Brewers are continuing to plead their case on short term excise tax reform and predict more financial hardship is coming without it. But, for now, Governments aren’t hearing the call.
Earlier this week the Treasury Secretary Steven Kennedy told a Senate committee charged with the economic response to the COVID-19 pandemic he didn’t foresee any further assistance coming the way of brewers.
His comments came despite an Independent Brewers Association (IBA) survey of its members found their sales had sunk in recent weeks by nearly 70 per cent on average and almost all were now in a “loss-making position”.
Mr Kennedy said while current stimulus packages and other allowances may need to be adjusted over time, he added: “But new challenges will have emerged. Some jobs and businesses will have been lost permanently.”
As it stands, Australian breweries will be paying the hefty excise tax bill on current keg stock despite the fact many of it will need to be disposed.
Capital Brewing Co‘s co-founder Laurence Kain said without short term excise tax reform he may not be able to rehire the staff he currently has on stand-down – even when venues re-open nationally.
“While JobKeeper has been massive for us… we are staring down the barrel of a huge excise tax hole. A big debt like that is not going to help us, or our staff, get back on our feet when all of this is over,” Kain said.
“We are set to be hit with the same excise tax bill as the big multi-nationals will be. Currently, we feel like we are just trying to hold on and the bigger challenges are still to come.”
Melbourne’s Stomping Ground Brewing Co‘s co-founder Guy Greenstone said a reduction in excise tax on current keg stock will see breweries, especially the hardest hit regional ones, bounce back with less financial burden than is otherwise going to be the case.
“(A) reduction would mean we can emerge from this in a slightly better position as liabilities are all rising during this time, such as deferred debt repayments, deferred rent, deferred tax etc. It’ll help us get going again without as much backlog owing on the other side,” Greenstone said
IBA Chair Pete Philip said two thirds of breweries were still reeling from bushfire and flood, and COVID-19 could be their last straw.
“We certainly hope that Treasury will look at specific assistance for small brewers. Two thirds of these brewers are located in rural and regional Australia and these locally-owned family businesses are suffering badly after a summer of bushfire, floods and now Coronavirus,” Philip said.
“We certainly appreciate the swift action State and Federal Governments have taken to help keep small businesses alive, but these programs may not be enough to keep these breweries open.
“All we’re asking for is a short term break in excise which will help small breweries make it through this crisis and emerge stronger on the other side.”
At Capital, there wasn’t much thought put towards repurposing their current keg stock of 800 into Growlers or the like. Whilst they have, along with Underground Spirits, repurposed some stock into hand sanitiser for ACT Health and frontline health workers, it is a matter of quality control why the majority won’t be destined for public consumption
“It’s too risky. All it takes is one keg to be contaminated, for whatever reason, and our reputation is on the line,” Kain said.
Stomping Ground Brewing‘s fellow co-founder Steve Jeffares went beyond the call for excise tax reform and is looking to Governments to release the modelling they are basing their decisions on so breweries can determine strategies going forward.
Jeffares said breweries will “need to hit the ground running” when venues re-open and that producing keg stock is only one aspect of that preparedness.
“We need more guidance form State and Federal Governments and it would be great if they shared with us the modelling they are basing their decisions on,” Jeffraes says.
“The government won’t just switch the light back on overnight, so I feel breweries will get enough lead in time to have product ready to divert to kegs. But it is all the unknowns that we will need to be ready for.
“Will we need to invest in new equipment to adhere to new hygeine guidelines? What will the new social distancing requirements be and will there be costs involved in that?
“None of us want to throw money at something that won’t happen.”