Melbourne-based craft brewery, Deeds Brewing, will close after it failed to find an investor to bail it out of voluntary administration. Deeds entered VA on 13 March.
On Instagram, Founders Pat Alé and Dean Milstein said their hearts were broken.
“We have a very sad announcement for you all. We have made the difficult decision to wind up our business. Over the last 12 years, we’ve poured our hearts into every brew, every interaction, and every moment shared with you.”
In March, the brewery appointed Deloitte Financial Advisory as administrator, with Alé telling The Crafty Pint the decision to go into VA was largely due to an ATO debt accrued during Covid.
Deeds also had a major incident due to contaminated malt that meant a sizeable number of beers had to be pulled from sale. Alé said they had been working with their insurer to recover the loss, but it rejected the claim on 12 March.
“We’ve got a massive cash flow hole as a result of that issue that we’ve been carrying and, coupled with the ATO, it’s made it really challenging in an already difficult market,” Alé said.
It has been a particularly tough time for craft breweries, with more than 12 going into VA in the past year.
Wayward Brewing went into VA in January but managed to keep trading with a Deed of Company Arrangement. Hawkers Beer followed in February. Hawkers co-founder told the SMH a carton of its West Coast IPA costs around 23 per cent more to make now than it did in 2018, and 45 per cent of that is tax. Less than half the increase has been passed on to consumers.
Mighty Craft has offloaded most of its portfolio in a desperate bid to avoid having to sell its stake in the Inspired Unemployed’s Better Beer brand, including Jetty Road Brewery in January and Mismatch Brewing in April.
Within two weeks of Deeds entering VA, Akasha, Black Hops, and Grand Ridge (Victoria's oldest independent brewery) all went the same way.
IBA CEO Kylie Lethbridge said the challenges facing the craft brewing industry are far greater, in that unlike wine and spirits, it doesn’t get any federal government support, policy recognition or funding programs.
Beer in Australia is the third highest tax beer in the world, and as with spirits, the tax is indexed twice a year to the Consumer Price Index. The increasing tax bill is compounded by other factors like the cost of raw materials increase 37-40 per cent in the past 12 months.
There has also been a CO2 gas shortage, which for a high-end user of energy saw the price of gas rise by 51 per cent for some.
There is also a tax debt burden from Covid. When the pandemic hit, the Australian Tax Office allowed a pause on alcohol excise payments for almost 600 independent brewers.
But by the time the ATO started demanding the money be paid, the trading landscape had changed to one of skyrocketing costs, cost-of-living pressures and declining consumer spending, and rising interest rates.
“It is the perfect storm of issues making it incredibly difficult to operate, which is more frustrating because a lot of those factors are outside of our control – except for the federal government, which can help us,” Lethbridge said.
“We’re seeing breweries go into voluntary administration because they owe the Australian Tax Office millions of dollars of excise tax, they were allowed to defer during Covid. It forces them into that position and then the ATO only gets seven cents in the dollar.
“We’re saying to the ATO if it was more flexible then it would be more likely to get the full amount paid, which is surely a better outcome for everyone. A freeze on excise rises would also have an impact.”
For Deeds Brewing, it will be supplying wholesale customers until stock is depleted and running a 30 per cent discount off everything bought online and through the Deeds Taproom Cellar Door.
