The Australian beer industry is on tenterhooks this week as it waits for the Australian Taxation Office to confirm the latest excise duty rise for alcohol.

Australia already has the world’s third-highest beer tax after Norway and Finland. Alcohol excise tax represents around 14% to 37% of the price paid for wine and beer and 50% of the price of spirits, and goes up twice a year based on the movement of the consumer price index (CPI).

It will rise again once the CPI data is published at the end of July, with the updated hikes will be implemented on August 5, hitting brewers and their customers.

The last excise increase pushed the price of a pint up as high as $15 in many pubs.

Brewers Association of Australia CEO John Preston told Yahoo Finance the next alcohol excise rise would be brutal for both brewers and venues.

“The hospitality sector is in crisis,” he said. “We’ve heard about bars, cafes, restaurants, pubs, and what they’re going through… they’re really struggling.

“This excise tax, they’ve got to pay it or they’ve got to try and pass it on. It’s really bad news for pubs and clubs and for beer drinkers.”

Bodriggy Brewing Co. co-founder Peter Walsh told SmartCompany last month that the current trading environment is among the toughest he’s seen.

“We noticed that the total average sales order for both our on- and off-premises accounts have dropped quite significantly,” he said.

“So a bar that was ordering three kegs a week 18 months ago is now ordering one.

“This situation mirrors what we have seen in the venue. Our booking numbers are relatively similar to previous years, however the spend is well down.”

Richard Abraham, who is a director of DBA Advisory, which has overseen the voluntary administration of Victoria’s Bad Shepherd, Dainton Beer, and Hawkers Beer, along with Sydney’s Wayward Brewing since October last year, said the cost of living crisis was making it hard for households to justify spending money on discretionary goods such as craft beer.

“From what we’ve seen, revenue from, say, two years ago is down, maybe 15 to 20%,” he said.

According to KPMG data there are more than 600 Australian craft brewers, who contribute an annual $1.93 billion to the economy. They employ more than 10,000 people – more than half (51%) of the entire beer industry, many in regional areas. 

At least 20 have closed in the past year, with more on the brink of collapse due to being slugged with ever-rising alcohol excise tax and the heavy burden of payroll tax. 

Lotus Beer Co, the Geelong craft beer company behind Valhalla Taproom and Valhalla Brewhall, entered voluntary administration last week.

Director Scott Hunt said the rising cost of rent, ingredients, power and a fall in foot traffic had led to the situation.

“We are devastated this has happened, we have poured our heart and soul and many years of hard work into this, so to say we are devastated is an understatement,” he told the Geelong Advertiser.

Meanwhile Mighty Craft entered administration on July 22.

At its peak, Mighty Craft owned or held stakes in Mismatch Brewing, Jetty Road, Slipstream, Sauce Brewing, Ballistic Beer Co, Sparkke Beverages and FogHorn Brewery.

Its last remaining beer brand was Better Beer. The company had been undergoing a divestment and restructuring program to reduce its debt and fundamental to this program was a proposed merger with Better Beer.

The arrangement that required the support of Mighty Craft’s senior lenders and the shareholders of Better Beer. A capital raise to support this process was also contemplated. However, administrators said it now appeared unlikely that an agreement would be reached between Mighty Craft, its senior lenders and Better Beer and that was acceptable to all parties.

Federal Budget’s devastating blow to brewers

Desperate calls from the drinks industry for the Australian Government to pause the alcohol excise tax and support local producers fell on deaf ears in the Federal Budget.

Announced on 14 May 2024, the Federal Budget revealed it will drain $8 billion from the industry – and drinkers – in the 2024-25 financial year.

That’s $2.63 billion for beer and $3.34 billion for spirits, rising up to $3.17 billion and $4.17 billion respectively in 2027-28.

Independent Brewers Association (IBA)’s Budget submission called for the Federal Government to take action to help the beer industry.

Suggestions included providing funding for a study to investigate the feasibility and potential structure for the creation of Beer Australia in line with the role and remit of Wine Australia; providing funding to the IBA to develop new market programs, resources, industry development and sustainability activities so they could continue to help alleviate the current pressures for members; and freezing indexation of alcohol excise for a period of two years.

Its pleas were not heard.

“We were told that our calls for help were being heard, we were granted the opportunity to inform many Members of Parliament about the challenges in the Australian beer market and provided them easy to implement and cost-effective solutions,” said Independent Brewers Association CEO Kylie Lethbridge.

“We are very disappointed the Federal Government did not see fit to use its power to help.”

The Independent Brewers Association was also forced to cancel this year’s Good Beer Week, warning “the Australian independent beer industry is at risk.”.