“If the government does not act now on common sense reforms independent brewing businesses will continue to close and the cost of a pint, made by a local Australian brewery, will be out of reach for many Australian consumers.”
That is the crux of the Independent Brewers Association’s (IBA) Federal Budget submission, which is calling on the Government to act now in order to save Australia’s independent brewing industry.
With many iconic craft brewers going into administration, restructuring or closing down completely, there is weekly evidence to support the IBA’s claim in its Budget submission that “the environment for independent brewing is dire”.
The IBA added: “2023 saw small breweries closing at an alarming rate and several larger breweries go into administration. The start to 2024 is no different. These restructures resulted in dramatic job losses and massive losses for supply chain suppliers and creditors – of which the Australian Tax Office is often the largest.”
Just this week Hawkers Brewing went into administration, and Founder and Managing Director Mazen Hajjar told Beer & Brewer that the decision to enter administration was made due to financial losses, restricted market access, increased production costs and legacy tax debt.
“The cost of energy went up 90 per cent, barley went up 22 per cent, cans have gone up more than 20 per cent,” he said. “We had to update our pregnancy warning logos with a third colour, which doesn’t seem like a big thing, but updating the plates cost us $50,000 on top of a very hostile trading environment.
“For the last several years, we’ve been talking about market access and restricted ability to sell our beers at bars because of competition for tap contracts. All of this is compounded by the cost-of-living crisis where people have the inability to pay for their increasing mortgages,” he said.
In particular, legacy tax debt has been a significant pressure on Hawkers, which was accrued during the pandemic when the ATO allowed brewers to defer excise tax payment.
“So far, we have been able to restructure and fix ourselves so that we have a more sustainable, profitable position. We’re up to date with all our suppliers and all of our taxes are up to date, except the excise tax. The ATO wants us to come to a payment agreement, and it is just unwilling to give us the space and time to pay back the debt,” Hajjar said.
SUPPORT FOR THE SECTOR
Richard Watkins, Chair of the Independent Brewers Association, summed up the reality of the position that Hajjar and many other independent brewers face right now, saying: “It is a very unhealthy situation for our industry at the moment. Beer tax has jumped by nearly eight per cent in the past three to five years and local brewers can’t match the prices of overseas-owned producers.
“We’re worried the cost of craft beer from a local Australian brewery that has employees in Australia, pays tax in Australia, will start to be out of reach for many Australian consumers.”
Help with tax debt and the burden of twice-yearly excise increases are two of the proposals put forward by the IBA in its Budget submission, the six proposals to the Government from the IBA are:
- Freeze indexation of alcohol excise for a period of two years
- The excise remission cap of $350,000 that was introduced in July 2021, should be indexed in line with inflation.
- Offer an extension/allow for flexibility for pay back terms for those independent breweries carrying an excise debt as a result of deferrals during the pandemic.
- Federal support to secure the future of our Australian independent beer industry
- Support regional brewing businesses by adding brewery technician to the national skilled occupation program.
- Support small brewing businesses to convert to more sustainable sources of energy.
The IBA says that its six proposals will provide the greatest support to the sector and that the first three listed above would provide immediate relief by reducing the regulatory burden, even on a temporary basis.
Kylie Lethbridge, CEO Independent Brewers Association said: “Every time excise rates go up, my first thought is how many of our independent breweries are going to survive this round and who will close next. Over the past three years, small independent breweries in communities all over Australia have done whatever they can to be successful businesses and to beat adversity.
“The biggest issues are structural and economic and only the Federal Government can address them. The Federal Government needs to act now if it wants the sector to survive – and to show Australians they do care about local small businesses.
“We are simply asking for common-sense reforms that go some way to creating equity for small breweries in a market stacked against them.”
“With one of the largest mid-strength beer markets in the world, beer has been a leading the way in low and no-alcohol offerings. And yet we face an unequal taxation regime that increasingly has beer being taxed at a higher rate than wine.
“If excise is supposed to be a tool for harm minimisation – then the Federal Government really needs to take a look at its own data and create an equal playing field that meets its own policy objectives.”
BEER WILL SURVIVE
The IBA submission highlights that according to demographer, Bernard Salt AM, the independent brewing industry is poised to continue to be a success and is important to Australian society because:
- Australia’s consumer market will continue to rise in the future.
- Independent breweries create local jobs which build skills and assets in the regions throughout Australia.
- New generations and societal behaviours are evolving where societally conscious consumers seek locally produced, sustainable products that make a societal contribution. Consumers of the future are interested in more than just taste and is a market that is more diverse than homogeneous.
Adding: “With government backing by implementing the common-sense proposals outlined throughout, independent small breweries across Australia can survive the current situation and add value to the Australian economy and society into the future.
“Beer will survive the current headwinds. The question for Government is what beer industry does it want to see in the future?
“We have a vision of ‘quality independent beer everywhere’. The Independent Brewers Association, our members and supply chain partners are absolutely committed to doing whatever we can for the industry to reach that vision.
“We know that the quality and innovative beer styles our members produce, the family-friendly (pokie free) environments our members create, and the relationships breweries have with their local community and agricultural suppliers, are what Australians want.”