Breweries seek government aid in extending credit
Typically, some 63% of beer sales take place in Ireland’s pubs, restaurants and hotels. However in 2020 just 29.7% of beer sales took place in the hospitality sector as the off-trade’s sales share rose from 37.3% in 2019 to 70.3% last year.
The closure of hospitality businesses here drastically hit our beer sector in 2020.
According to the Drinks Ireland|Beer report the Irish Beer Market Report 2020, just published, the value of beer exports declined 17% in 2020, from €305 million to €254 million.
This marked drop in exports reflects a lower international demand for Irish beer as most other key markets endured lockdowns of their own. The most significant fall was in exports to the country’s third-largest beer export market, the US, down by 45%.
Overall, beer production dropped by 13.8% in 2020.
Domestic market
Domestically, the closure of the Irish hospitality sector resulted in a 17.3% fall in total beer consumption in 2020 when compared to the previous year. This led to a 19.6% fall in per capita beer consumption.
Typically, some 63% of beer sales take place in Ireland’s pubs, restaurants and hotels. However in 2020 just 29.7% of beer sales took place in the hospitality sector as the off-trade’s sales share rose from 37.3% in 2019 to 70.3% last year.
The lockdown also impacted the type of beer Irish consumers in chose in 2020. Stout sales made up 29.3% of all beer sales in 2019 but this fell 4 percentage points to 25.3% in 2020. Lager was the main beneficiary of this, growing share 6 percentage points from 63.5% to 69.5% as ale’s beer market share dropped 2.1 percentage points from 6.2% in 2019 to 4.1% in 2020.
The report points out that in 2019 some 80% of stouts and ales were sold in the hospitality sector. But in 2020 hospitality’s share shrunk to just 43%.
Non-alcoholic beer enjoyed a fractional increase of 0.1% to 1.1% of the beer market.
However while beer’s share of the overall alcohol market may have shrunk, that of wine increased by 5.0 percentage points to 32.3% and spirits by 1.5 percenatage points to 22.3% last year. Cider’s share fell 0.8 percentage points to 6.6%.
Beer industry seeks Government aid
Coupled with this fall in Irish beer sales, brewers have also provided extensive financial support to their hospitality customers, points out the report. Breweries extended high-value credit lines which provided life support to many pubs and bars in 2020. The brewing sector also provided pubs with reimbursement for all unsold kegs as well as the disposal of that unsold beer.
As a result, the beer report states that, “The sector also requires additional financial aid to support the coverage of costs associated with the uplift, disposal and writing-off of out-of-date beer”.
The beer sector further requires a change in the duty system allowing for excise to be recovered in a manner similar to VAT on bad debts.
The decline in beer sales has repercussions for the government too.
In his introduction to the report Peter Mosley, Managing Director of the Porterhouse Brewing Company and Chair of Drinks Ireland|Beer, noted that, “Beer was not the biggest contributor to excise receipts to the exchequer within the alcohol market. Indeed, it was not even the second-biggest contributor with an estimated collection of €351 million paid to the exchequer in 2020, a fall of €70 million compared to 2019″.
This is reflected in the Exchequer’s alcohol take from beer dropping from €430 million in 2018 and €421 in 2019. As a result, overall excise on alcohol dropped 2.4% to €1.20 billion in 2020 from €1.23 billion in 2019.
As home consumption increased, excise receipts for wine grew by 12.4% from €378 million to €425 million while spirits excise increased by just €1 million to €374 million. Excise on cider was down 11.7% to €53 million from €60 million.
He continued, “As a drink that’s mostly popular in our pubs, the sector has been profoundly impacted by Covid-19. And with hospitality businesses remaining closed, the challenges continue for our sector in 2021″.
Jonathan McDade, Head of Drinks Ireland|Beer, commented, “As the vaccine roll-out continues, the beer sector hopes to be able to see consumers back in pubs later this year. But it’s vitally important that it receives additional supports from Government to allow it to endure the extended lockdown, which continues”.
Allowing for excise to be recovered in a similar manner to VAT on bad debts would prove invaluable in the beer industry’s continuing to support the provision of credit to the hospitality sector, he added.
