Big Shed Brewing, Hawkers Beer tap the administrators as craft beer sector calls for excise freeze

Two major names in Australia’s craft brewing scene have collapsed in the past week, as industry representatives urge the federal government to freeze alcohol tax hikes and soften the blow of COVID-era debts.

Adelaide’s Big Shed Brewing Concern entered voluntary administration on Tuesday, appointing Mark Lieberenz and Anthony Phillips of restructuring firm Heard Phillips Lieberenz to handle the business’ affairs.

The 12-year-old venture will continue to trade through the administration, with its tap room and restaurant remaining open for business.

Its collapse came one day after Australian Brewers Guild Pty Ltd, trading as Hawkers Beer, appointed Atle Crowe-Maxwell as administrator.

Those administrations are only the latest in a worrying stream of independent brewery collapses in recent months.

Wayward Brewing Co., Common Ground Brewing, and Bad Shepherd are just a few of the independents to have appointed administrators or restructuring professionals in recent months.

COVID-era hangover continues

Vulnerability in the sector comes after a booming decade and a half for Australian independent brewers, which capitalised on changing beer-drinking habits — and the interest of international beverage giants.

Formerly independent manufacturers like Little Creatures, 4 Pines, and Stone & Wood have all been scooped up by global beer conglomerates since 2012, highlighting what appeared to be a viable exit strategy for local brewery founders.

But the pandemic era, with its lockdowns and venue density limits, took a particularly hard toll on the indie brewing sector.

InDaily reports pandemic restrictions in early 2020 arrived directly after Big Shed Brewing undertook major investments to expand the business.

Earlier, the administrators for Melbourne’s Bad Shepherd told SmartCompany that pandemic-era debts, and lower-than-expected patronage when density restrictions finally lifted, contributed to its restructuring plans.

Equity crowdfunding rounds remain popular for craft brewers seeking external investment, and the recent popularity of non-alcoholic beer has allowed many manufacturers to reach a new kind of consumer.

Yet concerted action is needed to keep the local businesses afloat, according to the Independent Brewers Association.

Calls for excise freeze, debt repayment leniency

In its pre-budget submission, the industry group calls for significant reforms to “ensure Australia’s vibrant independent brewing industry is not squeezed out of the market in favour of large multinational businesses”.

At the top of its wishlist is a two-year freeze to alcohol excise indexation, giving local producers time to adjust to recent hikes to the cornerstone tax leveled on brewers.

The alcohol excise bumps up in February and August each year, based on underlying inflation figures.

As of February 5, take-home light beer — that is, beer not exceeding 3% alcohol by volume — commands an excise of $51.63 per litre of alcohol.

For take-home beers with between 3% and 3.5% alcohol, it’s $60.12 per litre of alcohol.

Headline inflation is moderating, but still remains higher than the central bank target — and unless it falls further, independent brewers and drinkers are in for another price shock come August.

“Independent breweries simply cannot keep absorbing costs rather than passing them on to the consumer,” the submission reads.

The Independent Brewers Association said 45% of the upfront cost of producing an IPA beer comes through the excise.

“In an industry in which margins have always been tight, it’s an unsustainable position, and one that has sharpened focus on key obstacles the industry has been trying, often unsuccessfully, to overcome since the craft beer revolution first took hold.”

The excise remission cap, which provides manufacturers with a full remission of excise duties up to $350,000 per financial year, should also be indexed to inflation, the industry group said.

Thirdly, it has called on the federal government to help independent brewers extend the repayment terms of excise debts racked up during the early years of the COVID-19 pandemic.

“The Federal Government needs to act now if it wants the sector to survive – and to show Australians they do care about local small businesses,” said Kylie Lethbridge, CEO of the Independent Brewers Association.

“We are simply asking for common-sense reforms that go some way to creating equity for small breweries in a market stacked against them.”