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In B&B's first issue we reported on our craft brewers' efforts to reduce the excise payable by small brewers to provide similar assistance to that received by the nation's small wineries. Jamie Cook looks at what it will mean for Australia's burgeoning micro-brewing industry if the new Federal Labor Government agrees to change the current beer excise regime...
Australian beer lovers are increasingly well serviced with the country now boasting more than 120 breweries and a number of new operations set to open in 2008.
This growth continues to be offset by the ongoing consolidation of the brewing industry across the globe. You only have to look at the current set of corporate manoeuvres taking place in Europe in recent months to see that the global beer market continues to condense.
SAB Miller's recent acquisition of the family owned and controlled Grolsch emphasises the brewers' thirst for growth and global domination. Whilst closer to home in the last couple of months we have seen the Boag's brewing business change hands to become part of the Lion Nathan stable of premium beer brands, followed by beverage giant Coca-Cola Amatil swallowing one of the country's newest regional brewers, Bluetongue.
Craft brewery growth will continue but what types of operations are evolving and, if the excise changes are introduced, how will each operation benefit from them?
Micro Brewers (Pub and Restaurant Breweries)
These brewers predominantly brew beer on small scale for their own venue and serve their range of brews in draught form. The traditional pub brewery concept - where a small brewery is installed within an existing hotel - has evolved a little over the last few years as we see more purpose-built venues appearing and a number of wineries adding a beer offering to their cellar doors and restaurants. Pub and restaurant breweries are driving the growth in the number of operations and these businesses would greatly benefit from the excise changes. Predominantly a hospitality offering, these venues contribute to the diversity and interest in the country's hotel, bar and restaurant scene and to an increasing extent (due to the growth in breweries in tourist locations) they add value to the tourism industry.
Because these operations have very small breweries installed, they can experiment and continue to develop their beers over time. This provides a real opportunity for consumers to discover and appreciate the ever-expanding world of beer and brings a new sense of sophistication to the drinking experience. Excise savings for these operators can be used to further develop the experience they provide for their customers by investing in staff, training and equipment.
Richard Watkins, Brewer at Canberra's Wig & Pen believes the proposed changes will allow for strong growth in the industry.
"It would allow successful operations like this to use our solid platform to expand our distribution into other outlets, whilst continuing to improve the quality of our offer at the Wig & Pen through investment in equipment and fit out," he said.
"But at the end of the day it's up to all of the brewers to make a quality product."
Regional Craft Brewers
These regional champions of the brew are popping up all over the country, and are usually focused on building a presence in their own regional market. The size of the operations varies greatly, based on whether they are metropolitan or country, and how long they have been in operation. These brewers may have a bar or restaurant where they sell and showcase their beers, however these new wave local brewers also produce a range of bottled beers on a small scale.
The regional brewers are providing investment and employment within the local area, and in some cases their operations complement other industries in the region such as local produce and tourism.
Producing packaged beer in these quantities is largely a hand bottling or semi-automatic operation and therefore highly inefficient in comparison to the larger breweries. Any savings in excise will help offset the higher costs of production and therefore assist them in marketing their products to a wider audience which will lead to greater investment and employment in the local community.
Ben Kraus from Bridge Road Brewers in Beechworth says the proposed excise changes will improve the feasibility of small regional breweries. He believes they will provide "improved margins which can assist in funding improvements to plant and equipment and create employment opportunities."
"Regional Australia needs new industries and exciting new businesses like a brewery can be a real boost to the local economy and the community by providing jobs for the younger generation," Ben said.
National Craft Brewers
Australia is blessed with a small number of craft brewers who have reached a scale where we can say they are truly national operators. They produce a range of beers that consumers are embracing with open arms.
The larger of these brewers tend to sit under the shadow of our two major breweries and are to some degree owned or controlled by the major brewers. There are also a number of smaller national craft brewers who are continuing to grow their business by staying true to their craft roots while maintaining their independence and continuing to support the local community that is their home market.
These breweries are certainly leading the charge in creating a beer market that is more sophisticated and diverse. By having a broad distribution base they are able to make their brews more accessible to the consumers who are searching for something more from their beer.
Howard Cearns of Little Creatures Brewing believes that there would be a small, one-off impact for businesses of their size, however the broader impact across the craft beer industry as an important positive move.
"The proposed changes would be a significant benefit to the viability of the smaller craft brewers, and whilst this would increase the level of competition, it would also improve the overall health of the industry. You only have to look at the US to see that a different excie structure can help support a stronger industry," he says.
Market Development
Of the 120 existing breweries, around 75 per cent are micro brewers, whilst 18 per cent are regional brewers and just seven per cent are national. The volume split across the three reflects the true nature of the situation with the national brewers producing in excess of 85 per cent of the craft beer volume.
Concentration of this nature is very similar to the Australian wine industry where there are some 2,500 wineries being supported by the WET (Wine Equalisation Tax), which is designed to assist the small operators in providing diversity and character to the marketplace.
All three types of brewing operations are growing in numbers and production volume, with the geographic spread favouring New South Wales, Victoria and Western Australia. However both Victoria and Western Australia are punching well above their weight in terms of the number and strength of the operators.
The number of strong operators contributes to the development of the overall market as they are all educating and developing the beer drinkers' understanding of the market leading to greater consumer demand, which then becomes a market for more brewers. Increasing the number of small breweries in operation increases employment and investment in their local communities.
This growth can be further fuelled by the excise relief proposed. For this to occur, the beer drinkers of Australia need to actively support their local brewers.
In the wake of Kevin07, we all need to pull together as one to show the new government that there is strong support for these changes, and they need to act to help a small part of one of Australia's greatest industries as it continues to compete with increasing globalisation and consolidation.
So what do we need to do?
Brewers need your help to petition the government and ensure that the excise changes are made as soon as possible. Go to www.thepetitionsite.com/petition/912224010 to sign up!
Write to your local Member of Parliament or even better take him to the nearest bar that serves a good beer and explain the benefits of looking after our industry. The proof is in the drinking!
This is not about drinking more beer. A more robust craft brewing industry does not necessarily equal higher levels of beer consumption. What it is about though, is drinking better beer in a way that builds stronger communities through the sharing of the good things in life.
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