Visit the Woolpack Dave's Beer and Stuff site

There are many costs that affect a brewery. We've found this year, for instance, that some of the major hop varieties we rely on have been scarce. This inevitably means increasing costs, or alternatively a compromise on recipes. As the economy improves we see, quite rightly, wage rises. This ripples through to increased costs of labour. Fuel may well be low at this present time, but that won't last long, you can bet on that and it's already showing signs of increases again.

RPI falls to zero - but for how long?
(Image curtesy ONS)
Out of all the costs we have to manage, beer duty is the one that is published widely. When it goes down, and the government promise a penny off a pint1, it leaves us brewers wondering what we should do about all the other costs that are rising.

Traditionally a duty increase signalled the time when we could all look at our costings, across the board, and make appropriate price increases. Yes, a penny or two on a pint, by the time it got to your glass, often looked more like 10-15p. The reason for this is that the brewery, and the pubs and shops that stock the beer, rolled their annual price review together into one event, and that was all shrouded by the duty increase.

Now, considering with the recession and all, beer prices at the brewery gate haven't seen much of an increase over the past few years. However, costs, as I've said, are going up. Overall, this is having a detrimental effect on the ability to earn an honest living out of beer.

The reader could be excused for questioning my arguments, based on today's announcement by the ONS of zero inflation. This is making interesting news, but one thing is certain, economic growth is not possible without inflation. As we move from deep and difficult economic times we will see increased economic activity, increased wages and fuller employment and increased inflationary pressures. Many would argue this is essential for economic recovery, but either way, we will see prices increasing for everything, and that includes beer.

In the past I've had pubs we supply ask me how they are going to explain to their customers that they probably can't pass on the duty reduction through to their pint prices. Indeed, some have even said that they should really be looking to put up prices, despite duty reductions.2

Some customers this time around have been asking us if we are going to reduce our prices in response to the budget. I'm quite clear on this. No.

As we are still below the duty threshold, and enjoy a 50% discount, the reduction in duty is only a half of the published amount. This results in the reduction in duty on a bottle of Azimuth to be only a shade over 0.3p. Meanwhile, a cost of living increase for our staff, hop price increases, transport cost increases and heating and power cost increases will put that, plus more, back on the cost of manufacture.

The duty cut will help us keep a level keel, help us to continue to develop our business, to invest in the future and to build a solid and competent team. It will not help us to reduce our prices, overall efficiency elsewhere might, but not a relatively minor duty reduction.

-------

1Actually, the real shocker is that even at full duty rate it is not even a penny off a pint until you get to 5% beer. Yes, Stella might enjoy that duty cut, but not your pint of 4% session ale, that works out at only 0.85p per pint. Micro-brewed beer will enjoy only be 0.4p on a pint of 4%. A bottle of Azimuth will only see 0.34p off its beer duty. It isn't very much really, is it?

Now, before my friend Keith Bott, or any of any of the other great people who have worked tirelessly to stop the beer duty escalator, and at least reverse the trend a little shout at me, I do appreciate it. We are in a much better situation now than we might have been had the escalator still been in place - except, if I remember correctly, it was linked to inflation.......

2I've known pubs put out a jar with 1p pieces in it with a sign saying "Here's you beer duty reduction, if you can be bothered to take it" - really, a penny? Why are those little copper plated steel things still circulating? they are more bother than they are worth banking, which is why many pubs are happy to give them away.





More...