08 February 2024

Hard times for Australia’s craft brewers

Australia | A skyrocketing excise tax, debt from the pandemic period, increased production costs, and depressed consumer demand have created a perfect storm for the country’s 600 or so independent craft brewers.

A major factor leading to the recent spate of independent breweries entering into voluntary administration is the legacy debt acquired during Covid, the website theshout.com.au reported recently. During the pandemic, the taxman allowed breweries to defer their excise payments. However, the taxman now wants them to repay their debt and quickly so, at a time, when everybody is struggling under poor operating conditions.

Excise is a real pain

But even without the legacy debt, the excise tax disproportionately affects brewers. As the website reports, the Australian government attempted to reform the excise structure, providing an excise-free threshold for smaller breweries producing less than 1 500 hl beer annually. Those really small breweries are weathering the storm a little easier, if they are just servicing their communities and do not ship their beer. But medium-sized brewers feel they are still being unfairly taxed.

Hawkers, a medium-sized brewery from Melbourne, sells AUD 12 million (USD 8 million) worth of beer per year, with almost AUD 3 million of that revenue going to the taxman. “I don’t have much of a profit margin in my business. It’s like the government is your silent shareholder,” Mazen Hajjar, its founder and CEO was quoted as saying.

Consumers are trading down

The cost of producing beer has also increased. The CO2 shortage was a major concern in 2023. Because of the shortage, Hawkers was reportedly down for a total of 20 days last year.

At the same time, beer consumption has declined, especially due to cost-of-living pressures. Many consumers have already traded down to beers that are cheaper than independent brewers can offer. Anecdotal evidence suggests that many punters now go for an AUD 19 six-pack (USD 12.50) rather than an AUD 25 six-pack (USD 16.50), which is the price for a craft beer.

Some independent brewers have diversified into other segments and produce seltzers or ginger beers. A lot of hop waters are being released onto the market. But there is no avoiding taxation and biting costs with these products.

Please help us

“We’re asking for some flexibility from the [taxman] in order for brewers to pay their debts back. We’re asking for some relief on taxes, as the third highest taxed beer industry in the world. We’re asking for the excise rebate to be indexed along with the tax. We’re asking for the tax hikes to be frozen for a couple of years to allow everybody to catch up and recover,” Kylie Lethbridge, CEO of the Independent Brewers Association told the website The Shout.

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