IBA calls on government to introduce reforms

IBA stall with two people talking

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:

  1. Freezing indexation of alcohol excise for a period of 2 years.
  2. The excise remission cap of $350,000 that was introduced in July 2021, should be indexed in line with inflation.
  3. Extending terms for repayment of excise debts that were deferred during the covid years.

Australian beer statistics from The Crafty Pint

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 onethird 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 Australians.

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?

Two men sitting with beers at a bar

Quotes attributable to Kylie Lethbridge, CEO Independent Brewers Association

“Every time excise rates go up, my first thought is how many of our independent breweries are going to survive this round and who will close next. Over the past three years, small independent breweries in communities all over Australia have done whatever they can to be successful businesses and to beat adversity.

“The biggest issues are structural and economic and only the Federal Government can address them. The Federal Government needs to act now if it wants the sector to survive – and to show Australians they do care about local small businesses. We are simply asking for common-sense reforms that go some way to creating equity for small breweries in a market stacked against them.

“With one of the largest mid-strength beer markets in the world, beer has been a leading the way in low and no-alcohol offerings. And yet we face an unequal taxation regime that increasingly has beer being taxed at a higher rate than wine. If excise is supposed to be a tool for harm minimisation – then the Federal Government really needs to take a look at its own data and create an equal playing field that meets its own policy objectives.”

Quotes from Richard Watkins, Chair of the Independent Brewers Association

“It is a very unhealthy situation for our industry at the moment. Beer tax has jumped by nearly 8 per cent in the past three to five years and local brewers can’t match the prices of overseas-owned producers.

“We’re worried the cost of craft beer from a local Australian brewery that has employees in Australia, pays tax in Australia, will start to be out of reach for many Australian consumers”.

People toasting beer cans

About the Independent Brewers Association

The Independent Brewers Association (IBA) is the peak national industry body representing Australia’s 600+ independent brewers with two thirds of these small businesses based in regional and rural Australia.

The IBA represents 425 brewery members the majority of which are small producers making less than 700,000 litres per year.

The IBA is primarily member funded by small businesses, and unlike the wine and spirits industries, does not receive funding from government of any kind.

View the IBA’s Federal Budget Submission here.

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