The independent brewing industry has expressed its disappointment and frustration with the federal government, after it made no changes to Australia’s excise tax in the 2024/25 budget.
Independent Brewers Association (IBA) board director, Callum Reeves, also owner of Kaiju! Beer, said, “The Federal Government may only think of our members as just a “revenue line” but we are much more than that. And we are not going away.”
Reeves said governments in the UK, Japan, and Canada have all supported some form of relief for their beer manufacturers, “so we know that it is possible”.
Rising excise, costs, static rebate
Twice a year, the Australian Bureau of Statistics (ABS) updates the consumer price index (CPI), which provides the basis for indexation. The formula for spirits and other excisable beverages is the total volume (litres) of product x alcohol strength x current excise duty rate. The excise duty rate is set per litre of alcohol (LAL) for alcoholic products.
There are also other factors that influence the final price of spirits and other alcoholic beverages including the GST and wholesale and retail mark-ups.
Excise is compounded by several factors in the last 12 months:
- having a premium product makes price rises challenging;
- cost of raw materials rose 37-40 per cent;
- CO2 shortage saw gas price rises by up to 51 per cent; and
- high freight costs.
And the $350,000 excise remission cap, introduced in 2021, has remained static. If it was indexed, it would now be around $390,000.
“That’s the salary of your junior brewer,” IBA CEO Kylie Lethbridge said.
More than 12 craft breweries have gone into voluntary administration in the last 12 months, with difficult operating conditions exacerbated by millions of dollars of excise tax they were allowed to defer during Covid, but which now has the ATO at their door.
The IBA says that not only does the current excise system create an unequal playing field for different types of alcohol, it makes no concessions for the range in size of breweries within the sector.
Lethbridge said, “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 represents only five per cent of the market.”
Solutions
“Our members contribute to the cultural fabric and economic vitality of communities throughout Australia.
“They are supporters of Aussie farmers, hubs of innovation and job creation, with tourism experiences that enrich our nation's beverage landscape through locally produced beers,” Reeves said,
Lethbridge added that even a temporary hold on excise would help breweries “stem the tide of cost-of-living pressures, retain employees or even afford the ingredients necessary for crafting a quality product”.
“We were told that our calls for help were being heard, were granted the opportunity to inform many members of parliament about the challenges in the Australian beer market and provided them easy to implement and cost-effective solutions.
“Addressing excise might appear insignificant, but for the smaller breweries in Australia, the cost disparity between producing a single can of beer versus a large multinational business is substantial,” she said.
The IBA said if the government wasn’t willing to offer a less encumbered regulatory framework for the industry, then it should at least ensure that independent breweries have fair access to market.
Lethbridge said, “In March 2024, the House of Representatives, Standing Committee on Economics released its report “Better Competition, Better Prices” on the inquiry into promoting economic dynamism, competition, and business formation.
“In that report, the committee acknowledged what we have been saying for some time – “that Lion and CUB exercise enormous market power in the beer sector, with a combined 85 per cent market share and margins higher than in the alcohol retail sector”.
“The Committee found that “there appears to be evidence of high margins in the beer brewing sector which may indicate excessive market power. This would contribute to the high cost of beer for consumers”.
“Now we are asking for action based on their own findings. The Australian Government could easily claw back this perceived lack of support by directing the Australian Competition and Consumer Commission to conduct an inquiry into the Australian beer market.
“Our members are people too and our issues cannot keep being put on the backburner. With every liquidation, voluntary administration and story of struggle we are seeing peoples’ lives impacted and jobs stripped from regional communities… its simply not sustainable.”
