Ahead of the looming tax hike for Australian spirits and beer, CGA by NIQ has published new data which analyses the dip in on-premise sales volumes owing to inflation and tax-driven price increases.
On Monday 5 August, the Australian Federal Government will increase what is already the world’s third highest tax on spirits, with beer excise also set to increase.
Research gathered by CGA by NIQ’s On-Premise Management (OPM) service indicates just how much impact this is having on price increases, with the average price of a schooner rising by 67 cents (6.2 per cent) in the last 12 months.
Australia’s spirits prices have also been affected, after spirits tax surpassed $100 in August last year and reached $101.85 per litre of alcohol in February 2024. Such increases are being passed onto the consumer, with the price for a 30ml service of spirits rising by 93 cents (8.7 per cent) in the last year alone.
Since the beginning of 2022, beer and spirits prices have seen a 10.5 and 11.8 per cent increase respectively.
Australian Hotels Association (AHA) National CEO Stephen Ferguson said a beer and spirits excise increase was a crippling tax, disproportionately affecting those choosing to socialise on-premise.
“We are calling on the Government, Opposition and Cross Bench to support reducing the excise on all beer and spirits poured into a glass and served to a customer in a pub,” he said.
“It’s not the politicians who cop the grief from customers every time the business has to pass this hidden tax on – it’s the worker or owner behind the bar who cops it.
“This hidden tax – which has gone up every six months for the last 35 years – will hit pub-goers in the hip pocket at a time they can least afford it.
“Australia’s hidden beer tax rate is now the third highest in the OECD and the excise on beer and spirits this financial year alone will be nearly $8bn,” Ferguson continued.
Sales volumes dip
Increasing prices paired with cost-of-living pressures are significantly impacting on-premise visitation, with operators recording a decline in sales volumes comparative to 12 months ago.
Findings from CGA’s Consumer Pulse Report confirmed that 43 per cent of consumers are going out less often than usual, and this has resulted in a 7.7 per cent fall in spirits sales by volume in the last year.
While beer, malt beverages and cider volumes have experienced a year-on-year increase of 1.4 per cent, perhaps because of their value proposition, they have shown less resilience in the last quarter. In the three months to May, beer recorded a 3.1 per cent decline in sales volume when compared with the same period in 2023.
The expected two per cent increase in excise tax on beer, spirits and RTDs is set to cause further challenges for the industry, and inflation is also impacting long-term stability.
The OPM service recorded a year-on-year price increase for key spirits categories, with whiskey and tequila rising at the fastest rates, 10.1 and 9.2 per cent respectively.
As expected, rising prices are putting pressure on sales. Australia’s three highest priced spirits – Japanese whiskey, cognac and mezcal – each recorded a drop in sales volume between 9.5 and 11.5 per cent in just the last 12 months.
As consumers seek value, other spirits categories are fighting for market share, and lower-priced spirits such as vodka and golden rum have outperformed the whole spirits category.
James Phillips, CGA by NIQ’s client solutions director – total liquor ANZ, said: “High inflation, the ongoing increases in alcohol taxes and pressure on consumers’ spending are creating a very difficult trading environment for many pubs, bars and drinks suppliers.
“In line with global trends, the spirits category has been hardest hit, with steep tax rises and people’s desire for value leading some of them to other categories or keeping them away from the on-premise altogether.
“With more tax increases imminent sales are likely to remain under pressure for some time, and spending will be increasingly polarised between premium and value drinks. With this in mind, it’s more important than ever to understand the nuances of sales trends and identify the opportunities for growth, and our sales and consumer research solutions are the starting points for strategies that overcome the market challenges and achieve real-term growth.”
The implications of rising beverage costs will be discussed at the Pub Leaders Summit on Tuesday 10 September in a panel called ‘In Focus: Shifting Beverage Consumption.’ Purchase your tickets now to hear more on this and other pressing topics affecting on-premise operations.