A pint of order in Australian craft beer split

May 25, 2017

The Australian beer minority spoke loud and not quite that clear last week.

 

But were there enough people listening? And of the few whose ears may have been pricked, did they fully understand the message?

 

Those that produce the least amount of brew decided to make a stand against those that sate the thirst of the clear majority of beer appreciators. So, last Thursday they kicked some of the more mature identities out of their little craft brew club. The group formerly known as the Craft Beer Industry Association morphed into the Independent Brewers Association.

 

Why? Let’s not beat around the bush here. The move was made to wrestle the issue of tap contracts.

 

And that isn’t a bad fight to have. The Australian Competitor and Consumer Commission has been looking into the matter, too. However, its recommendations have been delayed by the recent AB Inbev buy-out spree that sent a schism through the top end of the local beer industry. The ACCC hasn’t just put the matter on the backburner. It has been dropped behind a couch to be lost until a spring clean later in the year.

 

Those who are locked out of the taps – the small brewers who can’t afford to wage a war of wallets with Big Beer – were getting restless at the inaction and decided to escalate the battle by dumping from the craft beer club breweries such as Little Creatures, James Squire, White Rabbit (all Lion), Mountain Goat (Asahi) and Yenda (Coca-Cola) because they are owned by those that held the pourage deals. Some see it as tap contracts, others as a tap lock-out, stifling growth.

One of the backfires for the ostracism is that the majority of drinkers think Steam Ale, Dreadnought, Swindler and Rogers are craft beers, too.

 

The stoush over tap contracts in general is a fair point. There is something that makes the moral compass point due south on learning a business is paying another to keep out a rival.

 

However, the concentration on one issue to drive a wedge through the industry might be a waste of energy.

 

We have to be honest. If you take out the big breweries' “craft beer” (such as James Squire 150 Lashes, Little Creatures Pale) then the segment represents just four per cent of beer sales in Australia.

 

All of this for four per cent!

The wave of protest represents an even smaller grouping. Only 136 “small breweries” voted 134-2 in the recent CBIA/IBA transformation. There are more than 380 “craft breweries” around the country.

 

One team that disagreed over the CBIA/IBA change was Pirate Life and the Adelaide-based brewery confirmed to The Sip it was one of two dissenters at last week’s vote.

 

For a business that burst on to scene without tap contracts two years ago Pirate Life has become one of the most popular breweries in the independent craft beer segment.

 

But for them, and every brewery no matter their size or links, the three biggest issues hindering their progress is excise, excise and excise.

 

During Good Beer Week in Melbourne there was so much talk from breweries about what they could do to expand their businesses if they got the tax concessions similar to the wine industry. In some cases, wineries can get a $500,000 rebate from the tax man. It is enough to make a small brewer faint considering the most he/she can get back under beer's tax scheme is $30,000.

Yet fighting such a scourge requires a whole of industry approach. Everybody, no matter how much beer is made or consumed, is hit by the impost. A united front is required to get the politicians on board. Now it is up to various groups to act on each’s interests. And why would Big Beer, who by their nature have a greater access to government than their little cousins, consider the interests of a group that just punted them from the craft beer club?

 

There is no doubt the CBIA was helping small breweries with issues and their focus was on development. Someone always needs to look out for the little guy just like the US Brewers Association and the CBIA indicated the recent move was along that line of support.

 

“The association now has a clearer focus about who it is here to help and their requirements,” it stated shortly after the vote. “Any external perceptions about conflicts of interest have now been removed allowing us to be even more effective in our efforts.”

VIDEO: Ken Grossman from Sierra Nevada explains why those that sell out to Big Beer can't be considered craft beer.

 

However, the split was an interesting change of tack considering the winds blowing through Australian beer.

 

Less than a third of Australian beer sales are on premise. More than half of the nectar's sales come through retail stores. So, shelf space might be the bigger problem as the market expands.

 

Only more smaller Australian breweries are going to be bought by Asahi, Heineken, AB InBev, Lion et ale. That is simple business and economics drives all industries. The Sip forecasts another prominent Australian minor brewer with a large craft beer profile will be taken over before the end of the year. It will just further blurry rather than justify the line between the beer parties.

 

WA no longer has a Big Beer presence as Swan left four years ago and there are west coast breweries that aren’t members of the CBIA/IBA. One now is Little Creatures in Fremantle. The State’s beer brethren in the new IBA now has the tough task of re-educating the local public that the brand that kick-started the craft beer renaissance 18 years ago is no longer craft beer. Because craft beer is dead, now. Like the elephant in the room, the giant venue at the port that stands as a beacon to craft beer doesn’t exist in that world anymore. Yeah, right.

 

Another feeling taken from Good Beer Week is that the entire beer industry has become very crowded. Indeed, the likely growth in brewery numbers is expected to come from brewpubs, not stand alone operations, just as it is in the US.

 

So tap contracts aren’t going to be the biggest headache for brewpubs. But excise will be. 

 

The new IBA wants better labelling to ensure punters are informed of who makes their beer. That is also a noble cause. But, again, most of the drinking public probably doesn’t care. Emu Export in the can is still considered a WA beer even though it is made in Adelaide. We still drink copious amounts of VB stubbies made in another State. And we’re going to down a lot Goose Island, that Chicago beer made in Tasmania.

 

The old Emu Export is an interesting case in point in this craft beer argument.

 

One popular inner city Perth brewpub has a split tap arrangement. It has four taps for its creations while most of the rest are under Lion deals. Emu Export regularly outsells the home brand.

 

And when there were concerns The Queens in Highgate was tightening its range of beers, possibly putting some WA breweries on the outer, management confirmed that even with Feral’s Hop Hog, Cowaramup’s Pilsener, Mash’s Copy Cat, Matso’s Ginger Beer, Gage Road’s Little Dove and Nail Outmeal Stout as part of its tap line-up the two biggest sellers were 150 Lashes and Hahn Super Dry. And this for an establishment that has delivered solid craft beer support.

 

Variety is the spice of life and has been the blood pulsating through the veins of Australian craft beer for 20 years.

 

But in the end pubs must give the public, not the breweries, what they want.

 

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