the overall consumer price index, while the beer and spirits price indexes have increased by approx. half. In real terms this means that beer drinkers pay double the tax per standard drink compared to bottled wine and eight times the tax rate per standard drink of cask wine.
With one of the largest mid-strength (3.5% ABV) markets in the world – beer represents the adult beverage of moderation. Yet ever-increasing excise rates coupled with an unequal alcohol tax regime means that small brewing businesses will close and, the policy objective of harm minimisation will be unrealised. This represents a poor outcome for all Australian’s.
Increasing regulatory requirements and a refusal to acknowledge the size and scale difference of small independent breweries in implementing common-sense regulation is quite literally causing breweries to close.
The vast majority of independent breweries produce less than 100,000L of beer each year. To put that in context – Coopers Brewery reported 79.4 million litres and represent only 5% of the market. It’s easy to see how the volumes produced by the large multinationals aren’t even seen on the same scale as our members – and yet there are no concessions provided to our small businesses.
Beer in general will definitely survive the current headwinds. The question for government is what beer industry does it want to see in the future?