Ahead of 2020 Budget, IBA and BA make their demands
Tonight’s Budget is generating more interest than any in recent history, with embattled industries across the country vying for post-COVID-19 aid.
The brewing industry is no different with IBA chair Peter Philip calling this year the “the most challenging time in our history” in his organisation’s budget submission.
Ahead of the Federal Budget tonight, both the IBA and the Brewers Association, consisting of CUB, Coopers and Lion, have put forward submissions to the Government asking for packages to ease these challenges.
Both agreed on a number of points, including alcohol excise freezes and cuts, domestic tourism support, and criticised the onerous obligations of pregnancy warning labels and excessive regulation, but diverged on a number of issues.
In its letter to Treasurer Josh Frydenberg, the IBA said it represents Australia’s more than 600 independent brewers, of which 332 are members of the organisation.
65 per cent of the total are small businesses based in regional and rural Australia, it said, and represent 47 per cent of all employment in the brewing industry in Australia.
As a result, many of the IBA’s requests for a dedicated support package are aimed at gaining equality with other industries – in particular the wine industry – when it comes to domestic tourism, excise and funding.
The IBA iterated the challenges of COVID-19 and the mandatory pregnancy warning labels coming into effect as most burdensome on the industry, saying that in a recent survey 93 per cent of independent brewers say their businesses were already in a loss-making position, with small regional breweries who rely heavily on tourism being the hardest hit.
To combat these challenges, the IBA proposed a suite of measures ranging from funding for the IBA to tax relief measures and co-investment strategies:
- Beer Australia
In its submission,the IBA said that it hopes that 15 per cent of the Australian beer market will be independent by 2025, and asked for one-off funding of $300,000 for the organisation itself to support the development of a national industry strategy called Beer Australia.
To ensure that the industry reaches these levels of growth, 260 million litres of beer will need to be brewed, creating 3,000 jobs with a further $150 million invested in equipment and to develop export capabilities.
The 10-year strategy it proposes would inform public and private sector investment to address structural and economic concerns, the domestic market, tourism and export.
It said the international markets strand would be similar to that of the WIne Australia Strategy, aiming at the $1 billion Asian markets. It hailed the establishment of ale trails to boost tourism, specifically in regional and rural areas, and suggested that the strategy would aim to support and create more of these initiatives.
- Excise and regulation
The IBA pointed out that it had asked in its last two budget submissions to raise the excise rebate cap, currently at $100,000 for small brewers, to $350,000.
It asked again for this to be changed to be closer in line with the wine industry which enjoys rebates on the Wine Equalisation Tax of up to $500,000. This, it said, would be on a two-year trial basis.
It also requested that the rate be increased from the current level of 60 per cent to 100 per cent of excise payable up to the $350,000 cap.
In addition, the IBA recommended forgoing excise debt accrued by brewers while they have been deferring payments from March 2020, and asked the Federal Government to defer any regulatory changes that will further impact the industry in the next two years.
The excise issue is one that the Brewers Association of Australia regularly picks up, but the IBA said that it was a major concern for independents.
It argued that multinational brewers have “nearly unlimited capital resources to block access for independent brewers by buying up tap-points within pubs and hotels” in addition to their “staggering” economies of scale and therefore “massive disparity” in raw material costs.
It said these organisations pay little or no company tax in Australia, saying they siphon profits offshore to their multinational owners, and such measures should benefit smaller independent brewers.
- Funding and grants
The IBA asked for a Regional Brewers Support Package funding similar to the $50 million provided by the Federal Government through Wine Australia, saying that the current program is open to craft cider but not breweries.
It also asked for another round of Manufacturing Modernisation Fund co-funded grants, in which $50-100 million would be redirected into the support of next tier applicants who missed out on the recent round.
This is in addition to the $1.3 billion Modern Manufacturing Initiative announced by the Government last week to support the manufacturing industries with co-funding grants, which IBA general manager Kylie Lethbridge called a “good start” in supporting smaller producers.
“While we understand that many industries in our country have been heavily impacted, we also acknowledge that many have also received dedicated support packages,” the IBA said.
“Our industry is not currently recognised by dedicated federal policy nor through funding programs and strategies supporting the agribusiness, manufacturing or tourism sectors.”
Brewers Association of Australia
According to the Brewers Association, its three members constitute more than 79 per cent of all beer sales in Australia, employing 13,500 jobs across brewing, logistics, and associated industries, and it regularly calls for an excise freeze on their behalf.
This Budget submission was no different, despite the excise pause in August which admittedly as a result of the decline in the Consumer Price Index rather than a positive move on behalf of the Government.
It said that beer taxes netted the Australian Government $3.6 billion in 2018/19 which it says is the fourth highest in the industrialised world. It said this made beer “prohibitively expensive” to consumers.
BA chair Peter Filipovic, also CEO of Carlton & United Breweries, said in a media statement last month that cutting or at least freezing excise would give hospitality businesses a change to get back on their feet.
“Aussie beer drinkers deserve a break,” he said.
“With the great majority of Australians drinking in moderation, now is the time to reduce taxes. Even before COVID-19 alcohol consumption in Australia was at 50-year lows.”
In addition to beer excise hikes and regulatory costs such as state-based container deposit schemes, as well as the pregnancy warning labels and associated costs, it also highlighted the potential risk in permanent consumer behaviour changes as a result of COVID-19, saying people are now more likely to drink from home
In its submission, the BA echoed the IBA in highlighting the difficult times for the sector, with beer consumption declining to 15 per cent in the past 10 years, saying this highlighted a move away from the beer category.
It criticised the perception that off-premise beer sales were increasing, saying the opposite was in fact true.
“Consumers did, in one week of March as part of the general ‘panic purchasing’ buy large quantities. However, this was followed by April which was the worst month on record for beer sales.”
It said that to combat these challenges, the BA is calling on the Government to ensure that decisions are considered by the whole of government. It highlighted the ani-alcohol lobby’s recent focus on fetal alcohol spectrum disorder (FASD) saying that it was “no question” that the alcohol industry believe it is preventable and further measures should be introduced.
“However, we implore the Government to use targeted, evidence-based health policy to fo this, taking into account the actual costs to do business and what that may mean for jobs.”
It also asked that the Government continue JobKeeper for the hospitality industry, saying that there are significant economic challenges ahead, and socialising in venues may not return to ‘normal’ for years to come.
To aid this recovery, it also recommended a domestic tourism package, “to capture the billions of dollars Australians would have otherwise spent internationally”, although did not go into any further detail about what this might look like.