Sunday, 27 March 2011

Crying over spilt beer

Anyone reading this blog will quickly realise that I am not the greatest fan of the smoking ban. But, on the other hand, if you are running a pub or a brewery, you would be foolish to base your business plans on an assumption it may be repealed or relaxed in the next few years.

Equally, I am strongly, indeed viscerally, opposed to the current alcohol duty regime, in particular the “duty escalator”. It penalises responsible drinkers, closes pubs and encourages smuggling while doing nothing to curb problem drinking and indeed not even being effective in maximising government revenue. But, given the current level of anti-drink hysteria in the political sphere, realistically the prospect of removing the escalator, let alone any actual cut, is extremely remote.

Before the Budget, various parts of the drinks industry mounted a concerted and heartfelt campaign to get the government to think again, most notably SIBA’s Proud of British Beer video, but it all fell on deaf ears.

So, in your business plans, it makes sense to assume that the alcohol duty escalator will stay in place at least until 2014. The first realistic opportunity for it to be abandoned is in the pre-election Budget of March 2015.

Hardknott Dave makes a very good argument that, in the current climate, it makes sense for craft brewers to concentrate on quality rather than volume. A high tax regime increases the leverage exercised by quality. As often said in relation to wine, every bottle carries the same level of duty, so the differential between the £6 bottle and the £4 bottle is entirely (apart from the additional VAT) accounted for by higher quality.

6 comments:

  1. I might be missing the point here, but the duties on wine and beer are calculated totally differently - flat rate for wine, but by each %abv for beer.

    However, I've obviously no argument against brewing quality beers.

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  2. How can we tell that the difference between the £4 and £6 bottle is "entirely quality"? Couldn't it be profit? Or, conversly, efficiency savings? But I'm sure there's a lot in what you say - many people (rationally or not) do have an expectation of quality associated with high price. It's well-known that high prices can enhance perceived value. Neat - I'm raising my prices right now.

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  3. You're right, Stringers. A friend of mine worked in a posh London shop a good few years ago, and was told she could buy anything at cost price. Deciding to splash out, she chose an item for well over £100, and was astonished to be charged £17.

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  4. Zak - that's a very good point. I think Dave's argument (and BrewDog's) is essentially that brewers should make a virtue of necessity - charge more and sell on quality. It might work - they could say their beer is "reassuringly expensive"...

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  5. Dear Curmudgeon

    Our lawmongers ran out of sensible law decades ago. All they have left do is manufacture more and more garbage dressed up as 'law'.

    Our beloved government is working full time to manufacture more laws: the EU is reckoned to produce between 70% and 80% of our laws.

    Average 75% - that means we are now subject to approximately 4 full parliament equivalents of industrial grade lawmaking.

    The problem is broad spectrum; the alcoholic beverage industry is merely one small part in the time-wasting efforts of our multiple governments to micro-manage every aspect of our lives. They have too much time and too little to do, and get paid too much to do it, so they have an inflated view of their own worth.

    Start brewing your own. You can make it any strength you want and no duty to pay.

    You know it makes sense.

    DP

    ReplyDelete
  6. Issues on drink or drugs creates government /media lead hysteria which causes irrational and illogical legislation.

    Its a sad fact that Government think radical legislation changes would be opposed by the general public.

    So radical, sensible legislation will never happen...

    ReplyDelete

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