Tuesday 27 March 2018

The tentacles of big beer... the very real threat to Progressive Beer Duty.

(Just to clarify - PBD (progressive beer duty) or SBDR (small brewer duty relief) provides brewers producing under 5000 hectolitres (500,000 litres) a year with a 50% duty reduction of the "headline rate" and then a sliding scale of reduction from 5000hl to 60000hl (6 million litres) which is a lot of beer.... )  With duty relief the duty paid on a 9 gallon cask of 4% beer is around £15, £30 without it.  The EU position is described here as it was originally implemented in Bavaria and is now part of official EU policy although it's discretionary and governments can interpret it as they wish to a certain extent.

As you may have noticed we don't generally blog - or talk - about CAMRA much as we're not particularly enamoured with them, but predictably some of the motions at the 2018 AGM have only served to strengthen our opinion. One in particular, no.8, is calling for the reduction in "progressive beer duty" which us small brewers receive from the government to help us compete with larger brewers and their economies of scale. The motion says "This Conference believes that CAMRA should campaign for a reduction in the level of Small Brewery Duty Relief coupled with an increase in the barrelage on which it is granted"

The proposer seems to be a typical CAMRA "twigosaurus" who likes old-fashioned regional brown beers (he lists in a recent London Drinker a list of regional brewers he likes), but if only it were nothing serious and we could just laugh at him/them...  But this isn't funny, it's deadly serious, because if passed this motion would mean CAMRA tacitly, or directly, supporting the call (from big brewers who want their market share back which us pesky micros have "stolen" from them) to reduce or scrap the progressive beer duty reduction for brewers producing under 5000hl a year, or around a million pounds' turnover.

CAMRA, claiming to support microbreweries, cannot be seen to support such a review which may well result in the reduction or abolition of the small brewer's relief and this result in the closure of hundreds of brewers, setting brewing and the beer scene in the UK back 20 years and putting thousands out of work; if CAMRA decisively defeat this it will at least show there isn't cross party support for such a review.

Of course, turnover is vanity and all that and I'm not suggesting that all brewers turning over a million quid are raking it in, but it still stands that this reduction was designed to help the smallest brewers compete with the bigger ones and, so the argument goes, once you've expanded to a certain size you don't need the duty reduction any more... you may want it, but you don't need it! Once a brewer makes over 5000hl a year they are turning over around a million pounds per annum which, in my opinion, means they don't need the benefits of progressive beer duty reductions any more although obviously a tapered cutoff - as we currently have - could be reviewed as long as the results don't impact in any loss for the smallest brewers who need the relief most.

Back to the CAMRA motion... which is dangerous because, if the government believe there is cross-industry support for reforming progressive beer duty, then they will go ahead and listen to those who shout loudest which are - surprise, surprise - the rich big brewers who presumably went to the same posh schools as those making the decisions. So, I'd guess they would reduce the rebate to small brewers under 5000hl from 50% to maybe 25% and increase the threshold to maybe 15000hl per year. 

This will mean those who need, and in many cases depend, on the reduction to keep their business afloat in very challenging times will have to either absorb the smaller relief or charge extra for a container of beer; exactly how much extra will depend on the amendments to the scheme, but if we assume a 50% cut of the current 50% reduction (meaning small brewers would receive a 25% reduction to the full duty rate rather than the 50% they currently receive) then that will mean adding £7.50 to EACH CASK of 4% beer, more to stronger ones, whilst those who don't need it due to economies of scale will pocket it or theoretically "invest" it to squeeze out those they have taken it from...  as you can see, in the main this "review" is being driven by greed, pure and simple, to have something to which they are not entitled but somehow feel entitled to.

The whole idea of PBD (see the decription at the top of the page) is to give SMALL brewers a leg-up to compete then, once they grow big enough, the theory goes that they no longer need the help and can grow organically. Nothing has changed, this is still the case, but now avarice is coming into play and bigger brewers want money which they shouldn't be entitled to and, to achieve this, they are hell-bent on infiltrating the bodies which will enable them to give the illusion of "cross-party" support among the beer industry... that's how big beer works and it stinks of hypocrisy, turncoatism (is that a word?) and stabbing the little guys in the back.

I'd guess that if PDB was halved then maybe 200 (maybe more) brewers would close within a few months, if it were scrapped completely then who knows? Carnage would be my guess as you simply can't add £15+ to a container of beer, it's not affordable, especially when the bigger brewers will be pressing their advantage to recapture the market share lost. This really proves some people in CAMRA have no idea about the beer industry and, if this passes, CAMRA will become a total pariah within the small brewer sector for supporting what will probably become the death of small brewers in the UK. 

There is a "pressure group" of brewers, mostly the names you'd expect to be there but - sadly - some who have benefited from PBD but now seem to have forgotten why it's in existence, called the Small Brewers Duty Reform Coalition (see graphic below for a list of the members) who are pushing for reform of PBD which, presumably, means sod the little guys and give us big/bigger guys a slice of the free cake on offer... this group is well connected and will do well with giving the Government advice and so it's essential that CAMRA motion 8 doesn't pass as that will play right into the hands of this group.

The whole story needs telling and my fear is that at the CAMRA AGM there will be a lot of the type of member who like regional beer and see "craft" beer as Watneys all over again, so without knowing both sides of the story, i.e. the full facts, will vote for it as they think it will mean less "fizz" and more cheap brown bitter! Which is what it will mean, but also carnage in the brewing industry and many, many businesses ruined... do you want that?  No, I didn't think so, so let's make sure motion 8 gets thrown back to the dark ages where it belongs.

A final thought... If motion 8 does go through you can say goodbye to many of the innovative smaller brewers and the bigger/richer ones will gladly take up the slack setting the beer market back decades.. to me, and many people who love beer and work in the industry, this is something that doesn't bear thinking about, and that's as both a drinker of modern beer and a brewer of it too, and will mean the closure of swathes of the UK microbrewing sector and less choice coupled with more expensive beer all round and also the increased dominance of large brewers, hence less choice and lower quality beer.

We all know what happened the last time big brewers were in charge of the UK beer scene back in the 1960s and it didn't go very well until, ironically, CAMRA was set up to campaign against things and saved cask ale as we know it... so they need to look back at their history and realise that this is a moment where they will be judged on how they react to this motion; get it wrong and there will be a lot of blood on their hands.

I'm not hyping this up, not using hyperbole, it really is this serious and I'm talking as a small brewer who gets this 50% rebate on duty which makes it viable for us to compete with the bigger brewers. Without it I'd not reckon we would last long in what would become a bloodbath market with the big and rich winning out so, please, everyone who cares about small brewers and the boom in UK brewing, make sure motion 8 is defeated and CAMRA support no change in PBD, not even reform, as that is a slippery slope which is greased by the big brewers with their huge reserves and will only end one way.

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