PBD tax breaks 'distort market'
Tax breaks for microbrewers are creating massive unrest among the bigger players in the industry.
Leading brewers claim Progressive Beer Duty (PBD) has created an unlevel playing field - and question why similar tax breaks haven't been offered to pubs.
While PBD has led to more local beers appearing in pubs, many brewers fear some microbrewers are not reinvesting in their brands, threatening the image and quality of cask ale.
Simon Loftus, chairman of family brewer Adnams, said the current level of PBD had created a "bizarre distortion of the market" as it has allowed some microbrewers to heavily discount their beers against bigger regional and family brewers' brands.
"What is absurd is that brewers like ourselves, Timothy Taylor and Fuller's are losing sales simply because of discounts put into the market by microbrewers," said Mr Loftus.
"If they were selling the same amount in an equal market we would have no problem. We welcome diversity in the market but we would argue that the market's survival is dependent on category champions."
Currently brewers that brew under 60,000 hectolitres a year are given duty relief and Mr Loftus argues the level of relief allows the smaller players to offer anything up to £45 per barrel in discounts.
"We don't have a problem with start-up brewers being allowed this level of duty relief for something like three years, but anything over that is just ridiculous," he said.
Charles Dent, managing director of Timothy Taylor, claimed the Keighley, West Yorkshire-based brewer had lost between 50 and 100 barrels a week over the last two years as a result of PBD.
"It is the most amazing distortion of a market you would ever imagine - and for the benefit of only two per cent of the market," he said.
"Why should microbrewers be given this kind of tax relief? Why not pubs? They're just as important to the community and have been around a lot longer."
But Keith Bott, chairman of the Society of Independent Brewers (SIBA), rejected these criticisms.
"When we're accused of mass undercutting of the market I have to say this is not coming through in our industry report.
"The use of PBD to discount is not a big priority for our members," he said.
Alistair Darby, managing director of Wolverhampton & Dudley Brands (W&DB), called for a review of the current system.
"We're not against the idea of PBD. I see the logic in it. But I can also see if you are an Adnams or a Timothy Taylor how the thing must be pretty galling.
"PBD has led to an explosion in start-up breweries and this has led to a view that the success of cask ale is down to burgeoning choice. Our firm belief is that quality always comes before choice."
The Drinks Editor says:
As cask ale lovers look with disgust at the mass-selling national lager brands, the last thing they want is to see cask ale sold in the same way.
And yet these same people yearn for a return to the days when cask was king. Sorry ladies and gents, but you can't have it both ways.
The growth of microbrewers is great to see. However, the future of the category in pubs is dependent on the continued growth of the "category champions" - such as London Pride, Marston's Pedigree and Greene King IPA. These are the beers with the marketing muscle to compete with the big lager brands.
Perhaps instead of calling for a massive reduction in PBD the industry should look to make the situation more equitable and spread the same level of duty relief out over more barrelage among the microbrewers.
- What do you think? If you have a view please email nqnzj@gurchoyvpna.pbz or call 020 7955 3715.
What is PBD?
Progressive Beer Duty (PBD) is a government subsidy introduced by Chancellor Gordon Brown in June 2002 to give small brewers tax relief. The qualifying level of output for PBD was raised in June 2004 to include more brewers.
