Budget 2016 – more cash for beer

Budget 2016 has to have been one of the most leaked or at the very least, most openly discussed budget in history. The media coverage over the past two weeks has proven to be remarkably accurate. This surely cannot be a shrewd tactic? Is the Government making sure that all key channels of influence were well-briefed so they could sell the message to the people ahead of time? With an election on the horizon, the Government certainly doesn’t want a repeat of the aftermath of last year’s budget. They were talking up the benefits of the budget but most of real benefits not coming into people’s pockets until the first pay-packet of 2015. However, last year’s budget was certainly positive for craft beer with the increase to excise relief.

Tax cuts will certainly boost consumer demand. Plenty of other sources will cover the tax cuts, impact of the USC, changes to entry points etc. It is worth noting that the 9% VAT rate is being retained, for at least another year.  Craft brewers will hopefully see the impact in increased sales as it is expected that some of the gains will find their way into discretionary spending. This is after tax increases, contracting income and making ends meet over the past 7 years. However, we must not overstate the impact. There’s a long way to go to redressing the damage that people have experienced in recent years.

Excise duty on alcohol has not been touched but a packet of cigarettes will go up by 50 cent per pack. As the Minister of Finance, Michael Noonan TD said “this is the only tax increase in the budget” and was taken as a “public health measure”. Does this mean that alcohol is finally being separated from the “old dependables”? I certainly hope so. Perhaps it’s an indication that the work of the producers, their supply-chain and impact right across the economy.

Of course the budget does not just benefit tax payers. The Minister for Finance said “we will need to encourage new entrepreneurs and to support existing ones”.  For those owning or setting up a craft brewery will be able to avail of an earned-income tax credit of €540 so they don’t lose out by not being a PAYE worker. The revised capital gains rate of 20% will only apply to those selling their brewery and more likely to be used in other industries. However, this may make it attractive to some to sell up at some point in the future.

Last year, I increased the amount of beer that micro-breweries could produce and still qualify for this excise relief. To further assist their development, the relief will now be available upfront thus reducing the cash-flow burden of the current rebate scheme – Michael Noonan TD, Minister for Finance

Last year, the cap on total output of craft beer eligible for excise relief was increased by 50% to 30,000 Hl.  A major problem for breweries, however, was that they had to claw-back the relief, which tied up vital cash flow. Craft breweries will now be available to claim upfront the excise duty relief. The initial scheme was introduced in Budget 2005 and the recent improvements are acknowledgement by the Government of the contribution that these breweries are making to the economy, particularly in terms of regional growth.

The tax relief reducing the standard rate of Alcohol Products Tax by 50% on beer produced in microbreweries will now be available upfront as well as through a rebate. This will assist microbreweries with their cash flow and cash position  Budget 2016

So Budget 2016 is looking good for brewers and beer drinkers. But the efforts need to continue. Promotion of entrepreneurship and start-ups should not just be confined to the tech sector. We need to be championing craft beer. We need our breweries to be considered alongside the wider maker-economy, especially in the agri-food sector. The excise duty relief needs to be competitive with schemes in other European countries. The enterprise agencies need to step up their support to existing breweries, especially with exporting, and those looking to start. Breweries need to be able to operate tap-rooms should they wish. This would boost cash-flow, further connect breweries to their localities and also benefit tourism.

The impending general election is an opportunity to highlight such these highlighted above. Nonetheless, I think we should welcome these measures announced today.

 

Turning us into a nation of beer sellers

The Government is stepping up its support for craft beer these days. On the back of the 50% increase in the excise rebate ceiling for brewers in Budget 2015, state agencies are looking to craft beer and cider to join the “usuals” food and whiskey to help sell Ireland. Earlier this year we had six breweries participating in Bord Bia’s Marketplace International 2015. Then in July, Tourism Ireland supported the participation of nine breweries and one cider maker in Toronto’s Festival of Beer. This week saw another high profile event where craft beer was showcased.

Blending beer, cider, music & food to sell Ireland
Blending beer, cider, music & food to sell Ireland

Sixteen Irish food producers were given the opportunity by Bord Bia to exhibit at the Speciality & Fine Food Fair in London. The event takes place in Olympia, well known in beer circles as the home of the Great British Beer Festival. In the weeks leading up to the fair, Ireland’s food marketing agency put in plenty of legwork drumming up interest amongst leading food and drink buyers from the speciality food industry.

Galway Hooker was the sole brewery representing Ireland and was given prominent space amongst the Irish exhibitors. From the looks of it there doesn’t seem to have been a lot beer at the fair – Crazy Mountain Brewery from Colorado; Delicias de Burgos and Pasion de Duero, S.L. from Spain; and a Scottish honey beer from Plan Bee. The lack of beer could be a sign that the work of winning over space on dining tables from wine is painstakingly slow. Regardless, the fair was a real opportunity for the Galway lads. Their beers are great for pairing with food. They’re not overpowering and are well-balanced. You only have to look at their eponymous pale ale and how versatile it can be thanks to its distinctive malt base. I can only hope that for Aidan and Ronan, the brewery’s first appearance at the fair proves to be a success in the long-term.

Can more be expected? We can only hope so. Food Wise 2025, the new national food strategy, has identified the need to develop a specific strategy to help craft breweries to go and views exports as key. Marketing support and attendance at international food events is a start but more can be done. We need to examine new ways of helping breweries to get products to foreign markets. Could brewers pool together to share space in containers? Are KeyKegs the best way of exporting draught or are there other ways that could be considered? Should canning be the choice for exporting packaged beers because they save on weight, more reliable for shipping and can more compact (i.e. more beer per pallet)? Given the desire of our enterprise agencies to prioritise exporting companies, they should examine areas like these and more in order to help Irish craft breweries grow.

Talking craft beer on the Last Word with Matt Cooper

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On Wednesday 19 August, I was invited on to the Last Word with Matt Cooper to talk about craft beer. Joining me on the panel was the always excellent Sarah Roarty of N17 fame and Damien O’Reilly, lecturer in retail management at Dublin Institute of Technology. The topic of the discussion was “why are we willing to spend so much on craft beer”. It was great to be a guest on the show and see Matt in full flow.

Listen back to the discussion here

 

Crafty ambitious to be among the the top 50

“We want to be one of the top 50 craft brewers in the world,” said Dr. Pearse Lyons. It’s as simple as that for one of Ireland’s most successful entrepreneurs. His ambition knows no bounds. It’s been a busy few years for Alltech in terms of growth. The company has sold off particular business units that were no longer of key focus and has also acquired a number of other companies to accelerate its growth. However, last week’s announcement was the first time that it purchased a brewery or two for that matter to boost its beverage division.

The ever-ambitious & entrepreneurial Dr. Pearse Lyons
The ever-ambitious & entrepreneurial Dr. Pearse Lyons

Alltech announced on 21 July that it has acquired The Station Works Brewery in Newry Co. Down and Cumberland Breweries Ltd, in Great Corby, Cumbria, England. The two breweries had been operating under the same ownership and had been positioning itself in the Irish market over the past number of months, on foot of its Finn Lager brand. Station Works had invested well on the branding and big hopes were being placed on its new Foxes Rock ale.

Station Works at the 2015 Alltech Craft Brews & Food Fair
Station Works at the 2015 Alltech Craft Brews & Food Fair

So what’s in it for Alltech? It gives them a foothold into Europe in terms of production and adds a few more beers to their portfolio. The distribution chain for Alltech is quite strong in Ireland but this deal potentially opens up the British market too. The Finn Lager could even be an attractive brand State-side. Foxes Rock could prove popular with the horsey-set (e.g. Leopardstown Races), which fits in with Alltech’s sponsorship strategy. More importantly it gives them two breweries with a combined output of 40,000 hectolitres. This gives them a platform to develop a new range of products or brew existing ones in Europe that could be sold to the local market as well as exporting further afield.

Station Works at the Irish Craft Beer & Whiskey Festival in March 2015
Station Works at the Irish Craft Beer & Whiskey Festival in March 2015

Some craft beer enthusiasts may find it difficult to accept Alltech as a “craft brewery” due to the fact that it’s part of a very large company. They’d point to the typical caveats of small, independent and traditional. As far as I’m concerned the brewery is craft. Yes, it may have corporate leanings but it’s also part of one of the biggest Irish family-owned start-ups. It’s a company that follows a path of increasing organically and through acquisitions, it’s the latter that mightn’t sit easily with everyone.

He literally wears his ambition
Literally wearing his ambition

The big question is where next for Alltech? In order to achieve the target of being in the top 50 of craft breweries worldwide, surely more take-overs can be expected. Wonder if any will come from those that have participated in the Alltech Brews and Food in recent years? There were more than a few of them that came from far and wide.

A revisionist approach to supermarket beer

It seems that the supermarket chains are getting in on this craft beer game. We’re familiar with Aldi stocking O’Shea’s stout, pale ale and red ale produced by Carlow Brewing Company.   A more recent entrant to the scene is Rye River, somewhat double jobbing with its Crafty Beer (Lidl) and Solas (Tesco) ranges.

Of course this is nothing new.  The tactic of ‘own’ or indeed ‘exclusive’ brands has been used for decades.  Think of cans or stubby bottles of cheap own-brand cheap lager that have littered many a student party or bbq over the years.  In fact it would appear that there are even more own-brand lagers appearing on supermarket shelves.  And it is a pattern replicated for cider as well.  So should we be worried when more and more ‘own-brand’ craft beers start appearing?

Why can't more supermarket offerings take after Carlow Brewing Co. O'Shea's range?
Why can’t more supermarket offerings take after Carlow Brewing Co. O’Shea’s range?

Well naturally it all comes down to quality.  And given how price conscious supermarkets are, we have to ask, can the two be combined?  The Carlow Brewing Company has demonstrated that it can with its O’Shea’s range.  The beers are great value and have introduced more people to the world of craft beer.  I know of one person, a die-hard Guinness drinker, often the hardest to convert, who when at home, drinks nothing but the O’Shea’s Irish Stout.   And he tells me that he’s tempted to explore different stouts as a result.  So if the supermarkets adopt a similar approach to the one they use when considering wines for beer, well it could be a win-win.  For example, how many times are we told that the ‘own-brand champagne is the one to seek out for value and quality?

Supermarket chains are more than likely to partner with larger craft brewers that have the necessary production capacity.  They are more likely to focus on session-type beers rather than extreme ones; although, BrewDog produces a “variant” of its 9.2% abv Hardcore IPA for Tesco.  For the brewers, it can be a valuable source of revenue; also regular and sizeable orders from large multiples can impress the banks when looking for loans to expand the business.  It is no surprise that lenders prefer big, dependable orders over smaller, though numerous accounts.

So why am I writing about this now?  Well recently I had the chance to try a number of supermarket-brand beers. It will come as no surprise that some were better than others, but what struck me was that some of those were considerably better than the rest.  I then recalled one of the first ‘own brand’ beers I had ever tried. Perhaps it was time to refresh my memory.

The four "Revisionist" beers most likely to be spotted in Tesco
The four “Revisionist” beers most likely to be spotted in Tesco

The ‘Revisionist’ range is produced by real ale behemoth, Marston’s and Tesco has an exclusive on the bottles.  It’s worth noting however, that beers like Craft Lager can be had on draft in the likes of Wetherspoons.  My local Tesco stocks the Red Ale, Rye Ale, Dark IPA and the Wheat Beer. The range also includes Steam Beer and Saison in bottles.  These beers are produced at the different breweries within the Marston’s stable (Bank’s, Jennings, Wychwood, Brakspear, Ringwood and Marston’s itself).

The Revisionist American Hop Rye Pale Ale – to give it its full name – was as I say, the first beer from the range which I tasted.  And if I’m honest, it is also the only one on which I have notes as I tried some of the others while judging a beer competition.

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Firstly the branding is certainly interesting and certainly catches the eye, while scanning the shelves.  The beer pours an unsurprisingly amber colour with good clarity.  There are sweet tropical fruits and a hint of spice on the nose.  The beer was dry hopped with citra® and amarillo so that explains the fruitiness and the rye gives the spicy notes.  Initially, there is fresh citrus on tasting but a dry, almost Bombay mix-inspired spiciness takes over.  It is however, let down a little by the fluctuating carbonation levels. The dryness of the rye also leaves it tasting a little flat at times. It finishes quite dry.

It’s safe to say that the ‘Revisionist’ range encapsulates a problem for both the real ale brewers and for the retailers across the water.  Are they edgy enough in today’s fickle craft beer world?  Five years ago Tesco used to be the go-to place in this country if you were looking for English ales.  But now that range is dwindling, and not only in Tesco.  Yes, it’s a good thing that some of the space is being occupied by local Irish offerings, but part of me is sad to see that English brewers are being sought merely to imitate rather than innovate in terms of the beers to be stocked.   And yes these beers are fine, they do the job.  But I would argue that unfortunately they come in at too high a price point in Ireland to be deemed as good value.