CONTRIBUTOR’S
CPI increases choke innovation in premix spirits
PANEL
A
ustralians are an innovative people and we excel at finding ways to make the most of our warm climate, our beautiful beaches and our great outdoor spaces – just consider the esky. Another great Australian innovation is the premixed spirit (or RTD). The Australian spirits industry created this product as a way for our consumers to access their favourite spirit when out and about enjoying the great outdoors or when visiting friends. As previously reported in National Liquor News, 2017 was a standout year for growth in the premix spirits portfolio and in 2018 premix spirits continued to experience resurgent sales and strong growth. While the outlook for 2019 is slightly tempered, the outlook continues to be strong. There are a number of reasons why premix spirits are so popular. It is simpler and more convenient for a consumer to purchase, serve and consume a pre-mixed spirit beverage in a can or bottle than it is to purchase and mix a free-pour beverage, particularly when they are consuming away from home. As with other consumer goods, ongoing market and product innovation often generates new market segments. Producers in Australia have responded to consumer demand for new and different products which have often consolidated and built market share. Spirits & Cocktails Australia’s members continue to lead the way when it comes to new and exciting products. In addition to the ever popular Jim Beam and Cola and Jack and Cola, we are seeing new flavour combinations such as Jack and Ginger as well as moves into lighter premix styles with gin and vodka like Gordon’s Premium Pink Gin and Soda. While the Australian spirits industry continues to invest heavily in product and marketing innovation and, more importantly, in the many Australians who serve, sell and market our products, on 1 February we were whacked yet again by the six monthly CPI increase to one of the highest alcohol tax rates in the world. Imagine what more the industry could achieve with a little support from Canberra. In November 2017, the UK Chancellor put a
freeze on alcohol duty. Ahead of the freeze, the Scotch Whisky Association presented modelling to HM Treasury which concluded that a more competitive duty rate for spirits would grow government revenue. This modelling showed that a freeze would grow spirits revenue by £2m. Real-world data from HM Revenue and Customs has shown that the industry has exceeded the most ambitious projections. The 2018/19 year-to-date (April to January) spirits
receipts are £3,324m, which is £336m (11.2 per cent) higher than the same period in 2017/18. Back in 1817 Benjamin Franklin famously wrote: “In this world nothing can be said to be certain, except death and taxes.” If the six monthly CPI increase to spirits excise continues we risk the slow death of the local production of premixed spirits as the increasing tax burden eats away margins and chokes investment and innovation.
ALEC WAGSTAFF, CEO, SPIRITS & COCKTAILS AUSTRALIA Alec Wagstaff joined Spirits & Cocktails Australia in September 2016 bringing public policy and communications experience in the FMCG and telecommunications industries. Spirits & Cocktails Australia is an incorporated association with a vision to promote and protect a spirits sector which improves Australia’s drinking culture to create social and economic opportunities for future generations.
NATIONAL LIQUOR NEWS APRIL 2019 | 29
