Greene King defends IPA cost rise after Budget duty cuts

By Helen Gilbert

- Last updated on GMT

Related tags: Greene king ipa, Keg, Cask ale, Brewing, Hmrc

Greene King has defended its IPA price increase
Greene King has defended its IPA price increase
Greene King has defended its decision to increase the cost per barrel of its IPA at the same time as passing on beer duty cuts.

Last month, the brewer issued a letter stating the price of a 36-gallon barrel of Greene King IPA would fall by £2.04 as a result of duty reductions announced in the budget.

However, in the same communication — seen by the PMA​ — the company also revealed the cost per barrel would rise by £1.80 on the back of changes to its sediment allowance — set individually for each brewer by HM Revenue & Customs so brewers don’t pay duty on beer that cannot be sold.

The letter stated: “Following a review by HMRC of our cask beers, it has been proven that our yields have improved during the past year and, as a result, our sediment allowances have been reduced. This in turn has resulted in an increase in dutiable volume, which becomes effective from 23 March 2015.”

The news has left a bitter taste for one licensee who feels the brewer has given with one hand, but taken with the other. “I’m not happy about this at all,” he said.

“It’s very underhand. In January, prices went up but I always hold my changes until after the budget because I don’t like to increase prices twice. My customers are already asking about price reductions. I’m going to look silly if I put my prices up and we’ve had a reduction on beer duty.”

Profit

Greene King declined to comment on the timing of the letter but Chris Houlton, managing director of Greene King Brewing & Brands, said: “This year, HMRC determined there is less sediment.

However, this should mean little change for our customers as, while the amount of duty HMRC charges has slightly increased, there is more beer to sell in each barrel and therefore more profit per keg, which more than offsets the increase,” he said.

Greene King estimates licensees can sell up to six extra pints per barrel.

Related topics: Beer, Greene King

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14 comments

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It's about yield

Posted by Nick Griffin,

IB....They are linked as I have explained earlier. GK's yield has increased not that of the publican. I don't know of any publicans who get their beer in barrels these days, at best they are on kilderkins, most on firkins. Having asked around I am greeted with laughter at the thought of the publicans yield growing by a pint and a half in a firkin, it's just not the case. So what GK are doing is passing on an extra cost to the publican whilst saying the publican is no worse off, that is non-sense. They are seeking to hide behind their own margin maintenance at the cost to the publican and they should just be honest in saying so rather than invent a cock and bull story that no one pouring pints actually believes.

Add to this the point I raised about in-built ullage having long ago disappeared anyway because most weigh the tubs to know exactly how much liquid is in it now and we start to see through this charade.

HMRC hasnt increased duty, it is just charging the corrected amount based on yield at the brewing end. GK is taxing it's publicans via price rises for their yield having increased, I didn't notice them cutting the price of their beer year on year as their yield grew until HMRC caught up with them? Infact the very opposite, with the national wholesale prices rising year on year way above the rate of inflation on the cost of production and distribution - Do some sums in comparing the wholesale price 20 years ago until now having stripped duty out and you will see for some beers the publican is paying up to 40p a pint more than if it had been subject to inflation alone. That's a ridiculous figure and translates to around 80p to the consumer if the publican passed on the margin. No wonder pubs are seen as expensive in contrast to the off-trade.

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DUTY IS NOT PROFIT

Posted by Impartial Bystander,

Nick. You say you do not confuse duty rates with profit, but then immediately contradict this in the same sentence.
If the dutiable rate per barrel has increased by £1.80, then the extra £1.80 they are now charging their customers is all then paid to HMRC. How can this be inflating their profits?
As I have said before, this is duty: they charge their customers this as part of their overall price and then pay this to HMRC. In this way it is really no different than VAT, just a tax-gathering process for the HMRC. They cannot adjust their dutiable contents figures (in agreement with HMRC) and then decide not to pay this across. This would be the same as charging 20% VAT and then only paying 19% to HMRC.

Again I will state that Greene King are not inflating their profits in any way by doing this: the two are not "intrinsically linked", but in fact are entirely separate.

Greene King may well have recently had price increases which are considered excessive and, if this is the case, I fully agree with critising them for this. But, as I have already said, making incorrect allegations against them does not help support any criticism you may have which is justified.
Rather than contest what I have said I would suggest you just go and ask a brewer how duty works.

By the way, just to be clear on this, I do not work for GK or own any of their shares. However, if I believed what you were saying I would be rushing out to buy a load tomorrow.

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How long have I been going on about this?

Posted by Karl Harrison,

Once again the brewers "infill" the duty cut with further price increases of their own. Ignore all the bluster and false claims about sediment allowances. I note the PMA can claim to have seen only the Greene King correspondence and not any correspondence from HMRC. Let's see the letter from HMRC about the alleged reduction in "Sediment Allowance". If the Chancellor reduces duty then the producers will pocket the cash and then replace the duty with price rises of their own.

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