From today, selling beer in Australia won’t be the same.
Changes to the beer excise system across the country will make kegs under the standard 48-litre fill cheaper and, according to the Federal Government’s ideology, provide more sales avenues for smaller breweries.
The changes, in which all kegs between 8 and 48 litres are now taxed at an equal rate, received bipartisan support.
Yesterday a 30-litre keg of beer over 3.5% alcohol by volume was taxed at $50.40 per litre of alcohol. From midnight that rate was reduced to $35.50 – the same level as the traditional “50-litre” keg.
It meant a 30-litre keg of 4.5% beer which came with an excise bill of around $50 – compared to the “50-litre” keg’s tax of around $59 – would now only be slugged about $36.
Midway through last year, then-Treasurer Scott Morrison said lowering the excise rate for smaller kegs would stimulate tap opportunities for the rapidly growing band of craft breweries across the country.
“Currently, draught beer sold in kegs exceeding 48 litres is taxed at lower rates compared with beer sold in smaller kegs. This is unfair for smaller brewery businesses,” Morrison said.
“Extending the concessional draught beer excise rates to kegs of 8 litres or more will level the playing field for craft brewers, which typically use smaller sized kegs, to distribute their beer to pubs, clubs and restaurants.”
However, the excise overhaul has raised concerns amongst experienced craft breweries that the changes could encourage both new and established players with the wrong motives into an already crowded market.
Bentspoke’s Richard Watkins, who has seen the dramatic changes in Australian beer since he joined Canberra’s Wig and Pen in the mid-1990s before moving on to his own award-winning brewery five years ago, believed the old excise regulations helped keep out operations that simply sought to make a quick dollar.
“No-one likes to see excise go up and have to pay more money to the government,” Watkins said.
“But I’m a big believer in our excise tax, I think it is a really good protection for our industry. It is a barrier to entry for a lot of people.
“The main part about it is that if there was no excise tax beer would be really cheap to make.
“Excise plays a role in that we are not going to get people into our industry who don’t love it. Excise protects us from having people coming into our industry to make really cheap beer, that might not be up to standard, and try to make money.
“I wasn’t really supportive of lowering the excise level to 8-litre kegs. All the imported beer was coming in 30-litre kegs and now they can come into the country, they pay the cheaper rate of tax and compete for tap points, taking them away from local Australian breweries.”
Feral founder Brendan Varis, who has been involved in the industry for 20 years, said that while paying any tax hurts, it was a necessary evil to maintain the quality of beer produced by craft breweries.
He believes that the government should use more of the monies it collected from beer excise to provide a better social benefit to the community.
“I don’t have a problem paying excise tax and never have. I’ve not been one that has championed [the changes]. I don’t mind a little barrier to entry. You don’t want to make it too easy,” Varis said.
“Beer excise is a sin tax. I get a bit disappointed when it gets dumped into consolidated revenue and isn’t being poured back into areas such as the prevention of the poor use of alcohol.
“What goes into that isn’t proportionate with the amount of money excise contributes to the tax coffers. That rate isn’t right.”
There have been concerns the lower rate of excise for 10, 20 and 30-litre kegs could prompt an influx of cheaper, lower quality beers from overseas.
The WA Brewers Association president Dan Turley released a policy statement last year that cautioned the change.
“The reduced keg excise must be met with some caution, however, in that it may also potentially open the floodgates for cheaply produced imported beer packaged in smaller kegs, especially one-way disposable plastic kegs,” Turley said.
But Varis, whose Hop Hog Pale Ale has been Feral’s flagship beer for more than 10 years, isn’t so concerned about the threat to the Australian market from international breweries.
“I’m not scared or worried so much about imported beer taking away too much from local craft in this day and age because the industry has grown a lot,” Varis said.
“Our capability and quality have moved a long way since this conversation started 10 years ago.
“We needn’t fear more mature industries. And since we predominately drink hoppy beers, the ones made here should be better than the ones brought in from overseas.”
However, a much smaller producer, Artisan Brewing’s Brian Fitzgerald, believed the smaller keg excise regime should provide more opportunities to sell his beers to bars and pubs.
Artisan is a perennial Perth Royal Beer Award-winner for Fitzgerald’s high abv specialty Belgian ales. He produces less than 40,000 litres a year.
“The 30-litre kegs would be good for a Belgian Quad for example because some publicans and bar owners shy away from trying to move that style of beer in a 50-litre keg,” Fitzgerald said.
“With the smaller keg they know they shouldn’t have to sit on it as long. There isn’t such a high risk at finishing it.”
Watkins and Varis confirmed Bentspoke and Feral would each consider purchasing 30-litre kegs if there were a demand from customers.
Watkins said the smaller vessels had a clear occupational health and safety advantage, but Varis said the one-way kegs posed their own concerns for the community and the beer market.
“It is worse for the environment any way you look at it,” Varis said. “With 30-litre options you’ll be cleaning more kegs for the same number of litres or you’ll have more one-way kegs. And let’s face it, they aren’t great.
“The process to make those things, and the waste afterwards, are a bit of a problem.
“I think we have to remember here that there is the same amount of beer being consumed regardless of the size of the kegs. The pool of consumers doesn’t necessarily get bigger.”
Rebates for breweries
Another component of the Federal Government’s excise overhaul is the $70,000 increase to $100,000 in rebates for breweries.
It still falls well short of the $350,000 refund available to wineries under the WET tax system.
Watkins and Varis welcomed the new benefit but concurred more needed to be done to alleviate the imbalance in alcohol taxation.
“I don’t mind the rebate. You have to pay it first and if you’re not paying that level of excise you probably aren’t making any money anyway,” Watkins said.
“That’s another salary for us. We’ll employ someone with that extra money. In some ways we can thank the government for that. That’s a win-win for us and the economy.
“The solution to the whole excise debacle between the three levels – wine, spirits and beer – is to have a volumetric tax rate. The government has got to have the balls to get it done otherwise all we are doing is tinkering.
“While the government can say it did do something here, the volumetric tax is something we need the government to keep working towards.”
This is definitely a “wait and see” game. The truth seems to be that no one really knows what will happen.
There would be many venues that would better suit a 20lt or 30lt keg vs a 50lt keg. So this makes a good business case to expand into the smaller on-premise market, cafes, small bars, and restaurants. But in larger venues with high turnover beer on tap, 50’s won’t be going away anytime soon.
Smaller kegs make it more affordable for beers like; oak aged specials or high ABV beers, that become cost prohibitive at 50lts. This is another opportunity for creative/inventive brewers to get their brand on tap.
In terms of overseas competition, this may be true. So it’s now also about Aussie brewers becoming aware of their brand’s value.
If your brand doesn’t have a value in the market yet, then you better start looking at how to create a point of difference now. Otherwise, you could be in trouble – before you even start being concerned about keg sizes.
In terms of smaller kegs, if you have to wash steel kegs, then you are right. Same time, effort and some cost are involved.
Steel Kegs make sense in some instances and not necessarily so in others.
One way kegs have their place in the equation as part of a strategic portfolio of packaging products.
Quality products such as KeyKeg are designed from the ground up to minimise CO2 emissions. They are not resource hungry to manufacture. They are significantly lighter than steel. They are ideal for OH&S. They don’t need to be returned for cleaning and filling. You don’t have to worry about lost kegs or the cost of losing kegs. They have a fixed price so you know exactly what your keg cost is per liter. They are always 100% clean when you get them, so there is no chance of any cross-contamination. Quality one-way kegs, such as KeyKeg are designed to be part of a circular supply chain and are also recyclable.
With KeyKeg one way kegs your beer stays fresher longer (up to 3 to 4 weeks) more than in steel, and your clients have almost no wasted beer. This is a better consumer experience, and protects your brand at the tap, where it really counts!
Our suggestion is that you need to understand your client and their venue requirements. As long as you understand ALL of the various quality packaging options, you can then best serve your customers with the correct size keg whether it be in steel or one way.
As a brewer, you now have an exciting opportunity to develop a closer business partnership with your customers by understanding their needs and fulfilling those needs.
Exciting times ahead.
“With KeyKeg one way kegs your beer stays fresher longer (up to 3 to 4 weeks) more than in steel, and your clients have almost no wasted beer” Raymond, can you explain this claim please?
Hi Ross.
Yes, I am happy to explain.
The innovative design of the KeyKeg means the beer (beverage) is ALWAYS separated from the propellant. The propellant whether it be CO2, Nitro or even Compressed Air, never comes into contact with the beverage inside the KeyKeg.
Thus every pour from the tap is as if you have just opened a fresh can or bottle.
After tapping, beer will stay fresh in a KeyKeg for 3-4 weeks on average. With traditional spear kegs, as a general guide you may need to use the beer within 5-7 days after tapping. The shelf life of the beer naturally depends on the type of beer, storage conditions and cleanliness of the draft system
In terms of beer wastage. In traditional speared kegs you don’t know if there is a temperature or CO2 pressure issue that might be causing foaming inside the keg until the end of the keg. This is because the beer is being forced out of the bottom of the keg by the CO2 ontop of the beer. Thus if there is foam it remains on top. Also as above. If you have not used up all of the beer up within the “preferred” timeframe, then any beer remaining inside the keg is also wasted.
However, with a KeyKeg, the beer actually comes from the top of the keg. So if there are any cooling or CO2 pressure issues you see it at the tap immediately. This means you actually need to rectify your temperature and/or CO2 to get the foaming under control, then and there. Thus you have almost no foaming inside the keg. Additionally as explained above, since the beer actually stays fresher longer, it is more likely that you will be able to use all of the beer due to the extended lifespan inside the keg.
I trust the above response answers your questions.
Sorry, dispensing a keg with CO2 does not shorten it’s shelf life, everything being equal, & I’ve never know a keg foam at the top to the detriment of emptying the keg. I love the Keykeg concept, but those claims are honestly outlandish on any properly set up & maintained commercial system.
Is $35.50/litre excise correct? I haven’t been invoiced for any $1000+ kegs recently…
Nevermind, I just realised it’s per litre of pure alcohol not per litre of beer.