Beer excise tax killing off Aussie craft breweries

[Feldon]

Australia‘s craft beer system at brink of collapse - as breweries lose battle to multimillion dollar overseas giants
by Jack Evans, News.com, 21 Jan 2024

Australia’s once thriving independent brewery scene is at risk of collapse - and there’s a $29 billion reason for it.

The start of 2024 gave beer fans a tragic reality check with news a cult favourite – Wayward Brewery – had reached the brink of collapse.

Peter Philip, the founder of the Wayward brand based in Camperdown in Sydney’s inner west, voluntarily put the popular business into administration on January 2, owing approximately $2 million to trade creditors, statutory creditors and shareholders.

Meanwhile, some of the country’s most loved beer brands aren’t even owned by Australian companies.

Asahi, the Japanese food and beverage giant, acquired Carlton and United Breweries from AB InBev in 2019.

VB, Great Northern and Carlton - seemingly Aussie classics - are all owned by the $29 billion Japanese corporate giant.

Asahi also owns several highly-acclaimed former craft breweries across the country, including 4 Pines, Balter Brewing, Green Beacon, Mountain Goat, Pirate Life, Matilda Bay and Yak Brewing.

In the face of huge competition from multi-million dollar foreign companies, Mr Philip went out swinging, stating that conditions affecting smaller independent brewers were a “perfect storm” and that “consumers are not supporting us to the extent that we need”.

He said input costs had gone up 25 to 30 per cent in the past two years, with transport up 50 per cent and electricity up 70 per cent.

continued at: https://www.news.com.au/finance/sma...s/news-story/b34346979e966a41b2d3c18f8572c1cd

 

[YAPN]

Could simply be a market correction. Craft beer is high end luxury item and Australia just does not have number of buyers to support the number of breweries that have opened up.

What would hurt Asahi, and probably DanMurphys, is your local brewery delivering cheap, no-nonsense ale, direct to your door like the old milk-o. Dropping off fresh growlers and picking up empties.

Or something similar to the Mr Whippy model where a truck wanders around your suburb, at kick-off time, playing a glockenspiel version of Pub With No Beer.

 

[djebel]

And the tendency of some brewers to brew increasingly wild and wacky brews. I'll try most brews once, but if I'm buying something to take to a BBQ it'll be a simple beer done well. Not strange grains infused with something exotic and fermented with a weird yeast.

 

[Hangover68]

I haven't found a craft beer that i would drink on a regular basis, most are overpriced, over hopped and bitter.

 

[TheWiggman]

I can feel the passion that's going to go into this thread already.
I'm one of the [probably] few brewers that regularly buy the macro lager if I'm either going camping or have run out of home brew. Which happens, especially over hockey season. Whilst internationally owned, it is brewed by Australians on Australian soil using almost exclusively Australian ingredients from Australian growers. I too work for a multinational company, and though I may detest some of their policies I'm getting paid and it's all happening here in my backyard. My product is sold to fellow Aussies, some overseas. When I can, I buy Australian (within reason). My earnings go to my community and family and I like that. To say craft breweries are losing to the overseas giants is a little ingenuous, and that link (surprise surprise news.com.au is misleading!) conflates the sensational headline with the contents.
Excise and rising costs. Who can manage that? Could the government possibly do something about it? As much as I hate to say if I'm not prepared to regularly pay $9 for a schooner of VB and certainly not $11 for a Galaxy hopped 4.2% APA. And I'm a home owner in my 40s with a stable full time job, let alone someone in their 20s with a $50k debt after 4 years in poverty, a degree up their belt with employers wanting "min 5 years' experience", and a $450/week 1 bedroom unit. So if I won't pay that sort of money, who is? I think the cost of fancy beers is just something that people can do without. I would love to support local breweries and like most of us I've considered starting my own. But the market is saturated and I'm not seeing the value for money. I won't pay a lot for something I don't want just because I want to help something out. That's called a charity, and my pockets aren't bottomless. I walk into my local IGA liquor and there are about 20 different varieties of light APAs, fruit sours and 'new world' lagers for $24 for 6 pack. It's exhausting trying to pick. 5 steps to my right I can get a cans 8 of New for $22. Sorry, I'm grabbing the New. However once in a while I want to something to sip on so I'll grab some Coopers Sparkling instead. Refreshingly different, tried and trusted. I can brew a good APA at home so for 1/4 of the cost and a lot more of my time (read: passion) I'd much prefer that when I have rego, gas, rates, fuel, $110 camp sites, new sports gear, tyres for the mower, bird netting, school clothes etc etc. Life has always cost a lot of money, and now it's cost more than ever especially with modern expectations.
It's a very competitive business, and I think a few breweries have had a very good run in recent years. But the world is out to get us. The government will keep taking your money in the guise of what's better for the consumers but in order to fund their debt it will never stop. And for brewery owners I think we have hit market saturation, which I hate. There are some exceptional small breweries out there but there are many more sub-standard ones or samey-samey types that can't rely on generous customers any more. This won't be the last brewery to close, because I can't see electricity, transport and gas prices going down until energy workers and executives are prepared to take one for the team and pass on some pay cuts to the consumers. And there's a fat chance of that happening. How high will the excise get before the government goes "yeah that's enough"?. We'll sooner turn into Utah than take pressure off these small business owners.

 

[clickeral]

I'd like to point out that the first 350k of excise.

https://www.ato.gov.au/businesses-a...ol/remission-scheme-for-alcohol-manufacturers
At roughly $42 in excise per keg you are looking at roughly 8333kegs or about 400,000L per year excise free.

Let's say your looking at roughly $10per L sale price your looking at 4million a year gross it's higher if you sell on the premise that you brew at by the pint

 

[Feldon]

And another one bites the dust.

Wild Life Brewing in Shepparton, Vic.

"a large send off party planned for Saturday February 10th"

https://brewsnews.com.au/wild-life-brewing-to-close-in-february/

 

[eldertaco]

More likely story is most of these breweries have a lot of debt which is now too expensive to service due to rate hikes. When interest rates were low and the craft scene was still going strong a lot of them took on debt to fund expansion. Now that rates are higher they can't afford the debt and the double whammy is that it comes at a time when people are drinking less for some of the same reasons.

 

[dough]

I'm curious, anyone know, roughly, what percentage of the final price the retailers, bottle shops, pubs, clubs, etc, are getting on craft beer?

 

[Dave70]

As a small business owner, I'm not unsympathetic to the plight of breweries, and hate guberment intervention and the ATO as much as the next thinking person, but surely they have to shoulder some of the blame also.
And sorry, all this hand waving about 'supporting local breweries' is just that. If it wasn't, they wouldn't be dropping like flys.

I appreciate their passion for creativity and making interesting beers, but turns that tropical milkshake NEIPA sour isn't such a big seller.
And that handful of fixie riding hipsters who buy a can a week ain't gonna keep the lights on.
Why not just produce a handful of solid beers? Jesus, a serious brewer who can't even slightly improve New or VB should pack it in. Take the fight to them and market it thusly. Central / Western Europe has been basically this doing it forever, certainly hasn't hurt them.

I brew beer, I know what goes into it. So I'm at a loss to see the value in hop forward pale ale for ten bucks a can. You could put that down to perspective, but apparently most of the non brewing public agrees.
Aggravating the situation further, you can pick up a slab of Ashai for fifty-ish. It's a genuinely serviceable if not good (IMO) beer for a hot afternoon.
Sorry, I'm not shelling out a hundred bucks for something with wacky name 75 IBU's. And that's what you need to be shifting to make ends meet, daily and by the pallet load.

Furthermore, if you haven't got any political clout from the ground up or top down, you're goose is pretty much cooked. They will have their way with you. And there's FA you can do about it besides appoint the receivers or sell out.
On that note, spare a thought for the breweries creditors. It not just them who suffer when the liquidators move in.
Ask me how I know.

 

[terminal2k]

On that note, spare a thought for the breweries creditors. It not just them who suffer when the liquidators move in.

This is what gets me with the breweries going into admin. I think it was one of the qld ones last year that the creditors got 5 cents on the dollar for the debt and the company gets to keep trading.

As for what's wrong with the industry, the big blokes locking up taps is a serious issue. I wish I had a bar locally where there would be more than one tap of independent beer available. Then you add in the bottle shops where places like BWS have literally 50% of the fridge space stocked with their own fake craft beers all being sold cheaper than the good stuff. I'm knowledgeable enough to avoid them (they're usually not great anyway) but a normal punter isn't going to stand a chance. I mean the people that know about the independent brewery seal are likely the ones who would know what most of the beers looked like already.

 

[wide eyed and legless]

Agree with what Dave has to say, going into business means giving consumers what 'they' want not what the brewer wants. Why so many businesses fail is they are led from the heart, not the mind.
As far as creditors go, we can't all be secured like the bank and ATO so it is the creditors who bear the brunt unless the business owners are foolish enough to put their homes on the line.

 

[The Mack]

The big players have the buying power to reduce a lot of their production costs, command a lot of taps through incentives that most (if not all) Indies can't match, and have placed themselves (presumably by design) within a sector of the market that isn't subject to change and there's no incentive to try and keep up/be in front of changing in-vogue styles that crafties do. They use FA hops, supplement simple sugars into the mix and have mass marketing that has been around for forever. They are stable.

Add to that the number of breweries that were just scraping by pre-covid and despite the excise reprieves at the time- those chickens have come home to roost and many did not adequately plan for it. I do think multiple successive governments could have done something to encourage more small players (tax-wise), but similarly can see that the market may have reached a level of saturation (many of which with mediocre offerings) that isn't sustainable.

I personally hope more breweries start turning to the multitude of sensational European beer styles on offer, a decent Witbier/Pils in summer, a delightful Altbier, English Bitter or Dunklel in Autumn/Spring, some Belgian magic in the winter.. Keep it somewhat predictable and stable and throw some seasonal in the mix as an exclusivity type thing.

 

[Snowdog]

...most are overpriced, over hopped and bitter.

I don't mind overhopped and bitter. Preferred to the oversour and overfruity concoctions that has been the rage the last few years. Overpriced is definitely an issue. I try to support local independent breweries and bottle-shops as much as I can, but there is only so much beer one can drink. Currently my go-to pale is Stomping Ground, though I'd love to get Hard Road's Righty's Pale regularly. My local craft beer bottle-shop is Old Habits

 

[shmick]

After starting to work my way through the latest 2023 GABS Summer beer pack I'm not holding out much hope this 'sour everything' trend will ease up soon.
I don't mind the odd sour and absolutely love Lambics but 4 sours out of an 8pk of 'award winnings beers' seems overkill.
No offence to the brewers but the one I had last night was truly undrinkable. It was so sour it gummed up your mouth and made your tongue sting by the second mouthful. Mixed it 50/50 with a bland lager and it took the edge off enough to finish. My partner tipped hers out and swore at me.
I'm sure many other less persistent drinkers would have emptied several of the offerings down the sink and never bothered with craft beer ever again which doesn't do anyone on either side any favours.

Some of the others have been really nice though so I'll persist. (and pay more attention to the box details next year)

 

[blacktop™]

This won't be the last brewery to close, because I can't see electricity, transport and gas prices going down until energy workers and executives are prepared to take one for the team and pass on some pay cuts to the consumers. And there's a fat chance of that happening.

This is ridiculous.

I’m an electrician but far from an energy worker (and not unionised either). The issue here is state governments have privatised the power network. Shock horror!! How dare a company try to make money!!

If power was free I’d say there would still be breweries going into administration.

The market is saturated, cost of living in major cities is high. Plenty of breweries producing average beers at best. Excise is high as is cost of ingredients, power, logistics. Distribution is limited for lots of breweries to prefer to “stay local” but that’s isn’t good enough. Craft breweries are now forced to brew common/“boring” beers to appeal to the masses. Cervezas are literally everywhere…hell, even Mountain Culture have put an Aussie lager straight into their core range…

 

[Dave70]

Wayward has been given a stay of execution it seems.

https://craftypint.com/news/3343/wa...-drinks-collective-emerge-from-administration
He says that, as sole director, he is funding the DOCA, and remortgaging his house to do so, adding: "This was to protect the company and protect 40 jobs. Forty people are still employed. The ATO and other creditors have lost out; I'm sorry but that's what I had to do as a director."

It's been my experience at least that once a DOCA has been executed, its pretty much curtains for the business. Good luck to him, but given the current climate, and the unlikelihood and anything changing in the near future, its good money after bad.

Then, on the other hand:

"If independent craft beer is in a bit of a slump – and it is, but that's not going to last forever," he says, "then if 20-year-olds want to drink a citrusy, Sochu-based drink we'll make them."

He's right, trends come and go, but cranking alcopop leg-openers to a bunch of fickle zoomers to stay afloat?

What an ignominious demise for a brewery..

 

[TheWiggman]

If power was free I’d say there would still be breweries going into administration.

The market is saturated, cost of living in major cities is high. Plenty of breweries producing average beers at best. Excise is high as is cost of ingredients, power, logistics. Distribution is limited for lots of breweries to prefer to “stay local” but that’s isn’t good enough. Craft breweries are now forced to brew common/“boring” beers to appeal to the masses. Cervezas are literally everywhere…hell, even Mountain Culture have put an Aussie lager straight into their core range…

Maybe a short-sighted comment on my behalf but I have a vested interest in hatred of the energy system, be it private or government. I worked for a company that is now shut down which was primarily driven be increasing energy costs. This isn't speculation, at over $3m a month with discount prices in 2018 they simply couldn't wear it and didn't have the capital to invest in more 'green' alternatives. I don't like that hundreds of people lost their jobs while others (both union and executive) are fighting for very high pay rises on already well-above-award salaries and wages. I live in my own fantasy world about what I think is fair. And don't get me started on property.

I'm genuinely interested in what portion energy contributes to TDC. I would expect energy at a brewery would be very high consideration. For a standard 19l batch on electricity I calculated about $7/brew at home. I no-chill, so no costs for cooling but a brewery would pay for that. Then there's refrigeration/heating for fermentation and ongoing refrigeration after that. So estimate $10/batch. For $30 of ingredients that's a QUARTER of the cost to produce the beer (excluding on-site running costs) so I think energy has a big impact on businesses. Especially considering it was 1/4 of the price 10 years ago. Plus these costs to others are passed on through the whole chain.

Odd that you mention cevezas, I haven't seen any local breweries making it so either I'm looking at the wrong part of the fridge or they don't sell it around here. I think craft breweries should leave lagers to the big players.

 

[Feldon]

Australia has the third highest beer tax in the world.

But according to most respondents on this thread high beer tax has nothing to do with craft breweries going bust. It's the wacky beers, piss poor management, rising energy costs, economies of scale of the big brewers, a market correction, etc., etc.

Why is there no push back against high beer tax? The standard you walk past and ignore is the standard you accept.

Beer needs to be taxed at the same low rate as wine.

 

[philrob]

Australia has the third highest beer tax in the world.

But according to most respondents on this thread high beer tax has nothing to do with craft breweries going bust. It's the wacky beers, piss poor management, rising energy costs, economies of scale of the big brewers, a market correction, etc., etc.

Why is there no push back against high beer tax? The standard you walk past and ignore is the standard you accept.

Beer needs to be taxed at the same low rate as wine.

Perhaps maybe because the clever sophisticated people who sponsor and make those rules are predominantly wine drinkers, and they are convinced all alcohol problems in our society are limited to those ordinary people who drink beer?
And, of course, the wine industry has way more lobbyists and influence with our esteemed leaders than the beer industry. There's a cash cow from beer they are loath to give up.