entrepreneurship

Budget day impact on beer money

Budget Day usually causes a little angst for the beer industry. Always fearful that the ‘old reliables’ would be hit, brewers and drinkers alike expect bad news. Recent budgets have eased this worry, somewhat. The only tax increase in Budget 2017 involved a pack of cigarettes going up by 50 cent.

Excise on alcohol is too high by European standards. Yet, it remains stagnant. This became a common theme throughout Budget 2017. It acknowledged a lot of problems but did little to solve them. This budget is very much the product of political circumstance than economic necessity.

Token but limited gestures were the order of the day. Minor cuts to the Universal Social Charge will do nothing for consumer spending. Issues around housing affordability and availability in large urban areas will continue to take an ever increasing slice of wages, hitting discretionary spending more and more. A ‘sugar’ tax appears to be on the way but it’s not expected until April 2018 by the earliest. Well, not until Britain introduces one first.

Of course there was acknowledgement by the Minister for Finance, Michael Noonan TD of the “real risk to the economy”, namely Brexit. Government judged it “prudent” to retain 9% VAT rate to continue to attract British visitors. More needs to be done to protect exports in light of this. Irish breweries have been increasing their sales in the UK but the strong Euro will only see prices rise in the British market. Sterling has lost 23% of its value against the Euro since the Brexit vote. The question is will we see more beers from Northern Ireland and across the Irish Sea making a big push here?

Another big disappointment for brewers came in the lack of positive changes for entrepreneurs. Yes, tax equalisation for the self-employed with PAYE workers by 2018 is well on the way with the credit being increased from €550 to €950. In addition, the 20% capital gains tax was reduced to 10% on disposal of assists up to €1m in chargeable gains. This would only come into play if craft brewers wanted to sell up. However, this is nowhere near comparable with the scheme in the UK where it’s ten times the Irish limit.

Talking of UK start-up schemes, Government gave a commitment to introduce a share ownership scheme in the next budget. This had been called for over the past number of years and the lack of progress has been contentious. Employee share ownership schemes have been a feature of brewing in the US, particularly for attracting and retaining staff, especially brewers. There’s a scheme in the UK so why does it take so long to introduce one in Ireland? There are a number of breweries likely to look at this scheme when it commences.

For craft beer, in particular, there was change to the excise duty relief. This had been flagged by Michael Creed TD, Minister for Agriculture, Food and the Marine over the past month. The qualifying limit for excise duty relief was increased by a third to 40,000 hectolitres.

The special relief reducing the standard rate of Alcohol Products Tax by 50% on beers produced in microbreweries which produce not more than 30,000 hectolitres per annum is being extended to apply to microbreweries which produce not more than 40,000 hectolitres per annum – Budget 2017

There are only a few breweries close to the 30,000 hectolitre threshold. You could probably count them on one hand and still have a couple of fingers left over. This increase may be symbolic and tokenistic. It is likely to have little impact on the sector, particularly in the short-term. Yet, it’s the third year in a row that the excise relief scheme has featured in the budget. It is official recognition by Government that the sector is growing and is an important part of our manufacturing base.

It’s not all about tax, however. Government could do much more to support craft beer in Ireland. It could tackle the issue of on/off sales on brewery premises by introducing special tap-room licences. Local authorities could look at removing planning and commercial rates restrictions to encourage manufacturing in their respective areas. They could also develop local food and drink marketing campaigns and festivals. Bord Bia could roll-out a specific craft beer marketing strategy to unlock export markets and identify mechanisms to allow Irish breweries to exploit them. Fáilte Ireland could assist in developing food trails that feature craft beer. These are just some ideas but no doubt there’s countless more out there.

Beer business

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.

Beer business

9% VAT, Alcohol Products Tax, Budget 2015, Budget 2016, earned-income tax credit, entrepreneurs, entrepreneurship, excise duty relief, general election, michael noonan, start-up, startup, Tax

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

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

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

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.

Beer business

Alltech, Cumberland Breweries, Cumbria, Down, entrepreneurs, entrepreneurship, Finn Lager, Foxes Rock, Newry, Pearse Lyons, Station Works

Brewing up new business, the sequel

With the publication of last week’s report of the Sean O’Sullivan-chaired Entrepreneurship Forum the second annual Alltech International Craft Brews & Food Fair (6-8 February in the Convention Centre Dublin) couldn’t come at a better time. Last July’s event featured an enterprise pillar because let’s face it Ireland needs to do more in terms of new business start-ups. Renewed attention is being put on getting growth back into the domestic economy and craft beer is clearly bucking the trend.

A key focus of this year’s event will be on supporting and expanding an essential part of the craft beer industry – the pub trade. A dedicated conference will be held over a day and half discussing measures at reinvigorating the sector, principally through craft beer and ultimately greater choice for the consumer. We have seen a lot of media attention given to the pub trade, which has not just focused on closures but also on those that are turning around distressed pubs, new high profile entrants to the market such as Wetherspoons and those hoping to redefine the distribution business to pubs through a dedicated craft beer focus. Given the importance of pubs to communities and the part they play in our overall tourist offering, it is heartening to see that approximately 300 pubs have registered to attend. Changing the model for the Irish pub through an expanded beer range, quality Irish food or for the more ambitious, prepared to brew onsite will further reinforce the overall Irish craft beer industry.

The mainstay of the event will be “Craft Brews and Food Fair” itself featuring over 50 breweries from around the world paired with 15 of Ireland’s finest artisan food producers. It will be open to the public on the Friday (5pm-9pm) and Saturday (12pm-9pm), as well as there being set trade sessions during the event. Tickets are €15, which include four free drinks and there will be lots of food to sample as well. They can be purchased on the door or in advance here.

There will be a number of sensory sessions throughout the fair in which participants will get the opportunity to learn about tasting beers, matching beer to food, whiskey and gin tastings, as well as of course learning more about Alltech’s very own Kentucky beers from head brewer Ken Lee. For those more enthusiastic, Tim O’Rourke will be back and along with a panel of beer experts will be running a separate day-long Alltech Academy Sensory Class on 6 February with the opportunity to take an exam to become an “Alltech Certified Beer Taster”. This course has to be booked separately here.

BedA6hkIEAAeDHN — Small smaple of beers announced, including new entrants on the Irish beer scene

It will be interesting to see the beers that will be on offer during the fair. I’m looking forward to trying beers from new Irish breweries such as N17, Independent Brewing Co and Rascals Brewery. Also, the fair will feature a number of international breweries (such as Coisbo Beer from Denmark) that soon could be featuring on shelves of off licences or on draft around the country. Last year, attendees had the good fortune of encountering Hardknott’s Queboid and Beavertown’s Gamma Ray. Hardknott have an excellent array of beers on sale in Ireland and Beavertown thankfully are due here momentarily.

The Dublin Craft Beer Cup will be awarded for a second time, with the trophy making the short trip down the M1 from Lisburn, home of Hilden Brewery. The inaugural winner was of course Twisted Hop. The number of entries in the Dublin Beer Cup 2014 is expected to be 200 beers from at least 100 breweries in 16 countries, which goes to show that there’s prestige to being successful in such competitions and there’s a real opportunity to establish this as one of the premier competitions out there. The calibre of the beer entered last year was exceptional so it will be interesting to see the full list of entrants and the medal winners at the conference. Judging is expected to get underway on Tuesday 4 February with the winner being announced at lunchtime on Saturday.

Thinking back, it was at July’s event that I met Sam Black of Kinsale craft brewing fame and the lads from Brú brewery, as well as hearing about plans for a new brewery in Wicklow. I wonder by the time the third incarnation of this event comes around not only what the brewing landscape will look like but also what changes pubs will make on foot of what they will discover next week. All anyone will have to do is to heed Dr. Pearse Ryan’s three-day pep talk.

Beer business, Festivals

Tag: entrepreneurship