Tax is bursting the craft beer industry bubble

While drinkers look forward to toasting International Beer Day next Friday, Australian craft brewers are drowning their sorrows over a tax regime they say is crippling their industry and is now the third highest in the world.

When CPI figures are released on July 31, the latest beer excise rise will be calculated and take effect on August 5. Brewers say the tax has been supercharged by high inflation, with rate rises totalling more than 17 per cent since early 2020.

Australians pay high prices for beer due to high brewing margins and tax.Credit: AFR

And that’s bad news for price-conscious drinkers.

“There comes a point where you can’t continually absorb that, and then you try and pass it on to the punters and you’re losing business,” Perth craft brewer Travis Moore said.

The excise rises every six months and brewers say it’s sending them broke.

Independent Brewers Association (IBA) chief executive Kylie Lethbridge said the industry lobbied the government for relief in this year’s federal budget but their calls for a 12-18 month freeze on excise were ignored.

“So we’re now calling on our consumers not only to look for the ‘Certified Independent’ seal when they’re purchasing their next beer but to reach out and to tell our government they want their beer to be cheaper,” she said.

Moore said the “two big boys are locking out the rest of the breweries in the country”.

The “big boys” are Lion, owned by Kirin, and Carlton United Breweries, owned by Asahi, which account for up to 85 per cent of all beer brewed in Australia.

Australia now has the world’s third-highest beer tax after Norway and Finland.

Independent Brewers Association

Lethbridge said independents were being pushed out of venues by the major brewers.

“We’re now having to compete with supermarket beer on tap as well,” she said. “You’re seeing some of Dan Murphy’s brands go to keg and these home brands who are on the shelf at a much lower price point than ours.”

With the ACCC, saying there’s definitely an issue with the regulatory framework for beer in Australia, the IBA plans to make a formal submission to the consumer watchdog requesting an investigation.

In March, the House of Representatives’ economics committee found Lion and CUB were able to exercise “enormous market power” in Australia.

Moore, who is a co-founder of Phat Brew Club, said brewers were also being impacted by the cost-of-living crisis and reduction in discretionary spending.

“People are still going out but spending a lot less than what they traditionally would,” he said.

Like many craft brewers, Phat Brew evolved from a love of beer, rather than profits. It was formed by football club mates who persuaded friends and families to contributing their life savings, and even house deposits, to help launch the brewery and an associated venue.

There are around 700 craft breweries in Australia and the industry has grown more than 80 per cent in the past eight years. The market is now worth $160 million, contributes $1.93 billion to the economy and directly employs about 10,000 people.

Craft brewers are feeling the pinch because of the cost-of-living crisis and reduced discretionary spending.Credit: iStock

The IBA says Australia now has the world’s third-highest beer tax after Norway and Finland. Alcohol excise tax ranges from 14-37 per cent of beer prices.

Mr Moore said the industry needed respite from the relentless excise rises.

“Just to give everyone a chance to breathe, to give the price of beer a chance to breathe and allow us to get through a tough time with the economy,” he said.

He said breweries were given excise relief during COVID but then were asked to pay them back in full, “and that’s caused quite a few of them to go down as well”.

In the past 12 to 18 months, there were 25-30 breweries “that no longer exist”, Lethbridge said.

The IBA was preparing to advocate its cause at the federal election, expected next year “and we’ll take every advantage we can for the chance to be heard”, she said.

AAP