Australian spirits manufacturers are this week confronting the grim reality of yet another increase to the world’s third highest spirits tax.

The new rate of $101.85 per litre follows a series of especially punishing increases powered by automatic six-monthly indexation to CPI.

Australian Distillers Association chief executive Paul McLeay said the country’s craft spirits industry is united in calling for urgent tax reform.

“There are now more than 600 distilleries across Australia, half of which are located in regional areas,” he said.

“Their future is increasingly being jeopardised by these relentless six-monthly tax increases.

“We say to the Government: enough is enough. Freeze spirits tax at its current rate for two years so that we can work together on developing sustainable policy settings for our industry.”

Spirits & Cocktails Australia chief executive Greg Holland said the latest hike means spirits tax has increased by 16 per cent during the inflationary environment of the last three years.

“This tax is clearly unsustainable for spirits manufacturers, their trade customers, and consumers who are already struggling with the cost of living,” he said.

“We call on the Government once again to freeze this tax at its current rate for two years.

“This temporary measure will take the pressure off our industry and help the Government accomplish its mission of bringing inflation back under control.”

Industry under stress: Cape Byron Distillery

Cape Byron Distillery founder Eddie Brook said small distilleries are unable to pass the tax hikes on to trade and consumers in the current economic environment.

“And we don't have the economies of scale, nor are we growing quick enough to absorb these ongoing costs,” he said.

“As a result, these six-monthly increases really do have the effect of reducing margin in our business at a time when we are already experiencing cost increases across the board, and economic conditions are impacting consumer demand and spend choices.

“It's getting to the point that it is putting such stress on the industry.”

A hostile market for spirits: Starward Whisky

Starward Whisky founder David Vitale said the tax rate was around $64 per litre when his distillery was conceived in 2007.

“Here we are 17 years later and we’ll be paying $101.85,” he said.

“Start-up businesses have a fixed amount of capital available to scale and grow, and every six months that’s compromised by the government giving themselves a pay rise.

“Every dollar increase in excise is a dollar less that we have to invest in scaling our businesses.

“Our sights have to be set on export markets because it’s simply uncompetitive to operate here in Australia.”

Jobs on the line: Never Never Distilling

Never Never Distilling co-founder George Georgiadis said the latest increase is very hard to stomach under the economic conditions confronting distillers in 2024.

“Our margins are already being squeezed as input costs are going up across the board,” he said.

“Meanwhile, revenue is down because consumers have cut their spending on premium Australian spirits.

“We’re already struggling to make that work and then we get slugged every six months with tax increases that are not only swallowing up more margin, but making our products proportionately more expensive to beer and wine again.”

Georgiadis said the latest increase puts Never Never under pressure to further reduce its workforce, having been forced to retrench several employees last year.

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Australian spirits manufacturers have renewed their calls for a freeze on spirits tax increases, as bi-annual indexation continues to fuel inflation and cost of living pressures.

Spirits excise is once again scheduled for increases in February and August of 2024, having already risen in line with the Consumer Price Index (CPI) by a total of 12.5% in under two years.

Spirits & Cocktails Australia chief executive Greg Holland said spirit manufacturers cannot stomach further increases to this tax, which is the world’s third highest at $100.05 per litre of alcohol.

“The Federal Government’s own data is starting to bear out the folly of this outdated excise regime,” he said.

“Despite a record high tax, the December budget update revealed a projected $170 million shortfall in revenue from spirits excise in 2023-24.

“This is clear evidence that the tax is making spirits unaffordable for consumers. Continued increases would be nonsensical; consumers, manufacturers and the Government all lose out to this inefficient tax.”

Furthermore, the Australian Bureau of Statistics’ September Quarter results found spirits, powered by bi-annual excise increases, was the largest contributor to an annual CPI increase of 4.9% for the alcohol category.

Holland said this demonstrates the extent to which CPI indexation is actually fuelling the inflation problem that the Federal Government is purportedly trying so hard to address.

“This highlights that the rising costs of alcohol, fuelled by excise increases, is being felt by hardworking Australians.”

Australian Distillers Association chief executive Paul McLeay said the 600 distilleries spread across the country need urgent respite from this punitive tax.

“The average Australian would be appalled if they knew just how much of the hard-earned money they spend on spirits goes directly to the Government,” he said.

“Spirits tax above $100 a litre should be a barbecue stopper this summer.

“We are calling on the Government to freeze this un-Australian and unbearable tax so we can work together to develop policy settings to support the sustainable growth of this promising industry.”

The early bird registration discount for ADI's 2024 International Spirits Competition will end in about two weeks on February 2, 2024. As a reminder, as members of the Australian Distillers Association you can also save an additional $100/spirit when you use the discount code 2024ADA.

Note: Any spirits not yet imported into the US will need to complete a free FDA Prior Notice and our free COLA Waiver application, details of which will be provided after registration.

Members can find all the details about the competition by following the link below.

International Spirits Competition

Members would be aware that the Australian Distillers Association is in the process of reviewing the Rules and Constitution of the Association. This is hoped to be finalised early next year and presented to members at this time for your consideration.

In light of the impending proposed changes, the Annual General Meeting will be held early next year. At this time, we will produce an annual report that covers the highlights of this year and the challenges for the year ahead.

New Vice President

At the December Board meeting of the Australian Distillers Association, Cameron Syme resigned as Vice President and a member of the board. The Board thanked Cameron for his 20 year contribution to the industry and his passion and commitment to the category.

The board filled the vacancy with David Vitale. David is the Founder of New World Whisky Distillery (Starward). For nearly two decades David has been at the forefront of the global craft spirit movement building Starward into one of the most internationally recognised New World whisky brands. Having lived in America for the last 4 1/2 years, David is a huge advocate for Australian craft spirits abroad, and the unique opportunity Australian distillers have on the world scale.

David Vitale, Vice President with CEO, Paul McLeay

Thank you to Members who have engaged with their local MP. The most effective voice we have is when local distillers engage directly with your local representative. Many members have written to their MP or invited them to their distillery. This is the most important part of our campaign for fair and sustainable tax reform.

Hon. Richard Marles MP, Deputy Prime Minister (at time of his visit, he was Acting Prime Minister) visited Anther Distillery in Geelong with a group of Australian Distillers from Victoria.

The meeting provided a great opportunity for the industry to brief the Acting Prime Minister on the challenges and opportunities facing the industry, within the physical context of a working distillery. 

On 15 November, the CEO met with Brian Mitchell MP & Senator Perin Davey, the co-convenors of the Parliamentary Friends of Australian Spirits group to discuss options for Parliamentary Friends group functions when Parliament resumes in 2024.

On 21 November, Spirits & Cocktails Australia convened a group of members and representatives of Australian Distillers to participate in a policy briefing with the Minister on the industry’s trade and tourism potential. Participants included Will Edwards (Archie Rose), Satya Sharma (Lark), David Vitale (Starward), Cameron Mackenzie (Four Pillars) and Steven Magarry (Sydney Rum Company). The meeting was held at the Archie Rose manufacturing plant in Banksmeadow. 

Also on 21 November, the CEO attended an event for SA Labor, which was funded by SCA. The event was co-hosted with Distillers South Australia and attended by Nicole Lestal from SCA and distillers from Never Never, Imperial Measures, Seppetsfield Road and 5Nines Distilling. The guests of honour included the SA Treasurer and Attorney-General. 

The Royal Agricultural Society of NSW (RAS) will venture into the world of distilled spirits for the first time since 1981 next year as it launches its inaugural stand-alone Sydney Royal Distilled Spirits Show.

Under the guidance of Australian drinks industry veteran, Stuart Gregor, the competition will support the growth of the Australian spirits and drinks industry by providing producers with the opportunity to benchmark their products at a national level and go under the tastebuds of some of the best in the business. The Sydney Royal Distilled Spirits Show will join the RAS’ calendar of prestigious wine, dairy and fine food competitions which include the Sydney Royal Wine Show and Sydney Royal Beer & Cider Show.

Set to take place in September 2024 classes will include Brandy, Cane Spirit, Gin, Liqueur, Rum, Vodka, Whiskey, Alternative Distilled Spirits, Non-Alcoholic and a stand-alone Ready to Drink (RTD) class, with fifteen Champion trophies up for grabs.

Taking advantage of SCA bringing State Presidents together for the Parliamentary Inquiry Workshop, State Presidents held an informal catch up to discuss State issues. Weather conditions impacted on the attendance. Presidents agreed the new Constitution and an MoU between the ADA and states was an important and worthwhile project to pursue as soon as practicable because it would lead to increased member benefits.

In November, Australian Distillers President, Holly Klintworth, and Treasurer/Secretary, Stephen Parry met with the Chair of Spirits & Cocktails Australia, to discuss the MOU between the two associations.

Both parties agreed the document is fit-for-purpose but that enhancements could be made to better describe appropriate behaviour and conduct between the parties when embarking on joint activities. The Chief Executive of Australian Distillers and Spirits & Cocktails Australia will prepare a draft annexure to the agreement for approval at the first meeting of each Board in 2024.

Alcohol Beverage Australia held their Annual General Meeting and Council Meeting. The Chief Executive of ABA confirmed that the current Board had been elected at the previous AGM for a period of two years. A presentation was given by the Sydney University PhD candidate, who provided an update on the progress of his research, which is being funded by ABA. Members committed to assisting him with data and review, as needed.

ABA members engaged with the Assistant Minister for Health, Hon. Ged Kearney MP, in response to a media comment regarding possible exploration of cancer warning labels for alcohol beverages. The Minister for Health, Mark Butler MP, has subsequently publicly stated the Government has no intention of pursuing cancer warning labelling.