Aussie brewers fret over high inflation and beer excise hike

Australia | There is a lot of angst about the latest excise hike, following high inflation. The cost of beer is set to rise again, as excise tax went up by 3.7 percent on 1 February, after rising 4 percent in August last year.

Taken together, the two – automatic – hikes represent the biggest rise in a financial year in more than 30 years.

Observers say that the wholesale price of 50 litre kegs will reach about AUD 280 (USD 194), resulting in a price of about AUD 20 (USD 14) for a pint in a pub. That is why pubs are so expensive and profitable (provided covid has not shut them).

In the off-premise, average prices for beer in bottles and cans will be about AUD 20 for a six pack (2.0-2.3 litres) or about AUD 50 for a carton (9 litres). Craft beers are usually 50 percent more expensive. Draught beer is much more profitable for the retailer as the excise rate is much lower. Most craft brewers have their own tap room because of this

Will publicans absorb the price hike?

Publicans will need to pass the increase on to consumers. A publican, quoted by the trade publication The Crafty Pint, said: “There are generally two increases a year every six months, and we kind of eat one of them, but we generally have to put it up on the February one.”

Beyond the larger energy bills everyone is facing, the cost of meat, other kitchen essentials, and wages have gone up too.

The impact on beer consumption

Publicans are unsure what the reaction among beer drinkers will be. People’s eagerness to visit pubs, since covid lockdowns and restrictions have ended, may soften the blow for on-premise businesses, but off-licences or bottleshops, where margins are tight, could suffer.

Kylie Lethbridge, CEO of the Independent Brewers Association (IBA), which represents more than 400 craft brewers, said brewers know when excise hikes are coming, yet this significant back-to-back increase comes at a time when many across the country are struggling.

Recently, the craft brewer Ballistic Beer in Brisbane went into voluntary administration.

A Government inquiry into the cost-of-living crisis is underway. Media say that it will hear from companies such as energy producers and supermarket chains, as well as regulators including the Reserve Bank and competition watchdog ACCC, to determine whether enough is being done to ease skyrocketing prices.

Inflation reached 7.8 percent in December, but mortgage interest charges for employee households rose 26.6 percent over the quarter, and 61.3 percent over the year, media report.