Tax attacking 'Australian culture' as iconic brewers collapse: 'Unrealistic'

Australian brewers say they are facing a “perfect storm” of pressures, with rising business costs and another impending hike to the beer tax weighing heavily on the industry. The tax will increase for the second time this year and will mean Australia has the third-highest beer tax in the world.

Sauce Brewing Co founder Mike Clarke said the alcohol industry was “feeling the pinch” with pressures coming “from all sides”. The Sydney resident launched the independent microbrewery in 2016, selling his home and “putting everything on black” to do it.

“You’ve got excise going up every six months, as it always does, but you’ve also got all of the other costs of doing business that are really increasing faster than inflation is increasing so your cost of goods, wages, land tax, transport, fuel, electricity and gas,” Clarke told Yahoo Finance.

“At the same time, you've got consumers who are hit by cost-of-living pressures and can’t really afford to buy as much as they used to.”

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Despite the increased costs, Clarke said it wasn’t “realistic” for the brewery to keep putting up prices for customers and said they had decided to largely wear the increased costs.

“We just have to absorb it … The reality is that customers can’t wear 10, 20 per cent price increases on something that is already a premium priced product. So we’ll just have to grin and bear it for a while,” he said.

Dave & Dave’s Brewing operations manager Joel Meaney said about a third of the price of every beer they sell was tax. He said the brewery had also decided to absorb rising tax costs, rather than passing it on to customers who were already struggling.

“If we were doing that every time, I think we’d be driving people away. This will be the fifth one in two and a half years,” Meaney told Yahoo Finance.

“That means in two years what used to cost you $10 is now $14. It’s a really unrealistic jump in price for customers to be able to afford or accept.

“We try our very best to stay as loyal to the Australian culture as possible and still make it an achievable thing to do for people to be able to get together and have a glass of beer.”

Clarke said his business had “its ups and downs” and they had put in effort to try to "future-proof" the business. In the last six months, he launched Twizzle Cocktails, ready-to-serve cocktails in cans, to diversify the business.

Meaney said Dad & Dave’s Brewing had tried to recoup the extra costs through their venue space with live music and trivia nights, along with a food truck.

Events like BeerFest Australia, which launches in Sydney at the end of the year, are also aiming to help support local craft brewers.

Beer tax to hit next week

The beer tax will be raised again on August 5. It is applied to distillers and brewers and is calculated depending on the alcohol percentage and product volume.

The Consumer Price Index (CPI), which the government uses when deciding how much to tax beer, rose 3.8 per cent annually in the June quarter.

The Brewers Association and Australian Hotels Association (AHA) have called on the federal government to cut the draft beer tax, with the AHA also pushing for the tax on spirits to be cut.

Clarke and Meaney both agree things need to change but aren’t sure that cutting the beer tax as a “snap decision” is the best solution.

Clarke wants the government to do a “broad spectrum review” of the excise regime to make it fairer and wants the tax to be the same across all types of alcohol. Meaney believes a tiered system, similar to income tax, could provide a solution.

“The bigger companies are capable of managing those costs of taxes coming in because they’ve got bigger revenue outlets,” he said.

Australian breweries collapse

The iconic Billson’s Brewery in Victoria’s Beechworth announced it had been put into voluntary administration yesterday, with the owners noting “several mistakes” had put the company’s systems and processes under pressure.

It’s the latest in a string of Aussie breweries that have gone under this year. Sydney’s Malt Shovel Brewery confirmed it would shut down in June, citing cost-of-living pressures and a shrinking beer market as reasons for its decision.

The Independent Brewers Association said Billson’s was the 20th independent brewery to either shut, be structured or enter voluntary administration in a year.

Adding further pressure for independent breweries are the duopolies that dominate the industry. Lion, owned by Kirin, and Carlton United Breweries, owned by Asahi, account for up to 85 per cent of all beer brewed in Australia.

“There’s been a long-standing issue with tap contracts,” Clarke said. “The two big Japanese breweries own something like 90 per cent of the taps in the country and that leaves the rest of us fighting for those one or two taps that are remaining.

“The other problem is also those pseudo craft brands or the brands that are owned by those two big Japanese brewers in retail stores as well that aren’t independent but look like craft brewery but aren’t really.”

Meaney said bigger companies like Carlton were able to keep their prices very low because they were such large corporations.

“For guys like us that are just independent craft brewers, it’s not as easy,” he said.

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