Comment - Carlsberg, Greene King See Small Beer Tax as Big Deal
Beers at or below 2.8%abv will begin to benefit from a tax break in the UK from the start of October, but how big is the opportunity?
Carlsberg said this week that it will lower the abv of its Skol lager in the UK to 2.8%abv, from 3% previously. Greene King, meanwhile, has been trialling Tolly English Ale at 2.8%abv, while J W Lees is producing a Golden Lite lager also at the magic 2.8%. It's no coincidence that, from 1 October, the UK Government is set to enact its small beer duty scheme, which will offer a cut-price rate of tax on beers at 2.8%abv or under.
Beers above 7.5%abv will, meanwhile, pay more tax, unless they qualify for reduced rates associated with small-scale production. The Government's stated aim is to "tackle problem drinking by encouraging industry to produce, and drinkers to consume, lower strength beers".
According to the British Beer & Pub Association (BBPA), the tax cut on lower strength beers is equivalent to GBP0.35 per pint, in a country where the average price of a pint is just over GBP3.
On the face of it, this is all makes sound sense. Brewers will save on tax and consumers will have more change in their pockets. On a political level, the drinks industry as a whole has moved quickly to push the idea that it can help consumers to stop drinking so much by cutting alcohol volume in drinks, rather than cutting the volume of drinks consumed. It is a strategy that the current government appears to accept, at least for now, as it seeks to engage with industry to promote responsible drinking.
There is friction, though, with the 2.8% threshold slapped on beer. Mainly, there is widespread uncertainty within the trade about how well consumers will take to lower strength beers. The big question for brewers is whether they can maintain enough taste in a beer at just 2.8%. Some brewers that I have spoken to think that it is a big ask.
When the Government announced its plan, earlier this year, many of us journalists had to ransack our addled minds to think of any beers below 2.8%. Molson Coors' Carling C2, at 2%, is one example, but it's unclear how successful this innovation has been.
While the industry is broadly supportive of any Government plan to cut tax on beer, however peripheral, the BBPA is keen for ministers to increase the limit. "We’d now like to see a move to raise the new threshold from 2.8 to 3.5%, which would benefit many more beers, and add a huge boost to lower-strength drinks," said the BBPA's CEO, Brigid Simmonds.
From the point of view of taste and encouraging more beer drinkers to cut down on alcohol content, the BBPA's stance looks more sensible than the current situation. Perhaps the taxman is not keen to lose that much extra revenue?
For now, having been handed fertile land, brewers are working on the basis that 'if you build it, they will come'. I would expect some success, too, particularly if brewers can accurately gauge when people most want weaker beer. That said, there may well be a low ceiling.
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