Craft Breweries take case to WTO

[Phoney]

A couple of my locals featured on Lateline last night:

http://www.abc.net.au/lateline/content/2014/s4135158.htm

EMMA ALBERICI, PRESENTER: Australian craft brewers have asked the World Trade Organisation to intervene in a dispute over fair trade for small local breweries.

In recent years the popularity of craft beers has increased in Australia, but the smaller brewers claim they're being unfairly squeezed by the big domestic breweries and foreign microbreweries and it's those foreign brewers who are the target of the action by the Aussies in the WTO.

On another front, the ACCC is investigating restrictive trading practices which lock craft beers out of some Australian hotels. But consumers are putting pressure on pubs to change their ways.

This report from Steve Cannane. The producer was Sashka Koloff.

STEVE CANNANE, REPORTER: This there's something highly unusual about this Sydney pub. It has 22 beers on tap, but not one of them is Tooheys New or VB.

At the Union Hotel, a hard-earned thirst is more likely to be quenched by a cold craft beer.

LUKE HISCOX, UNION HOTEL: Out of the 19 taps that are craft, we might have 40 or 50 brewers a year and so far I think this year we've had 300 different beers on tap so far.

STEVE CANNANE: It would've been unthinkable two years ago, but small brewers are now knocking Australia's best-known beers off the taps in pubs like this one.

RICHARD ADAMSON, YOUNG HENRYS: There's only one reason that those pubs will take those brands off and that's because they're not selling. So if people are just making their purchasing decision based on, "Well I want to drink that beer for whatever reason it is," - better flavour or just like the ethos of the company, like dealing with the - supporting a small guy, then that's the reason that those taps are doing well and the other ones are coming off.

STEVE CANNANE: Craft breweries are typically small, independent and focused on quality. Richard Adamson set up Young Henrys two and a half years ago. Already, he's winning international awards.

RICHARD ADAMSON: We got invited to do a - our Real Ale, which is our take on an English bitter for Wetherspoons, which is a massive pub chain in the UK. They've got about 1,000 pubs. And I'd just got back into Sydney and I checked my email and it was like: we bloody won!

STEVE CANNANE: While total beer sales are declining in Australia, craft beer is becoming more popular, driven in part by the tastes of young drinkers in inner-urban areas.

VOX POP: Before that it was just, like, standard, like, Carlton Draught or Tooheys New, that kind of thing. And they were fine, but, suddenly, like, when you taste something different, it just ...

VOX POP II: You can't go back.

VOX POP: Yeah, you can't back after that.

VOX POP III: There's some pretty special bars with a much better vibe because people are there for the beer - the craft element of the beer, not just 10 litres of it.

STEVE CANNANE: But small brewers find it hard to get their beers on tap in most pubs. That's because the hotels sign contracts that allow the big brewers to monopolise the taps in exchange for tens of thousands of dollars worth of rebates and equipment. The small brewers believe that this is a restraint of trade.

DAVID HOLLYOAK, AUST. REAL CRAFT BREWERS ASSN: This doesn't happen in other parts of the world. For example, in America, it is illegal to have one tap contracted. In the UK, it is illegal to have more than two per cent of the total UK market as tied. Yet in Australia, they're allowed to have up to 93, 95 per cent of the tap market tied up and it's not seen as an issue.

STEVE CANNANE: The Australian Competition and Consumer Commission is currently investigating these kinds of supply conditions in the draught beer market.

The big breweries argue the market is already competitive.

JEREMY GRIFFITH, CARLTON & UNITED BREWERIES: It's very competitive. We actually like that people are coming into pubs wanting choice and variety. We are seeing a lot of publicans at the moment actually demanding that they - we can bring more craft beer taps to the consumer. As I said, 70 per cent of our customers aren't contracted at all and many of those ones where they do have contracts are not completely exclusive.

STEVE CANNANE: The big brewers have found another way of preventing the craft brewers eating away at their market share: buying up small breweries, such as Little Creatures, White Rabbit and Matilda Bay. But independent craft brewers say they're being squeezed from all angles. They face further restrictions in the bottle shop market and pressures from foreign craft brewers like Sierra Nevada.

DAVID HOLLYOAK: Australia's in a very unfair position because in 22 out of the 33 OECD countries are providing substantial reduced tax rates for their small brewers. And under the General Agreement of Trade and Tariffs, that is deemed a government subsidy. So, when those brewers are then importing their beers into Australia, they are being subsidised by their government. So, we're in an unfair trading position.

STEVE CANNANE: David Hollyoak has written to the World Trade Organisation calling on them to take action. As the craft brewers await decisions from the WTO and the ACCC, it's consumers who are forcing local publicans to rethink the contracts they've struck up with the big breweries.

Ray Reilly turned down a deal with Carlton & United worth over $50,000. He says the decision has already paid off.

RAY REILLY, HENSON PARK HOTEL: Big dividends. I mean, you know, just having the flexibility to do what, you know, the community really wants. And that's have a good selection of beer and we can do whatever we like to do. I mean, you know, if we take a beer on, doesn't work, we get rid of it and we put another beer on.

RICHARD ADAMSON: I think what we used to see with pubs was the offering was very much supplier-led in terms of what choice people had. It seems to be more consumer-led now, so, people want that choice.

STEVE CANNANE: Steve Cannane, Lateline.

Good on them!

 

[Online Brewing Supplies]

Got to get on board and support these guys.
Nev

 

[droid]

fantastic stuff! I wish the craft breweries all the best and I am sure there are a lot of people who aspire to run some kind of beer supply/shop that use this forum

thankyou for the post!

 

[pajs]

Thanks for posting that. Good news.

 

[Online Brewing Supplies]

I think a good place to start is to demand "X" breweries beer be on tap at your local, I do.
Its a small ask but can make a big difference.
Nev

 

[NewtownClown]

I think a good place to start is to demand "X" breweries beer be on tap at your local, I do.
Its a small ask but can make a big difference.
Nev

That's what I do, local restaurants, too - and point out there is more to beer than the choice of a few lagers and that a beer brewed in Australia under license is far from being an imported beer!

 

[Snowdog]

So they're upset about American microbrewery's local tax advantage? Hmm... If this part gets any traction, I'm guessing that the imports will start withdrawing from the market.

I get the rest of the article on tap contracts and contracted fridge space. Good to see more local variety appearing around in the pubs.

I have a serious issue when I go to a local brewery and buya pint of their beer they have made right there, and they are charging me $9 for it. And local microbrew 6 packs running upward into the $40 range... I likely don'rt have the whole picture, but I can see there is a tax/licensing/etc. problem when one can buy a six of Little Creatures or 4 Pines or Sam Adams for nearly half what an Ekim or Nail or such are priced at.

 

[buckerooni]

OT but I hear you Snowdog, I paid $12 for a single 500ml bottle out of a car boot in a market out the back of coburg a few weeks ago. It's my decision of course but I just didn't expect it to be that much! Straight faced me $72 for a sixer when I asked, 'ave ta pass on that one buddy...

 

[yum beer]

Packaging costs are a killer few small breweries.
Probably costs a micro twice as much for bottles and boxes then the big boys, someone has to pay for that.
Its not far off $20 just for the bottles if your not buying buttloads.
Make it hard to compete on price.

 

[fraser_john]

What really needs to happen to let craft beer take off is alcohol excise reform so microbreweries are treated similar to small wine makers.

 

[TimT]

Good on them. I'd love to know what the lawyers think - whether this challenge will work at all.

There's a lot of changes that should be made to laws and regulations and tax regimes around alcohol before craft beer really takes off (as it deserves to). But I support these guys anyway - you have to pick your fights, after all, and win them, one at a time.

 

[philmud]

What really needs to happen to let craft beer take off is alcohol excise reform so microbreweries are treated similar to small wine makers.

I agree. The action described in this topic seems to be saying "let's make imported beer prohibitively expensive."
I far prefer: "let's secure tax concessions so we can offer competitive pricing"

Edit: I'm not referring to the ACCC action, I'm on board with that

 

[TimT]

The action described in this topic seems to be saying "let's make imported beer prohibitively expensive."

Strongly disagree.

I don't think just one victory will let craft beer flourish in Australia. Those craft brewers that are in business have a lot to do before things really swing their way - hence they can't just let the issue of subsidies to brewers overseas slide.

One issue that will affect ambitious small brewers is ability to make sales overseas. But ability to make sales overseas is heavily affected by big subsidies delivered to breweries overseas, and not delivered to breweries here. Hence this battle.

If at least some of these subsidies are removed, we can expect breweries to grow on profits made from exporting beer overseas. This will benefit craft beer in Australia too.

It's definitely not the only issue affecting our small brewers. Excise taxes are the biggest issue affecting brewers here, and should be largely scrapped. Another battle is the one over Carlton United's ownership of defunct brands, which they sometimes do very small runs of to maintain the ownership of. Thunder Road fought CUB a while ago in the courts over this, and I'm not sure what the judgement was - but at least there's been some legal clarification around this issue, and the idea of local beer has been brought back onto the agenda.

Small victories. One at a time.

 

[philmud]

The action described in this topic seems to be saying "let's make imported beer prohibitively expensive."

Strongly disagree.

I don't think just one victory will let craft beer flourish in Australia. Those craft brewers that are in business have a lot to do before things really swing their way - hence they can't just let the issue of subsidies to brewers overseas slide.

One issue that will affect ambitious small brewers is ability to make sales overseas. But ability to make sales overseas is heavily affected by big subsidies delivered to breweries overseas, and not delivered to breweries here. Hence this battle.

If at least some of these subsidies are removed, we can expect breweries to grow on profits made from exporting beer overseas. This will benefit craft beer in Australia too...

Do you think Aussie craft brewers anticipate that the biggest impact from the removal of overseas subsidies/protections would be from exports, or from increased domestic sales? I could be wrong, but I'd have thought domestic sales and I'd prefer they achieved that growth through excise relief, not by increasing the price of imported beer.

By the way, Thunder Road lost their case against CUB. Was excellent exposure for them though.

 

[Online Brewing Supplies]

I believe that it would be favorable to increase domestic sales over exporting.
I dont think imports being increased was the point , just an example of the way imports are treated in their country of origin.
I am all for cheap imports and a domestic market which can compete on a level field. Win Win
Nev

 

[TimT]

Well I'm generally in favour of free trade and think the long-term benefits of a (subsidy-free, open) marketplace outweigh the short-term disadvantages. Still, that's a discussion to be had at (long and tedious) length somewhere else, some other time. Suffice to say that if we start trying to outcompete other nations on subsidies for our brewers, no-one's going to win.

I had thought Thunder Road lost though I missed it at the time. Anyway, the case had at least three points that will be in craft breweries advantage in the longer term - it got publicity for the idea of local brews, a niche market which craft brewers are well placed to enter into. It at least provides some clarity around the laws now, and a detailed reading of the judgment could well benefit craft brewers in future cases against Thunder Road. And as you say it provided great publicity for Thunder Road - which I'm taking as a win for craft brewers in general - anyone who stands against the Great Satan, CUB, can't be all that bad!

The most important point, though, is that no one change to the laws, regulations, and taxation regimes on beer are going to be good enough on their own for craft beer to really flourish in Australia. We have to take on a lot of issues, one at a time, and build on past successes. Overseas subsidies for brewers is one issue. Let's get on it!

 

[TimT]

It at least provides some clarity around the laws now, and a detailed reading of the judgment could well benefit craft brewers in future cases against Thunder Road megabrew.

Ugh. Sorry for the mistake, please substitute 'megabrew' for 'Thunder Road' in my second point above.

 

[Blind Dog]

Just wandered onto this thread and must admit that I wasn't aware of subsidies to Brewers overseas. They pay less tax in their local country of production than a micro here would, but its pretty inaccurate to call that a subsidy, more that the duty system is a mess here. Also pretty sure that alcohol coming into the country gets charged the same rate of duty as locally produced stuff, and it's generally excluded from free trade agreements.

 

[RobW]

- anyone who stands against the Great Satan, CUB, can't be all that bad!

... or the Greater Satan SAB Miller

 

[Phoney]

I think a good place to start is to demand "X" breweries beer be on tap at your local, I do.
Its a small ask but can make a big difference.
Nev

I tried this yesterday at one of my locals, by no means a bogan pub. But a newly renovated pub full of hipsters that is otherwise pretty cool, except the "best" beer on tap is LCBA. The conversation with the barman / manager went like this:

'I wish you guys had craft beer on tap'
'why'
'cause it's heaps better'
'nah its not. I reckon craft beer is gay'
'I disagree, I think its much nicer and so do a lot of people'
'Well what do you want to see here?'
'Maybe like [named a couple of local micro's], at least one or two rotating taps'
'Yeah well with Lion nathan we don't get much of a choice as to what we can put on'
'Right, so all of your taps are contracted out?'
'Yep, and plus the owner of this pub doesnt like craft beer'

I dont think I'll be going back there after that. Owner of the pub sounds like ******.