SIBA Board Report

SIBA Chief Executive’s Board Report May 2020

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Contents 1. Chief Exec introduction 2. Campaign objectives • Covid 19 • Peacetime issues – update • Future of SIBA campaigning 3. Member support and communications 4. BeerFlex update 5. FFD 6. Industry Restart 7. SIBA competitions and Regional Meetings 8. How you can help

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1. Chief Executive Introduction I hope that you and your families are safe and well and fairing as well as you can in these uncertain times.

This board update aims to give you the key pieces of information about what SIBA has been doing since the last Board with particular focus on what we have been doing during Covid 19.

It seems obvious to say it, but our industry is never likely to ever be the same again.

Through all the adversity what has kept me going are the positives.

Team SIBA has stepped up massively to lobby Government, to chase down debtors and call out bad practice; to communicate clearly with the brewing industry and to lead the way. I’m grateful for such a great team of people behind us – they have made it all happen.

The industry itself has also adapted swiftly and this may lead to long term change. Securing the ability for brewers to sell directly to the public in the first week of lockdown may have long lasting implications as brewers realise the margins to be made on direct small pack sales are much better than can be enjoyed elsewhere.

The Pulling Together and Beerishere initiatives are helping brewers who do small pack create some cashflow and I hope that consumer behaviour ‘sticks’ to buying direct.

But I’m not in any position to forget about the 65% of you who are mothballed. I’m hugely concerned that cask, which was in crisis before Covid, now might be on ‘life support’, if you forgive me for using the phrase.

There are immense challenges ahead and I hope that SIBA can continue to play a major part in addressing those challenges. Not every brewery and not every pub will survive and that I am certain of.

But as ever, the role of a good trade association is to give everyone at least a fighting chance.

Our top 10 key achievements over the last 6 weeks 1. Daily email briefings to all breweries in the UK – not just SIBA members 2. Convinced the Government to allow breweries to remain open for takeaways and deliveries, with specific mention of breweries within the guidance 3. Lobbied HMRC and received clarity over beer disposals including cash payments, wholesalers and crediting duty 4. Weekly call with the Small Business Minister, Head of Business at Number 10 and regular briefings with DEFRA, BEIS and Treasury 5. Calls with Secretary of State for Business on industry issues 6. Launched (with CAMRA) Pulling Together and (with Simply Hops) Beerishere.org 7. Generated significant media coverage with industry survey to raise the profile of the issues through joint open letters, press releases and interviews. Multiple radio, TV interviews and national and trade press 8. Called out and rectified bad practices within the industry including with Wetherspoons and LWC 9. Chased and received payment of majority outstanding BeerFlex invoices 10. Despite the circumstances, raised significant goodwill about SIBA across the industry.

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2. Campaign objectives Covid 19 Since March, SIBA’s efforts have been squarely focused on the current Covid-19 crisis. Our role has been to: • • •

Lobby for Government support for brewers Keep members and non-members updated and informed Take up issues on brewers’ behalf and seek clarification

With the announcement on 20 March 2020 that the Government was closing pubs, bars and restaurants, SIBA successfully lobbied the Home Office and HCLG to allow breweries to remain open to sell beer through takeaways and deliveries.

SIBA’s campaign has been on six key areas: 1.

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Suspend beer duty payments in March and April and for the following quarter Extend business rates support to include breweries Relax the licensing laws to allow breweries without an off-licence to sell beer directly to consumers Establish support for starting up production once the restrictions are eased Work closely with other trade bodies BBPA, CAMRA, UKHospitality and the BII on a ‘One Voice’ approach.

Work with other players in the supply chain to resolve their issues, too.

Beer Duty SIBA worked with industry partners to seek the suspension of beer duty payments. This included direct lobbying of the Treasury, joint letters with other organisations and appeals through the press. Despite this the Chancellor decided not to do so. Instead those brewers in financial difficulty have been directed to the Time to Pay helpline. Several members have experienced challenges with Time to Pay and we have been in regular contact with HMRC to resolve these issues. This includes having money taken despite agreeing arrangements with HMRC and the wrong amount been debited. One brewer had ten times the incorrect amount taken two months in a row.

We have been privately advising brewers on the advice of HMRC to simply cancel their direct debits with HMRC. We cannot do this publicly, however as it may constitute incitement to tax avoidance.

Financial measures inc Business Rates The Government announced a series of financial measures to assist businesses impacted by the Covid-19 crisis.

This included exempting retail, leisure and hospitality businesses from business rates and providing a cash grant of £25,000 to those with a rateable value of less than £51,000. Unfortunately, breweries, as primary supply manufacturers, are not included within this definition.

As local authorities have some leeway, we have encouraged breweries to apply and several that have taprooms or shops on site have been successful. We have lobbied the Government to extend the definition to include primary supply manufacturers so that all breweries can have access to this support. This includes meetings with the Business Team in Number 10, the Small Business Minister and officials at the Business Department and within HM Treasury.

We have weekly exchanges with the Small business Minister and are in regular WhatsApp contact with the BEIS secretary of State.

Smaller breweries in receipt of Small Business Rates Relief have received a £10,000 one off grant. There has been a few cases where breweries have not received this because their landlord pays the Business Rates and we have been campaigning for changes to the scheme.

We are working on a ‘blueprint’ with BEIS that will allow local authorities to more easily identify and get money to breweries using the SCAT code system.

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Licensing laws We have made the case to the Home Office for licensing laws to be temporarily relaxed to allow breweries that do not have an off-licence to be able to sell beer directly to the public. Working with Mike Hampshire we prepared options for the Government to do so. The Home Office initially rejected our proposals but we have been working with Number 10 and the Business Department on making the case again. In addition, we have been providing clarification and guidance to our members on local licensing issues as they arise. Around Âź of SIBA members cannot sell directly to the public under the licenses they have.

Start up support In recent weeks, the Government has begun to focus on starting up the economy. SIBA has ongoing conversations with officials on the process and logistics (what needs to be in place and in what order), timing (how long breweries need) and support (either through extending the existing financial measures such as flexible furlough or new initiatives). While SIBA are still developing its proposals, our conversations have included start up grants and beer duty holidays. We have helped the Business Department to draw up case studies to understand the impact of Covid19 on the industry.

Over the next week as the Government announce how lockdown provisions will be relaxed, SIBA will be monitoring closely and making recommendations to Government on both the practicalities of how our industry works and what we require by means of additional support.

The UK has brewing capacity for much, much more than will likely be required by pubs and the need for continuing direct support from Government is clear.

Beer Duty and destruction in cellar SIBA has been working with the BBPA and HMRC to develop policies for the disposal of spoilt beer in pub cellars and in breweries. This includes much needed clarification for brewers on claiming duty, beer in wholesalers and crediting pubs.

The BBPA have published their latest guidance on 1st May. We made requests to work the BBPA on making this guidance a joint, pan industry proposal but this was not forthcoming so we are now working on our own, more practical version. We have submitted written evidence to the Business Committee for its inquiry into the impact of Covid-19 on business and have prepared evidence for the All-Party Group on Hospitality’s inquiry on the pathways to recovery.

HMRC have made clear that beer duty reclaim would normally be deducted from the next beer duty payment. After intense lobbying HRMC have confirmed that brewers can claim duty back on destroyed beer as cash, rather than on your production account.

SIBA continues to support its members through the lobbying of Parliament and MPs, including Written Questions to Ministers, meetings with MPs and letters on behalf of members.

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“Peace Time” issues - update Spring Budget In preparation for the Spring Budget, SIBA submitted a detailed submission asking the Chancellor to deliver a package of measures to create certainty and growth in the independent brewing sector. This consisted of: • • • • • •

Positive reforms to Small Breweries’ Relief which will secure sustainability, growth and jobs in the market Commitment to at least a freeze in beer duty for the duration of this Parliament Mitigations for small brewers implementing the deposit return schemes in Scotland and England, Wales and Northern Ireland A radical and wholesale review of business rates An alcohol duty review that protects the UK’s national drink, beer Proper resources for HMRC enforcement

SIBA also prepared a detailed paper on SBR and presented this to Treasury officials. SIBA also supported a One Voice letter and one from the Long Live the Local Campaign on beer duty.

Since the December election, SIBA has been targeting new MPs and held 15 face to face meetings to discuss SBR. We also briefed MPs ahead of a Westminster Hall Debate in February in which several MPs spoke in favour of positive reform.

The Chancellor announced in his Budget that beer duty would be frozen. He also said that the results of the SBR review would be announced in the Spring and that a full review into alcohol duty would be in the summer along with a review of business rates. Due to Covid-19, the Government has since confirmed that the consultation on alcohol duty and business rates will take place in the summer and further information on the SBR review will be announced in due course.

Scottish Deposit Return Scheme In March, the Scottish Government announced the outcome of its consultation on the Deposit Return Scheme (DRS).

Despite significant lobbying by SIBA and Scottish brewers, including a joint letter signed by 26 SIBA members, a petition to the Scottish Minister, meetings with MSPs and visits to members’ breweries, the Scottish Government did not make changes that addressed our concerns.

The main changes to the scheme are: • • •

The Scheme will go live in July 2022 instead of 2021 The registration fee has increased to £360 For producers with an annual turnover of £85,000 or lower, there will be no registration fee

The regulations have been laid in the Scottish Parliament and after 54 days there will be a vote to confirm them.

Ahead of the Environment Committee meeting on 29 April, SIBA produced a briefing outlining our continuing concerns especially in light of Covid-19. This included: • • •

At this time, small breweries are at a critical crossroads because of the Covid-19 crisis and have lost 80% of their sales and will take a long time to recover if they do so at all.

The Scottish Government has not addressed the concerns that brewers have raised but increased the registration fee from £209 to £360 and set any exemptions far too low, so small businesses have to pay the same as Coca-Cola and Heineken.

There are no guarantees that the Scheme Administrator, which will be dominated by Global producers, will take account of the needs of small businesses.

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The Environment Committee signed off the proposals and they will now continue to a confirmative vote in the Scottish Parliament. The Cabinet Secretary has indicated that they may be willing to shift on the timetable in light of the Covid-19 outbreak but believes it important to introduce the regulations now so that businesses can prepare.

SIBA has also held discussions with the CMA on the implications of the Scheme. However, it is very unlikely that the regulations will not pass and SIBA should now concentrate on the formation of the Scheme Administrator. While the Scottish Government will make the final decision, a proposal has come forward from BBPA, BSDA, AG Barr, Coca Cola, C&C and Highland Spring to form the Administrator. There will likely be a cut off to become a member of the Administrator (1% sales is likely so SIBA may not qualify) and membership would include a financial commitment to fund the C. ÂŁ28m start-up costs. There will be a strategic advisory board which will include views from smaller producers.

Westminster Deposit Return Scheme A DRS scheme for England, Wales and Northern Ireland is proposed as part of the Environment Bill which is currently at the Committee Stage in Parliament. SIBA has made representations on members’ behalf. During the Second Reading we sent a briefing to every MP and have proposed two amendments at Committee Stage to take account of the size of the producer when setting fees and the scope of the scheme and for the Administrator to demonstrate how it will fulfil its duty for small producers. With the Covid-19 outbreak, the legislative process has been suspended.

The timetable is now likely to change, but originally a DRS was expected in 2023, with a public consultation in September 2020 and regulations set out in 2021. SIBA has been having regular conversations with DEFRA officials on the progress of the scheme and is a member of the Producer Forum.

HMRC discussions A meeting was held to discuss beer duty issues with HMRC. This included fraud, the calculation of production figures and beer packaged elsewhere, modern collaborations, merger and acquisition, export and SBR. HMRC agreed to work with SIBA further on these issues.

Northern Ireland SIBA met with 11 brewers in Belfast in January to discuss forming a new campaign group to call on the Northern Ireland Executive to change alcohol laws which prevent them from selling directly to the public. After this meeting one NI brewery joined SIBA and others have expressed an interest.

The Department for Communities held a consultation on liquor licensing laws in Northern Ireland (NI), which SIBA responded to. The Executive now intends to introduce legislation. SIBA held a joint meeting with CAMRA and the Competition and Market Authority to discuss this issue further. SIBA has been working with NI brewers on case studies of taprooms.

Export SIBA arranged a meeting with DEFRA and the Department for International Trade to discuss the British Beer Box initiative that we have been developing jointly with the BBPA. Government officials were lukewarm about the initiative in the meeting, suggesting that funding is highly unlikely be forthcoming. They were only able to offer in market support. However, officials are interested in further discussions on what can be done to support the beer sector.

SIBA recently held a meeting with the Trade Minister, Greg Hands, to discuss the impact of Covid-19 on exports and what support could be provided. He agreed to consider the Beer Box idea.

Tied Pub Bill Neil Bibby MSP has introduced the Tied Pub Bill in Scotland and SIBA has prepared written evidence as part of the call for views.

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One Voice coalition In February the Beer Group hosted a celebration of beer parliamentary reception, where several of our members contributed beer. In March the Beer APPG published a report on pubs in the community.

The Group held its away day at Tiny Rebel brewery, where joint initiatives such as on DRS were discussed.

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3. Member support and communications At the beginning of the Covid 19 crisis we made the decision to totally transform SIBA’s industry engagement strategy. We have given every brewery in the UK, regardless of whether they are a SIBA member or not, the same information in order to give them the best possible chance of survival.

We did this because: 1. Sending the information out to every brewery and supplier is a marginal cost to us 2. We wanted to be a focal point for the industry – bringing us together in this time of crisis 3. Ensure that SIBA has as many brewers as possible to serve ‘on the other side’.

This strategy has been led by social media and our daily news alerts. These daily news alerts may move to bi-weekly or Mon-Wed-Fri alerts in due course and this is kept under regular review by the SMT. The Daily Covid emails: Creating regular personal contact with all independent brewers

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SIBA Covid-19 Brewing Industry survey We’d like to thank members and non-members for taking the time to respond to our first industry Covid 19 survey.

Achieving 282 unique independent brewery responses is excellent and meant that the quality of the analysis was very high. The Brewers Association received around 400 responses to their survey which given the size of the US market compared to the UK market, means our survey data was robust.

Negative impact on the industry • 82% drop in beer sales amongst independent breweries • 65% of breweries have stopped brewing altogether, a further 31% saying it has slowed, 3% saying it has stayed the same, and just 1% saying it has increased • 81% of breweries believe the Government is not doing enough to support independent breweries • 54% breweries have not been able to access any of the existing Government assistance • 64% of brewery staff furloughed • 29% of breweries considering redundancies HMRC ‘time to pay’ arrangements are not working for breweries • 61% of breweries who tried have been successful in accessing the Government’s ‘time to pay’ service • 1 in 10 brewers had money deducted from their accounts in error by HMRC last month Independent breweries adapting to survive • 70% of breweries offering new delivery or takeaway services • 61% of breweries now offering free local delivery to their communities • 55% increase in online beer sales We used some of these key results to create an infographic which could be easily shared across social media, increasing engagement with broader brewer network.

We will be running another survey in the coming weeks as the issues and the priorities change and we need your support once again in filling this in so we can make our points to Government.

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Covid-19 brewing industry impact survey - Media Coverage We achieved some excellent coverage as a result of the survey results and subsequent PR campaign focussed on the huge drop in beer sales. Highlights being pieces in the Telegraph and Evening Standard plus live coverage on LBC Radio, BBC, and Sky News – but also lots of trade and regional too. Some of the press coverage highlights can be found below.

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#PullingTogether – linking beer drinkers with local breweries We worked with CAMRA to launch Pulling Together, an initiative which aims to link beer lovers with the local breweries near them offering local beer delivery or takeaway services. We promoted this service through our above press work, which has helped to drive people to the site and create new business for members.

SIBA are also co-funding a social media advertising campaign to promote the service. As of 21 April when CAMRA sent over the metrics report the adverts had received 16,577 link clicks, a reach of 135,030, impressions are 233,650, at a cost per result of just ÂŁ0.02 per link click (that is extremely good, showing the advert is resonating with people).

Ad preview:

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We are also working with CAMRA on the next phase of this project, the ‘Brew2You’ app, which uses the data from the above database and allows people to search using the app for breweries near them. We are encouraging SIBA member breweries to join up and crucially have agreed with CAMRA that they will promote all SIBA member breweries with the Assured Independent British Craft Brewer seal within the app.

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4. BeerFlex update The team have spent a lot of time in April chasing debt to ensure that brewers can be paid in full for all beer delivered in March.

I am pleased to report that all brewers have been paid in full for all beer delivered on BeerFlex up to date. In the most part in chasing debt we have been successful and from having almost £600k of pubco debt outstanding at the end of March we’ve managed to secure nearly all of this in payment, or in payment plans spreading out into April and May. Some of our smaller customers have been in touch to say that they are currently looking at grants and loans to help their businesses and will pay as soon as they are able but these will not have a material impact on SIBA’s finances.

5. FFD At the last Board meeting the Board authorised SIBA the executive to begin the process of finding a buyer for FFD in light of an expressions of interest being made. Through extensive consultation between the SIBA executive and the FFD board we agreed to open up to offers of expressions of interest outside the two we had already received. A communication was published on the 20th March with a set period for interested parties to express interest, sign a confidentiality agreement and receive a memorandum containing information pertaining FFD. One party remained at the end of that process and negotiations began.

These negotiations have subsequently stalled due to the Covid19 crisis and the FFD Board have effectively ‘mothballed’ the company to ensure the long term survival of the company.

We will update members in due course when there is an update to give.

6. Industry Restart Now the bulk of initial lobbying activity is somewhat settled, we are increasingly focussed on industry restart and how to ensure things can return to some form of normality safely. We are working with other trade associations on the protocols for how pubs may open.

A simple reality exists in that for some pubs, adhering to social distancing measures may simply not be possible for financial and or/operational reasons. Either with half the tables and chairs removed you won’t get the throughput therefore it makes no sense to open or your premises (if less than say 150sq m) are not viable to be adapted to include social distancing measures.

Public opinion on their comfort level of visiting a pub will be key. National surveys vary and CAMRA is conducting a survey of its members to understand attitudes. For those reasons we need to be cognisant that pub volumes will not be as they were and competition for lines will be immense.

I have written to all of the Chief Executives of the major pub groups encouraging them to work constructively with SIBA and its members to ensure there are local beers on the bars and have received positive responses. I have also written to the Prime Minister and Government departments highlighting to them the threat posed by the global beer companies to us and the predatory tactics they will use.

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7. SIBA competitions and regional meetings We have taken the decision to cancel all SIBA regional competitions for 2020/21. In their place we are exploring with the competitions committee the idea of a ‘digital’ competition to find the UK’s best beer in lockdown.

8. How you can help You as independent brewers can help our industry and our campaigning by: 1. Keep reading SIBA’s regular emails and tweets for the latest information on Covid 19 2. Email membership@siba.co.uk if you have a query, or a priority you think we should focus on 3. Fill in our calls for evidence including the next SIBA industry Covid survey. These help us inform our policymaking and give us an evidence base we can take to Government

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PO Box 136, Ripon, North Yorkshire HG4 5WW Tel: 01765 640 441 Email: riponoffice@siba.co.uk

16 www.siba.co.uk