David Grant, managing director of Moorhouse’s Brewery in Burnley, Lancashire, explained that some micro-brewers are using Progressive Beer Duty (PBD) to sell beer at “rock bottom prices rather than invest for the future”.
PBD, which was introduced in 2002, allows small breweries to pay less tax on their beer to help them compete.
“Cask ale is the only growing sector of British brewing, but life is getting even tougher with now more than 1,200-plus brewers in the market fighting for bar space, while pubs close at more than 20 a week,” said Grant. “This is leading to an unsustainable market for some brewers. But quality and innovation is the way forward, not price slashing.”
“This approach is disastrous for the longer term, leading to poor quality. It may mean a brewer survives for another month, but this is unsustainable. Cask ale is reduced to the status of a commodity. Even the consumer does not benefit. The reduced price is rarely passed on across the bar.”
Grant said that this practice is not across the board, but urged those who are guilty of undercutting prices to stop.
“The tax relief was introduced to help small breweries grow, not to benefit licensees and pub companies,” he explained.
“In the past, Moorhouse’s benefited from duty relief. Now we have to pay full tax. But we must maintain our margin. This is not sour grapes. Maintaining margin is crucial to long term sustainability for brewers committed to quality and the long haul. We will not compromise on quality and service.”
The two-year-old brewery has recently hit the five-million-pints-a-year landmark, and saw a record turnover of £4.5m in the past financial year – up 18%.
Moorhouse’s now aims to produce 600 brewer’s barrels per week and achieve a £7m turnover by 2015.
Julian Grocock, chief executive of the Society of Independent Brewers said: “SIBA agrees with Mr Grant that discounting by brewers is not helpful for the long-term health of the local beer sector.
"However, we don’t believe that many local brewers are using their Small Breweries’ Relief to fund discount pricing, it is more of an issue that many small businesses do not fully calculate their cost of production. SIBA is committed to creating opportunities for profitable business for its members and assisting them to create a sustainable business model.
“According to our most recent survey of how SIBA members are using SBR, discounting is at the bottom of a long list of priorities, well below investment in new equipment, staff recruitment and training and marketing.
“SBR is designed to help small brewers with the large costs involved in starting up and expanding a brewery, until they reach a size where they no longer need that help. We’re confident that the vast majority of our members understand this and are using their SBR wisely.”