CHANGES TO BEER DUTY

You’ll have no doubt heard about the seismic changes to beer duty on 1 August, which will absolutely create some big changes in the British beer industry (& cider & wine & spirits). We are all trying to get our heads around it as it is incredibly complex and very late in being finalised. Even while writing this things have changed again.

 With regards to beer, there are 4 general things happening:

·         1 - Beers below 3.5%:  let’s start with the positive. Beers in this category will see a drop in beer duty. Consequently 3.4% is going to become an ABV you will see many beers at from pretty much every brewery. We will be lowering Revival and Nano Cask from 3.8% to 3.4%. Fortunately for us that is within our allowable tolerance so I would be shocked if anyone will taste a difference in the beers, but we will be able to sell them a bit cheaper than we used to. We’ve always been recognised as one of the best brewers of full flavoured, low-ish ABV beers, and we’re really confident that this will be a positive change for cask beer drinkers (combined with point 4 below). I don’t see why beers will exist any longer from 3.5%-3.9%. It is basically a dead zone.

·         2 - Beers 3.5%-8.4%: There is a lot of propaganda in the news about the duty change. In reality, most brewers will see their beer duty go up, and we’re unfortunately one of those. The silver lining is that the change in the duty curve means when brewers grow there will not be the 5kHL ‘hockey stick curve’ disincentive that existed before.  We (and most others) are being penalised now, but if we grow then we will be penalised less than we would have been in the past. The intent of the reform is to remove the disincentive for growth. Whilst I agree with that wholeheartedly, the bigger players in the industry managed to hit most small brewers in the process, and that is wrong. It’s very much, rob from the poor & give to the rich. I suspect we’ll see an increased number of closures.

·         3 - Beers 8.5%+:  This will be another huge change. Beer duty in this bracket is tripling incrementally – i.e. an 8.5% beer will pay 3x the duty of an 8.4% beer, and compared to what we currently pay it is doubling. I don’t see how things like Imperial Stouts, Double/Triple IPAs, strong Belgians, etc. will be viable to sell anymore, and that is the point – the government is trying to reduce ‘alcohol’ consumption in all categories. In addition to the huge increase in absolute beer duty, the way annual duty will be calculated will be based on how much pure ‘alcohol’ a company makes, so making high strength products also negatively hits you in the following year.  Breweries with a big focus on strong beers, and those with attached wine or spirit business will have to seriously rethink their business model.

·         4 - Draught beer:  what initially started as a campaign to benefit cask beer has become draught duty relief and will benefit all containers 20L and larger that will be used to serve draught beer directly in a venue (not for takeaway). This is another piece of incredibly complex, well worded propaganda. In effect it holds beer duty at the current rate while everything else goes up, or at least that is my understanding of it. 

I need to caveat all of the statements above with them being based on my understanding and our own position in the market (how much HLPA - Hecto Litres Pure Alcohol we produced between 1 February 2022 and 31 January 2023). If you look at those dates alone, they make no sense to anyone, nor does the rest of the system, but it is the system we all need to learn and operate in from 1 August 2023, and these are my assumptions based on what I know.

·         Looking at it from a consumer perspective, you need to be prepared to:

§  Drink in pubs (a good thing!)

§  Drink 3.4% beers (or pay more than you are currently paying)

§  Look at the price of 8.5%+ beers (and cider, wine and spirits) before ordering. They will be massively more expensive, if you can find them.

§  Don’t take your frustration out on the brewer or pub. We didn’t want reforms implemented in this way. It is very clear to see that the bigger players in the market will be the ones to benefit at the expense of the independent small producers. Please continue to support your small independents before the sector dries up and you’re left with nothing but 3.4% macro beer.