Interview: Independent Brewers Association CEO explains causes of craft beer’s current crisis

February 16, 2024
By Cody Profaca

A worrying trend of breweries being forced into voluntary administration has begun to emerge in Australia’s craft beer industry. The problem first became apparent in January 2023 with the fall of Queensland’s Ballistic Beer Co, however it has been steadily gathering momentum over the past month with breweries such as Wayward, Hawkers and Big Shed all being forced into voluntary administration, the latter two in the past week alone.

Drinks Trade sat down with Kylie Lethbridge, CEO of the Independent Brewers Association, to discuss what is causing the crisis.

Drinks Trade: So firstly, can you run us through what’s been happening and why these breweries are entering into voluntary administration?

Kylie Lethbridge: So this week has obviously been a little heavier on that front than others with Hawkers and Big Shed, which are two obviously fairly well-known names, one in South Australia and the other a long-standing brewery in Victoria.

It’s so disappointing… they’ve done all they can, fought tooth and nail to try and keep up to pay back any excise debts they had accumulated and had expected, like many others around the country had expected (or hoped I guess) for a booming summer to offset some of the challenges that they had faced in 2023… and that just didn’t happen.

Australians just don’t have the money to spend at the moment on those long lunches/on those long days out, so that’s had an impact.

And then of course, the second [reason]: the first excise hike for the year on the 5th of February was the catalyst for a number of breweries that were already doing it tough.

DT: Can you talk at all to how many other breweries you are aware of that are also currently on the brink?

KL: I know that there are more, obviously couldn’t speak as to who they were, but there are definitely others and more that we know of around the country as well.

It’s not just one state that’s being impacted by this over the other, and it’s not just one type or size or scale of brewery that are having those issues, so there’s no trend that we can see.

It’s just those [breweries] that had accumulated that excise debt.

There will be others in the coming weeks and months. Anybody that’s in the industry at the minute is looking at the next 12 to 18 months as still presenting some challenges. So, although some have seen that little bit of light at the end of the tunnel, it still looks like 2024 is going to be quite challenging.

DT: Big Shed, Hawkers, Wayward, Dainton… all the breweries that have entered into voluntary administration seem quite similar in terms of their pricepoints, marketing, scale, etc. Why do you think these breweries are suffering the most?

KL: It’s not really, there is no pattern.

I’d say the thing that they have in common, all of them, was an outstanding ATO debt. And what we’re not able to come to a conclusion on or have any evidence to support is why the ATO is being flexible for some breweries and extending payment terms and not others.

DT: Can you explain this this inconsistent treatment by the ATO a little more?

KL: One of the things that the federal government could do [to help alleviate COVID pressures] was that is was to be able to allow businesses to defer some of their tax obligations.

And so for us, that’s the excise tax and it meant that breweries could defer; and when it was first announced there was no end date as to, you know, you can hold off paying your tax obligations for the minute because we know times are tough.

That was extended and then at some point in 2022 it was ‘okay the holiday’s over you’ve got to start paying your obligations now’ and we’ve all got to work on a payment plan.

Not everybody did defer that debt but for us the vast majority did, and so when it came to ‘okay we’ve got to pay it back’ that was based on the negotiation with the ATO. So some who had smaller debts maybe were okay to pay back in a year, and some who had larger debts had negotiated two or three years.

Since then, they’re obviously a little bit burnt by breweries going into voluntary administration because they end up with five cents to the dollar or 10 cents rather than 100 and so breweries come out the other end being a viable option and moving forward.

And so the challenge that we see and that we’ve identified and we can’t quite understand is why the ATO would not say, yes you can have a two year extension because we’ve seen you’ve met all your payment milestones, you’ve not missed a payment, and therefore you’re a viable option and give them another two years to pay that back. Therefore Australians getting 100 cents to the dollar rather than saying no you’ve actually got seven days and the brewery’s forced into liquidation, administration, or closing their doors.

But then in other instances I’ve been told that they have extended them by 12 months or two years, and so what we can’t work out is any rhyme or reason as to why one brewery will get an extension and one won’t.

I think what you’ll see is the ones that have gone into voluntary administration with a large tax debt is potentially that they’ve not been allowed an extension, and that therefore has forced their hand.

DT: What’s your forecast for craft beer moving forwards?

KL: Unless we get some relief from the federal government then we will see more businesses close and we will see more voluntary administrations and we will see more redundancies.

We are the tiniest part of the Australian [beer] market, but we employ over 51% of the industry because we’re quite labor intensive, and so the more breweries that close or restructure downward, the more jobs that are going to be lost in this country.

If we don’t get a little help, you’ll definitely see more of that pain.

DT: Any messages to the trade?

KL: The message is the same for traders as it is for the consumer: the more they can support Australian independent breweries, the better. They need everybody’s help. They need consumers drinking it which means they need to see it in a retailer.

The more partners that we have using our point of sale, which says ‘look for the seal’ and ‘buy Indie,’ the better.

‘Just support your local independent breweries’ would be our message to your readers.

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