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.