Sunday, 7 August 2011

Weak beers to flood the market?

It seems that the Daily Mail has woken up to the fact that, from 1 October, the duty on beers of 2.8% ABV or lower will be halved. However, despite the suggestion in the article, I can’t see it affecting the price of the “normal” pint bought in pubs. Obviously it’s too early to say exactly what the impact will be, but I would expect the main beneficiary to be cheap off-trade lager.

Price may influence people’s decision as to whether to go to the pub or not, but once inside they’re not all that price-conscious, otherwise mild would do a lot better than it does. Also bear in mind that many drinks in pubs are bought in rounds, where there is less incentive to choose the cheapest, and any disparity in price is accepted so long as participants don’t blatantly take the piss. I can’t see £2 pints of 2.8% bitter decimating the sales of the 4% stuff at £2.50. I know it’s politically incorrect to say so, but people actually buy beer partly because it contains alcohol, so whether or not the taste is unaffected is not the sole consideration.

I can, however, see the likes of Carling, Carlsberg and Fosters bringing out 2.8% versions which may sell enough in pubs to be viable, but won’t take over from the mainstream brands. Apart from maybe a few existing milds being reformulated to take advantage of the lower duty, I really don’t see much impact on the cask sector. But of course only time will tell.

8 comments:

  1. It's an interesting, some might say irrelevant, development, but I tend to agree with you on its likely impact. If, however, the barrier was 1% or even a little bit less, then that would be really interesting.

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  2. Do you mean 1% there, or 4%? If it was 3.5%, as CAMRA have proposed, it would make a much bigger difference to the beer market, but of course would also cost the government a lot of revenue. 2.8% is low enough that it won't make much difference to revenues, but will still give the impression of doing something "responsible".

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  3. I think 2.8 is just too low a percentage for brewers to think about any major changes. It's obviously easier for the macrobrewers as all they have to do is change a few settings on a computer and the strength drops suitably seeing as they have no concern for how things taste. I think that if the lower limit was 3.5% many brewers may think about changing one of their permanent beers to a low strength one. Even if the compromise was to lower the higher rate of duty to say 6%. Low strength beer has it's place for sure and I'd love to see any rate of duty decrease.

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  4. I'm old enough to remember when there was very little draught beer available in the UK (or any kind of beer really) over about OG 1040, so I can imagine how a 3.5% cut-off point might be tolerable. In the days when it was brewed at Henley, the 3.4% Brakspear's Bitter was one of my favourite beers.

    Of course Guinness, Carling and the like would be brought down to that level. The problem is that it would effectively impose a ceiling on the strength of mainstream beers, with only a small number of speciality products available at higher strengths. It could even largely kill off cask beer at a higher strength, and thus would limit and distort the beer market. Be careful what you wish for!

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  5. Yes, I also think that 2.8% is really much too low.

    How many non-Carling C2/'value' beers can one think of that are actually brewed to that strength or less on a regular basis? I can only think of one: Manns Brown Ale, which is 2.8%. I don't mind this beer at all but it is of course very sweet, almost overwhelmingly so until you get more than halfway down the bottle, when it turns unexpectedly complex.

    Is there a market for proper low-alcohol ales?

    If you were to ask me, they should either taxing incrementally on ABV or, better yet, reducing the tax on beer. It's far too high as it is.

    They could reduce duty on beers of 4% or less but the only problem is that would then discourage beers higher than 4% ABV from being made, or beers that are some way over 4% (i.e. 4.1%-4.5%) to come down to 4%. Which isn't ideal in any case as this has already happened.

    Would many people even buy sub-3.5% off-trade lager in any case? I can't imagine that there's that much of a market for it because surely the vast majority of people who like industrial pale lager will also want something that actually contains and tastes of alcohol? Those who like non-alcoholic lager are already catered for (i.e. San Miguel 0,0, Kaliber) so I don't know who this is aimed at.

    Still, I'll probably be able to find a bottle of brown in Home Bargains for 60p a bottle instead of a quid - rock on!

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  6. My forecast is that we will eventually move to a form of tiered beer duty that favours weaker beers, something like:

    up to 2.8%: 50%
    up to 3.5%: 75%
    up to 4.5%: 100%
    up to 5.5%: 125%
    up to 7.5%: 150%
    above 7.5%: 200%

    Of course, the first and last of these are already coming in on 1 October.

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  7. Again, they're not living in the real world.

    So it looks like that along with the alkie crowd, those of us who like strong beers and who aren't a problem are going to get taxed prohibitively because we like them. Way to discourage the budding craft brewing industry.

    More and more people are going to be driven into home-brewing by this. Fantastic. Encourage a home market of potentially very strong, unregulated alcohol in an unregulated atmosphere over sensible pub drinking in a sensible-ish atmosphere that can be kept an eye on.

    Seriously, what are these people drinking? Whatever it is, it sounds like they should probably stop.

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  8. I suppose what we need is a proactive sliding scale of duty based on brewer's level of output, rather than simply abv.

    Interestingly, it seems that a flat rate of duty has its pitfalls as well. The American craft scene, unhindered by abv restrcitions, seems dominated by very strong beers.

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