Independent brewers tap out in beer revolt

July 13, 2017

Less than two months after the revolution and the band of Australia’s rebel brewers has lost its most important battle.

 

The nation’s consumer war lord has spoken. It has ruled the biggest part of the independent beer makers’ protest against the system is null and void.

 

And, as a result, one of the key arguments in forcing a wedge through the craft beer industry has been blunted.

 

So, was the split worth it?

 

Not only was the Australian Competition and Consumer Commission’s ruling today that Big Beer tap contracts were "unlikely to substantially lessen competition in any of the markets we investigated" a blow for the Independent Brewers Association's cause, the timing of the release was almost cruel.

 

It was only on May 18 that the Craft Beer Industry Association took a stand against some of its members who were owned by the feared multinationals – AB InBev (CUB), Asahi, Lion, even Coca Cola.

That meant James Squire, still in the public’s eyes Australia’s No.1 craft beer brand, Mountain Goat, Yenda, Malt Shovel, White Rabbit and Matilda Bay couldn’t be part of the gang anymore because their parent companies were allegedly blocking supply of pub and bar taps through Big Beer contracts.

 

So 136 of the more than 380 eligible members of the old CBIA told some of the association foundation entities to nick off and prepare for a public relations fight.

 

The IBA hardly got to throw a punch. While there has been a couple of months of trash talking about legal battles from opportunistic legal firms, creation of labels highlighting independence and countless social media taunts, the new association’s campaign has started to looking wobbly on its feet.

 

“The complaints from craft brewers stemmed from some of Lion and CUB’s contracts requiring venues to dedicate over 80 per cent of beer taps to their big name brands in exchange for rebates, infrastructure investment and refurbishment loans,” wrote deputy chair Dr Michael Schaper in today’s ACCC release.

 

“Although some venues had exclusivity arrangements, most pubs and clubs said they did not feel constrained from allocating taps to smaller brewers and could make taps available for craft beer if necessary.”

There will be no action. Australia’s so-called independent breweries are back to square one, when they still called the workers at James Squire, Mountain Goat and Malt Shovel their brothers and sisters.

 

But what has happened is the craft beer category, which whether like it or not was a key marketing and promotional tool (even used by the small breweries!) and a point of difference for the industry, has been butchered. And, it seems, for no positive outcome.

 

One of the reasons the IBA was formed centred on educating the public about the difference between independently made brews and those made by Big Beer in sheep’s clothing.

 

Yet the ACCC decision is going to leave most punters on the edge of the craft beer segment (yes, we’re going to use that term) in a state of confusion. The IBA education process just go so much tougher.

 

It must be remembered that even the IBA’s own recent economic snapshot revealed independent brewers accounted for just 3% of Australian beer production. It seemed that might have caught the ACCC's attention.

 

“While some craft brewers may have been refused access to taps by certain venues, our investigation found that the venues were responding to consumer demand for certain beer brands, rather than restrictions imposed by the big brewers,” Dr Schaper said in the ACCC release.

 

“In fact, over half of the venues contacted by the ACCC indicated that customer preference was the key factor in determining the brands, types of beer and number of craft beers offered by the venue.

Publicans and Big Beer can now continue to do as they have. And there isn’t much the IBA, which has proudly shouted it generated $740 million in economic benefit each year, can do about it.

 

“This investigation has been dragging on for more than three years and to now find out that the status quo will be maintained is a bit hard to take,” said IBA chair Ben Kooyman.

 

“For any small business to survive it needs protection from the market practices of dominant players. We had hoped that Australian consumer law, as interpreted by the ACCC, would be able to provide that protection. It seems we were wrong.

 

“The ACCC’s finding that tap contracts do not substantially lessen competition certainly does not match the realities faced by our members in the marketplace. We find it puzzling that the investigation seems to have focused on the venue’s experience rather than that of

small brewers.

 

“Of course this decision will also affect the ability of Australia’s beer lovers to access the beers they want to drink.

 

“The big winners from this decision are a select group of multi-national companies.”

 

Kooyman said the IBA would keep pursuing this issue as part of its on-going advocacy campaign for a fair go for independent brewers.

 

The second pillar of the IBA revolution was to obtain excise relief for its members. It wanted incentives similar to the rebates offered wine makers.

 

However, excise is an issue across the brewing industry. Big Beer pays it, too. A lot more than the small breweries combined.

 

Thus wouldn’t it be better for the entire beer making market, including Lion, James Squire and all the littler operations to get together a fight the matter as a group? Surely there is safety in numbers.

 

There will be other concerns, State government red tape, export concessions, tourist opportunities that will be unique to the independent breweries and like the Brewers Association in the US, the IBA can have an impact in negotiating better arrangements.

 

When it comes to tap contracts it is the fight the association can’t win, even though the protests will continue.

 

The wedge in the Australian beer industry will remain.

 

And mainstream bar drinkers will get on downing the beers they went there for in the first place.

 

But Australian craft beer as a segment will never be the same.

 

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