Alcohol Excise Increase Another Hurdle For Brewers In UncertainEconomic Times

“The 1 July alcohol excise increase could not come at a worse time for brewers, with the effects of COVID-19 still holding sway on the economy and the hospitality sector far from being back to normal,” said Brewers Association of New Zealand Executive Director Dylan Firth.

“The increase which occurs annually is based on the most recent CPI increase to March 2020 and will add another 2.63% to the current excise rates, the largest single increase for 9 years.”

“This would equate to $29m more the alcohol sector pays to government based on last year’s total excise take. Unlike we see with petrol, this may not be directly passed onto the consumer straight away. Businesses will make those decisions individually, especially understanding that consumers are already reluctant to spend during an economic downturn,” said Firth.

“Overall, in 2019 the alcohol sector paid almost $1.1b to the New Zealand Government in excise. The beer sector alone contributing $403m,” said Firth. “The CPI measurement used for this was for the period pre-lockdown to the end of March. The fact the increase is based on a CPI that did not take into account the full negative economic effect of COVID-19 to date is unfortunate, potentially costing the industry millions more than what a CPI measurement today would reflect,” said Firth.

“The brewing industry, like many other sectors in New Zealand, has had a difficult 2020 so far. With two of the most valuable channels to market closed over lockdown through bottle stores and hospitality venues. This has had a real impact on those in the brewing industry and with the wider hospitality industry still at a fraction of where it was pre-Covid-19, there is a long road to recovery on the horizon,” said Firth.

“Our members have been the first to acknowledge the role of industry to support our own where they can. To date our members have committed to support the wider hospitality sector through renegotiation of debt, extension of credit, cash back for unused product which was spoiled over lockdown and multi-million dollar spend in marketing encouraging consumers to support local.”

“The Brewers Association along with other industry bodies approached the Government requesting the excise be frozen in 2020 so we could focus on rebuilding and supporting our customers. However, the request was denied. Our hope is that the Government will acknowledge the long-term effects of COVID-19 and consider this in the coming years,“ said Firth.

“Other areas around excise we have been in discussions with the government include seeking excise refunds on keg beer that has spoiled over lockdown. Our members took back that stock and refunded customers as part of wider initiatives to support struggling hospitality industry and the excise refund would help us bear this cost during current hard times for business. While we have been in discussions with Government on how to make this work, to date there has been no decision.”

“The work we have been doing with Customs has been extremely encouraging, officials have gone over and above to assist where they can and within the bounds of the regulations they are governed by, but extraordinary times call for extraordinary measures. We know that what we are asking with kegs would require minor amendments to legislation. So is in the hands of government,” said Firth.

“There are over 15,000 Kegs sitting out there filled with spoiled beer, taking up mountains of space. Our members just need the certainty of how to deal with the situation and can get back to supporting our customers and providing consumers with products they enjoy,” said Firth.

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