George Georgiadis: Booze tax hike a slap for SA’s booming distillery industry and its customers

When a gin and tonic starts to nudge $20 a glass, you know someone is bleeding us dry, writes George Georgiadis.

When Never Never Distilling Company was founded in 2017, there were just a handful of distilleries in South Australia.

Today, our industry comprises 108 manufacturers that support 8400 full-time equivalent jobs and $1.2 billion in added value to the Australian economy throughout our supply chain of liquor wholesalers, retailers and hospitality venues.

South Australian distillers punch above their weight in terms of quality. Expert judges have repeatedly declared our products best in the world, when tasting them blind against competition that have mastered their craft over hundreds of years.

Our valuable contribution to the Australian spirits industry reflects South Australia’s overall strength in food and beverage.

Our famous wine sector provides the growing spirits industry a head start in supply chains, tourism reputation, research and development capability, and access to training.

SA’s spirits sector has made great strides through collaboration and partnerships with our wine industry friends.

Never Never Distillery Co-owners & founders Sean Baxter, Tim Boast and George Georgiadis. Picture: Bianca De Marchi

The business I co-founded, Never Never, is co-located with Chalk Hill Wines and food provider Cucina di Strada in McLaren Vale, which has proved a tourism boon for the region.

Never Never alone has around 85,000 visitors a year, making it one of the most popular attractions in South Australia. It complements other iconic destinations in our region like the d’Arenberg cube, just down the road.

And just like our wineries, South Australian distilleries are making products that speak proudly of their provenance.

Never Never’s Oyster Shell Gin uses Kangaroo Island oyster shell and local botanicals to create a unique expression of the Australian coastline.

We also make Ginache, our distinctly McLaren Vale expression of the innovative grape gins that are becoming a signature of Australian craft spirits.

The overlaps and similarities with wine are many, yet our policy treatment by the federal government could not be more different.

Chalk Hill Collective at McLaren Vale. Picture: Meaghan Coles

Effective from February 5, the latest increase to spirits excise means we are now paying $101.85 per litre of alcohol – the world’s third highest spirits tax behind only Iceland and Norway.

This hike comes in an economic climate where consumers are cutting their spending on premium spirits, and our input costs are going up across the board.

It is the 13th increase since we started Never Never in July 2017, at which time the rate was $82.27 a litre.

When inflation took off two years ago, so did spirits tax, fuelled by the system of automatic indexation to CPI that has now been in place for 40 years.

The compounding effect of this model was always destined to take spirits tax beyond $100 eventually.

But we didn’t foresee how expensive it would make our products, relative to beer and wine.

We are getting to the point where a gin and tonic might cost upwards of $18 on a drinks menu. This makes it extremely difficult for spirits to compete in settings where consumers can purchase a beer or wine for more like $12.

This discriminatory treatment is increasingly working against Australia’s economic interests.

There is so much export potential for our uniquely South Australian spirits, but it will remain untapped while our industry is continually being throttled by spirits excise.

Never Never is currently seeding product in 14 different export markets, but this channel has no chance of scaling to meaningful market shares in those markets without marketing support and boots on the ground.

Our domestic business needs to be profitable and cash-generative for these investments to be achievable.

This is why Distillers South Australia is joining spirits industry calls for excise to be temporarily frozen at its current rate.

This measure is critical to stop the current bad situation from getting worse.

Only then can we take pause to consider the further reform that is needed to make the excise tax regime fair and enable the sector to develop.

It’s easy to focus on the negative, but what we’re really talking about here is a manufacturing industry with world class capability, world class products and boundless potential.

But the industry won’t get the opportunity to grow to scale unless we do something about the unequal, unfair excise regime.

George Georgiadis is president of Distillers South Australia and co-founder of Never Never Distilling Company.