A recent report on European brewing's impact on the EU Economy, 'The Contribution made by Beer to the European Economy', makes for interesting reading. Commissioned by the Brewers of Europe, it details the state of brewing in each of the EU27 member nations, as well as Turkey, Croatia, Norway and Switzerland. Trade publication Drinks Industry Ireland report on what the research has to say for the Irish beer market.

While most of us enjoy drinking the stuff, beer also has a not inconsiderable role in the economy of Europe. Cash-strapped politicians in the UK and Ireland may find themselves tinkering with taxes on it at their peril. A new report on the European beer market from Ernst & Young, commissioned by the Brewers of Europe, finds that beer contributes EUR57bn (US$84.87bn) to European governments' coffers each year.

Indeed, Europe remains the world's largest beer producer, brewing 427m hectolitres a year to China's 393m and the US's 234m.

The report also indicates that beer brewing is on the increase with the estimated number of breweries up 25% over the past three years in the region, to 3,733 this year. And the good news for our own GDP is that Ireland ranks third in terms of beer exports as a percentage of production by country, after the Netherlands and Belgium.

Ireland exports 4.5m hectolitres and imports 872,000 hectolitres of beer every year. In 2008, Irish breweries produced 8.8m hectolitres of beer, slightly less than 2007's 9.3m figure or 2006's 9.4m figure. As a result, Ireland remains a net exporter of its beer with over half - 51% - going outside the state. We therefore compare well against leading major exporters such as the Netherlands, with 62%, and Belgium with 57%. In fourth place lies Denmark which exports 45% of its beer.

This puts our beer export figure way up there when the average export to production percentage for all the countries in the survey rests at just 15%.

But we enjoy beers from other countries too. At 17%, Ireland sits above the 13% EU average for the amount of beer imported as a percentage of total consumption. Luxembourg tops the list at 43% while Turkey imports less than 1%.

Consumption patterns

Beer consumption has diminished from 5.5m hectolitres in 2006 to 5.2m in 2008 with annual per capita consumption of around 98 litres today. Most beer is consumed in the on-trade but there has been an acceleration of the previously apparent trend from on- to off-trade channels.

Beer remains the most popular alcoholic beverage here, although consumption is shifting from beer to wine.

"Although most beer is still sold in hospitality venues, consumption of beer in pubs and restaurants has declined in recent years," notes the report, "Pubs are the dominant outlet channel for beer in Ireland but in recent years beer sales in the hospitality sector have decreased. In 2007 consumption in the Irish hospitality sector decreased by 4% while at the same time the off-trade sales increased by 8.5%.

The report quotes Irish Brewers Association figures when it states: "Around 69% of total beer sales is sold on-trade while 61% of the beer consumption in 2007 consisted of draught".

At that time, bottled beers accounted for 15% of sales while canned beers accounted for 24%. Lager continued to dominate the beer sector with a 61% share to stout's 33% and ale's 6%.

The report also notes that some 3.6m hectolitres are being sold by Irish pubs, restaurants etc.

"With a consumer price of beer at EUR8.54 per litre (excluding 21.5% VAT), consumers are estimated to spend EUR2.5bn (excluding VAT) on beer in pubs and restaurants. Turnover per employee in the Irish hospitality sector is EUR57,400 a year."

Retail sales of beer account for 31% of the total or 1.6m hectolitres. With an average consumer price of EUR3.49 per litre (excluding 21.5% VAT), net consumer spending on beer in retail is estimated at EUR557m.

"Because turnover per employee is estimated at EUR348,500, this means 1,300 people working in the retail sector owe their jobs to the brewing sector," the report concludes.

Beer revenues

The report notes that Ireland has one of the highest excise duty rates on beer in Europe.

Annual European beer consumption amounts to 394m hectolitres having a value of EUR124bn (including VAT).

About 40% of consumption is via the on-trade, equating to nearly 72% of the value of total European beer sales.

Across Europe, beer contributes EUR57bn to Europe's national coffers each year.

The contribution to the 27 EU member states (plus Turkey, Croatia, Norway and Switzerland contained in the report) is largely the result of VAT and excise tax.

The other third of the EUR57bn total comprises social security contributions and income tax from those employed in the production, distribution and retailing of beer.

The 'production and sale of beer' is also responsible for some 2.5m jobs across the 31 countries, representing around 1% of all jobs in the EU27.

For each job offered in the European brewing sector, one job is generated in retail, two in the supplying sectors and more than 12 in the hospitality sector. This last sector accounts for 73% of the 2.5m employment total.

"Governments would be wise to value those facts when discussing levelling additional burdens such as tax increases on the shoulders of Europe's brewers," warned BoE's secretary Rodolphe de Looz-Corswarem at the report's launch.
"The Brewers of Europe report, together with our own data, gives an impressive overview of our industry," stated Irish Brewers Association senior executive Stephen Lynam, "It shows how important the brewing sector is to the Irish and European economy. Under every heading - jobs, purchases, exports, excise, VAT, income taxes - we contribute greatly and pull our weight.

"However, the report also shows the great challenges we face. Ireland's beer industry faces punitive excise rates that are amongst the highest in Europe. Coupled with the deep recession that we are operating in and the considerable loss of trade across the border, it highlights how important it is for the Government to allow our industry survive.

"The livelihood of tens of thousands of Irish people depend on a strong brewing sector."

This feature initially appeared in the October issue of Drinks Industry Ireland.