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Tax Cuts To Serve Up Future Growth In The Beer Market

According to Breweries & the Beer Market, a new Market Update from market intelligence provider Key Note, the UK beer market is estimated to have grown in value by 1.5% in 2013.

While the estimated growth seen in 2013 is a positive factor, the UK beer market has remained extremely challenging in recent years, as a result of significant annual increases in alcohol duty through the beer duty escalator — which imposed inflation plus 2% increases in duty each year — combined with depression in consumer expenditure during the recessionary and post-recession periods. While consumer expenditure is on the rise and beer duty has been cut in recent years, trading conditions remain tough, with a continued decline witnessed in beer sales in the UK, in terms of volume, despite recording value growth in 2013.

The removal of the beer duty escalator in the 2013/2014 financial period was a significant boost to the industry, removing the threat of any further significant inflation in the price of beer. Furthermore, in 2013 and 2014, the Government moved to cut the cost of duty for beer — at variable rates depending on strength in terms of alcohol by volume (ABV) — relieving, to a certain extent, the significant upward pressure on beer prices in recent year. Nevertheless, with the escalator in place since 2008, prices have still risen considerably over the past over the 5 years. This has been particularly damaging to UK pubs, where cost are generally higher than the competing take-home trade market. With consumers increasingly favouring the lower costs of alcohol available in the take-home trade during a period of economic depression, the rise in duty only served to exacerbate this issue until its abolition.

Due to the recent cuts in beer duty and no further major tax increases, combined with economic recovery across the UK, the beer market is forecast to see growth over the next 5 years, albeit at fairly subdued rate. Certain sectors of the market are, however, expected to show strong growth, such as craft beers, fruit beers and lagers, and lagers infused with various spirits.

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