Established in 1696, Incorporated in 1996
Members:
Dublin Brewing Company, Irish Brewing Company, The Porterhouse Brewing Company
Celtic Brewing Company, Dwan's Brewery, Bar & Restaurant, Carlow Craft Brewers,
Biddy Early's Brewpub, The Franciscan Well Microbrewery, The Balbriggan Brewing Company
Executive Summary/Press Briefing

Microbreweries Propose Revision of Irish Excise Law

While a number of sectors of the economy have been or are currently being stimulated through tax incentive schemes (urban renewal, BES, scrappage scheme, designated areas, etc.), one industry with huge direct employment potential and with significant potential for direct and indirect impact on tourism, regional development and export trade, has been ignored thus far.

A microbrewery is a small brewery with a limited production capacity which, of necessity, produces labour intensive hand-crafted beers. Over the last two years, a number of small breweries have quietly made their way onto the brewing scene in Ireland bringing a whole new dimension to the Irish food and beverage industry.

We, the Brewers’ and Maltsters’ Guild of Ireland, outline in this document a modest proposal to encourage a fledgling industry which is beneficial to the country in a number of tangible ways, and which would help rectify the severe disadvantages it suffers vis-a-vis its established foreign-owned competition. We herein outline reasons why we believe the current excise system is damaging the microbrewing industry and propose how it can be reformed. Key points outlined in this document include:

Brewing beer on a microbrewery scale is labour intensive. It creates jobs. Many microbreweries are located in high unemployment areas in the major cities (Dublin and Cork) or are in small towns (Carlow, Enfield, Newbridge, Inagh, etc.), bringing much needed skilled jobs. Current direct employment in microbreweries in Ireland is 40. It is anticipated that with the right tax environment, this figure will grow to 1200 within the next five years, at minimal cost to the exchequer. These jobs will largely be based in small towns around the country and will not cause any displacement from existing breweries.

Microbreweries are trying to emerge in an industry where currently a virtual monopoly exists. For this sector to emerge and the benefits to be realised, it is necessary to put in place an environment which is conducive to their needs. We contend that a change in the tax regime along the lines of this document will provide that environment and impetus to the industry. In an industry which is plagued by high prices, price fixing and exclusive reselling agreement, supporting the microbrewing industry through excise reform represents a chance to mitigate the damages microbrewers suffer under current market conditions. Since 1984, the EC Commission has accepted that single market regulations relating to competition do not apply to the brewing industry. This allows large brewers to engage in anti-competi- tive behaviour with impunity. This also represents a barrier to domestic markets for new entrants, especially for those who cannot match the resources of brewing multinationals.

This kind of support has existed before in the Irish brewing industry and indeed continues for the domestic cider industry. It is not novel in an International context either. Both German and US micro brewing industries have benefited greatly from staggered excise rates linked to output size.

In a time when consumers are demanding more variety and quality, the large brewing industry is stagnant and offers little choice to the consumer. Consumers have been turning to imported alternative specialty beers, wines and other beverages. Microbrewed beers compete directly with imported beers and we already see some level of import substitution as a result. Large brewers cannot compete in this segment of the market. In fact, microbrewing is the only growing sector of the brewing industry in Ireland.

Ireland is pitching itself as the ‘Food Island’ and culinary capital of Western Europe. Surely we must not forget that our beverages are an important feature of this image. It is traditional in this part of the world to drink fine beers with food. The microbrewing industry is reviving this part of our culinary tradition and can revitalise brewing as a cornerstone of the Food Island. Brewers are currently exempt from food regulations requiring disclosure of ingredients. Microbrewers therefore cannot benefit from the comparisons that consumers would make between natural produce and chemically enhanced products, which would normally work to the advantage of the former.

Exports by microbreweries are genuine exports, of benefit to the Irish economy. “Irish” pubs may be all the rage in the UK and continental Europe, but increased demand for Murphys in the UK will be satisfied by Whitbread plc, and whilst Guinness may still be on target to open an “Irish” bar a week in Italy, the beer will be supplied by a Guinness brewery in Egypt. These are being presented dishonestly as Irish beers, but Ireland does not benefit from this activity. Some microbreweries in Ireland already export over 75% of their production, and this represents foreign exchange earnings for Ireland.

It is our contention that rather than costing the Exchequer money in lost tax revenues (which would be negligible in the kind of reform we propose), that there will be instead a net gain to the Exchequer through direct and indirect impact on employment, tourism, agriculture and regional development.


The Brewers’ and Maltsters’ Guild of Ireland

Proposal for changes to Irish excise

We, the Brewers’ and Maltsters’ Guild of Ireland, representing Ireland’s craft brewers, request the implementation a staggered excise system to help foster our growing but struggling industry. This industry represents the only growing sector in Irish brewing in terms of employment. In other nations, such as the US and Germany, a staggered system has led to the development of a more diverse, healthy brewing industry with increased employment and a renowned vitality. This sort of discounted excise system for small brewers has existed in Ireland before (General Order C. &E. No. 132/1932 Paragraphs 411-417 inclusive). This staggered excise system was implemented to incentivise the use of and thus stimulate the Irish cereal crop industry. It was removed in 1979, as it was largely meaningless to the remaining existing large brewers. Interestingly, those same brewers, as the primary consumers of malted barley in Ireland, are currently being implicated in the struggle between the barley growers and the maltsters. Another staggered excise system continues to exist for the cider industry in Ireland. The rate of excise for cider is approximately half the rate of excise in place for beer. Again, this was undertaken to stimulate a struggling industry and foster its development. We believe our current and potential contributions to be worthy of such stimulation.

We herein present a brief history of the microbrewing industry in Ireland, an important definition of who we are and what we represent in contrast to the ‘National’ brewers, some preliminary statistics, and what we see as the future evolution of our sector of the Irish Brewing Industry given the implementation of a staggered excise system. Also, of course, are our supporting arguments for such a system.


Brief History of the Irish Microbrewing Industry

The last small, alternate brewery in Dublin (Findlater’s near Mountjoy Square) closed in the 1940’s leaving a single producer, Guinness. See attached (Appendix I) for synoptic history of the Dublin brewing business.

1982-83
Dempsey’s and Harty’s, two ‘real’ ale microbreweries opened and closed shortly thereafter in Dublin and Blessington, Co. Wicklow.

1995
Opening of Biddy Early's in Inagh, Co. Clare (Brewpub)
Opening of the Irish Brewing Co. in Newbridge, Co. Kildare (Microbrewery)

1996
Opening of The Porterhouse Brewing Co. in Dublin (Brewpub)
Opening of The Dublin Brewing Co. in Dublin (Microbrewery)

1997
Opening of The Celtic Brewing Co. in Enfield, Co. Meath (Microbrewery)

1998
Opening of Carlow Craft Brewery in Carlow (Microbrewery)
Opening of Dwan’s Microbrewery in Thurles, Co. Tipperary (Microbrewery)
Opening of Maguire’s Masterbrewers in Dublin (Brewpub) (Dec. ‘98)
Opening of Franciscan Well Brewery in Cork (Microbrewery) (Dec. ‘98)


What is a Microbrewery?

Definition and Scope

A microbrewery could be broadly defined as a brewery of less than 30 000 HL annual production. Unlike the large brewers, the microbrewery presents a craft-based production approach with small batch sizes and a higher labour component. This scale allows the creation of more wholesome, stylistically accurate, full-flavoured beers that aim to please the discriminating, not necessarily the average, palate. Unlike the large brewers, the focus is not on volume and efficiency, but instead is on taste, balance and quality. Small brewers tend to command a premium price for such attention to ingredients and handling. The premium price of the microbrewed beer comparative with ‘National’ brands supports the perception of quality in the marketplace.

The comparatively small size of microbreweries allows them an advantageous flexibility in adjusting to a sometimes fickle and often demanding market. That market was often assumed too small for the large breweries to consider servicing efficiently. The growth of microbreweries in North America has forced them to reconsider. Many large breweries have been brewing darker, stronger, unpasteurized beers, which are preservative-free. They have also been buying existing small breweries, investing in others or starting their own. They have not, however, diminished the growth of microbreweries in the marketplace. Indeed the growth of microbreweries has forced Anheuser Busch to improve their practices in the interest of consumers. For example, they have recently introduced best before dates on their beers, a practice which only started after microbreweries used the freshness of their beers as a selling point.

The typical ‘All natural, artificial additive and preservative-free, whole grain, often unpasteurized,’ nature of most microbrewed beers was considered difficult to achieve in cost effective means by most large industrial breweries. Microbrewers are uniquely sized to produce limited, often seasonal speciality beers such as those found in continental Europe that can command an ultra-premium price. These beers are often considered as novelties in the marketplace but can bring rewards both monetarily and in terms of national and international recognition for the brewery and its products. In addition to these ‘big’ beers, microbrewers continue to offer interpretations of classic styles, which have all but disappeared from the marketplace at the hands of the national brewers. The microbrewers continue to offer a wider array of beers which makes matching beer with cuisine (as opposed to wine) a more frequent occurrence. They have also caused resurgence in the acceptance of beer as a wholesome food product often possessing refreshingly energising properties.

Annual Production Capacity

HL BBL 33 cl bottles
Designation*
Brewpub/Cottage brewery
Microbrewery
Regional brewery
National brewery

<3000
3000-30000
30000-200000
>200000
<1850
1850-18500
18500-122000
>122000
<910000
910000 - 9.1 million
9.1 - 60.6 million
>60.6 million
*Note: Exact definitional size often depends on local tax codes. These numbers represent approximate delineation of size designations.
What is staggered excise?

Staggered excise is a tax system which supports the development of the small producer of excisable products through a discounted rate of excise. If we look at the German system for domestic beer taxation we see one example.

German Model

In the German model, a base rate of 1.54DM per hectolitre per degree Plato applies to large brewers of more than 200 000 hectolitres of beer per year. A degree Plato represents about 0.5% alcohol by volume (ABV). The Irish base excise rate for beer is £15.65 per hectolitre percent (ABV). For comparison the German rate would be about 3.08DM per hectolitre percent (ABV) or £1.49 per hectolitre percent (ABV) for a National brewer. In the German model, small producers benefit from a rate, which is a fraction of the base rate according to the following table.

Size of Brewer

Excise Rate
<10000 hl per annum
10001-20000 hl per annum
20000-40000 hl per annum
40001-200000 hl per annum
>200000 hl per annum
50% of base rate
60% of base rate
70% of base rate
75% of base rate
base rate applies


The small loss to the public purse resulting from this system is more than offset by the benefits it brings to the German brewing industry in terms of competitiveness, diversity and employment stimulation. The quality of German beer is world-renowned and for good reasons. They have great regard for beer and regard it as a staple in their diet. This regard has manifested itself both in German culture and in German law. All German brewers must adhere to the Bavarian Purity Law, which lays out strict quality guidelines relating to brewing materials and processes. It was incorporated into German Tax Law in the 1920’s but traces its roots to the early 1500’s when it was originally introduced as a consumer protection law against less scrupulous brewers and their poor quality beer. It has been continuously enforced since its inception. Other nations have not been so fortunate. We next turn to our American example.


American Model

In America, the federal base excise rate translates to about £2.06 per hectolitre percent (ABV). Small brewers (<200000 hl per annum) pay a discounted rate of about £0.80 per hectolitre per cent (ABV). Brewers also pay a further excise tax at the local level (state and/or municipal). This additional tax varies by state from 0 (in Pennsylvania) to about £0.77 per hectolitre per cent (ABV). The discount in the American model has led an explosion from 50 breweries in 1975 to more than 1375 in 1998. This explosion has meant huge growth in employment in the brewing sector at a time when overall sales volumes in the brewing industry are shrinking due to demographic lifestyle changes. All but a few of these post-1975 breweries are small, local microbreweries. While vastly outnumbering their larger brethren, the microbrewers in America only hold about 5% of the marketplace. Again the loss to the public purse is relatively small and again, the loss is more than offset by gains in employment, competitiveness and diversity. The effectiveness of the American model is examined further.


Why develop a staggered excise system?

Any economist would agree that in a near monopoly marketplace, the consumer suffers. Given the high level of excise in this country and the lack of competition, large beer producers have had no incentive to price their products competitively in this marketplace for some time. They currently have the luxury of charging whatever the market will bear and blame the taxman and the publican for the price of a pint. Consequently, the foreign owned large breweries in Ireland are extremely profitable by world standards and the domestic market price is comparatively quite high. In mature, diverse brewing markets such as the US we can see a couple of interesting things as points of comparison with the domestic market here.

In the United States, National brand beers are comparatively cheap to purchase whereas microbrewed beers are more expensive (often 100-200% more). This situation occurs because it is much more expensive to produce beer on a small scale with labour, materials, energy inputs and general overheads forming much greater components than for large brewers who consequently operate on much greater margins of profit (50-100X greater margin on an input/output basis). What we also see is a vast number of breweries (>1375, with new breweries opening weekly) but the majority of the marketplace (>95%) remains in the hands of the National brewers.

If microbrewed beer is so expensive to produce and the large brewers dominate the market anyway, why the need for microbreweries in the marketplace and how do they survive competitively? The need was created by consumer demand for choice in the marketplace and in the existing US beer market of the time a grass roots consumer backlash against the preponderance of low quality, chemically enhanced and preserved, relatively tasteless, albeit inexpensive, beer gained mainstream acceptance. The microbrewers of Ireland already see this backlash gaining momentum here, not just for beer, but for virtually all foodstuffs. Prior to 1975 in the US, an educated consumer who wanted an all-natural, full flavoured beer, free from artificial additives and preservatives, had no choice but to buy a relatively expensive imported beer. Currently, domestic microbrewed beer in the US holds a larger market share than imports. Microbreweries in the US survive competitively for three reasons. Firstly, they are a largely local phenomenon, integral to and participatory in their communities unlike the large brewers and are consequently given heavy local support. Secondly, through their excellence at niche marketing, they are adept at placing their product in its appropriate market. Microbrewers are great at discovering, developing and exploiting niche markets considered too small by most large brewers to merit developing, let alone servicing. Thirdly, and most importantly, small brewers in the US survive due to a discounted rate of excise compared to that paid by the National brewers.

Microbrewers came into existence in Ireland because of perceived consumer demand for high quality, all natural Irish beers both domestically and in foreign markets. In other words, we identified our market niche, which the large brewers were under servicing. The domestic market we entered, however, has been hostile from the National brewers and the comparatively high applicable rate of excise along with the pre-existing artificially elevated price points for National brand beer continue to make it difficult to exploit that niche competitively. Given the high price point, it is unrealistic to charge more than this, as the market will not bear it. The microbrewers continue to survive, struggling on narrow margins, with some of the larger microbrewers turning to exploit niches in export markets to avoid domestic excise altogether on that portion of their production. A staggered excise system would give much need economic stimulation to this burgeoning industry.


Federal Excise per HL and per pint for 5% ABV beer (£IRL)

Small Brewer (<10 000 HL) Large Brewer (>200 000 HL)

per HL
per pint per HL per pint
United States
Germany
Ireland
UK
France
£4.01
£4.45
£78.25
£70.26
£8.00
£.02
£.03
£.44
£.40
£.05
£10.32
£7.43
£78.25
£70.26
£8.00
£.06
£.04
£.44
£.40
£.05


Why stimulate this industry?

1) The Irish Microbrewing Industry is an IRISH industry.- The Irish microbrewing industry is owned and operated by Irish people with the exception of the use of a few outsiders to bring in expertise heretofore realistically unavailable in the market. The large brewers in this country are largely owned and ultimately controlled by foreign entities (Guinness Ireland - Diageo, Murphy’s Ireland - Heineken, Beamish & Crawford - Scottish & Newcastle). Irish people hold a very small share holding of the domestic large brewing industry. The National brewers do employ a shrinking but significant number of Irish people in the brewing industry but key areas are often handed over to foreign entities.

2) Developing Microbreweries Means More Employment and More Training.- Small brewers represent the only growing sector in terms of employment in the domestic brewing industry. We are taking untrained persons and investing them with the appropriate training to operate breweries on a small scale according to good manufacturing practices. We have made this investment and continue to do so with little or no government assistance. Even if the industry were to close tomorrow, we would leave dozens of trained people with highly marketable skills in foreign markets. The same cannot be said of large brewers as the work force shrinks in large breweries around the world through rationalisation and automation.

3) Supporting Microbreweries Stimulates Healthy Competition in the Beer Industry.- Competition is essential to the long term health and prosperity of any industry. Operating in a competitive marketplace inevitably leads to greater efficiency of production, heightened levels of research and development and ultimately (immensely more important for the large brewers) to the ability to operate competitively and effectively in a global marketplace where protective barriers from international competition are disappearing. Economic stimulation of the microbrewing industry is good for the entire brewing industry. Since the advent of the microbrewing industry in North America, large brewers have been using fewer additives in their beers and have begun diversifying their own product lines to revive previously dying regional styles. This is a direct response to the phenomenon of the microbrewery and benefits the consumer through greater choice (and consequently greater competitiveness) and more wholesome production practices.

4) Microbrewed Beers Enhance Ireland’s ‘Quality Food Producer’ Image.- As Ireland strives to increase its reputation as ‘The Food Island’, producing high quality, wholesome food and drink for the rest of the world, the current state of the brewing industry undermines that effort. National brands of beers in this country have begun to lose their reputation as high quality drinks. As the world-wide microbrewing industry evolves, more and more consumers of imported beer in other nations demand that these products be wholesome and relatively free of additives and preservatives. The large brewers thus far have refused to provide ingredient lists. There has also been a phenomenal growth of Irish theme pubs on all continents. Guinness owns many of these pubs but little of the beer consumed therein is actually brewed in Ireland as Guinness has breweries all over the world. It can be quite farcical. It is a misrepresentation of a misrepresentation. There are many other examples of beer being misrepresented as Irish. Adolph Coors Co. produce a product called George Killian's Irish Red, which has a tenuous Irish connection at best. It and others like it are becoming known in the trade as ‘Fake Paddy Beer’.

As many begin to capitalise on Ireland’s excellent reputation for fine and wholesome food and drink, we must take steps to ensure that the reality at least reflects the widely held perception. Craft based industrial production can enhance the international credibility of the Irish brewing industry through servicing high value niches in export markets. In order to be recognised internationally as Irish brewers, we obviously need to build a consumer base in Ireland. That will be very difficult given the high level of excise we pay.

5) A Healthy Microbrewing Industry will Contribute to Developing Ireland’s Tourist Industry Through Regional Development.- We cannot overlook brewing as a tourist attraction. The Irish Whiskey Centre and the Guinness Hop Store are two successful examples of this. Both are located in central Dublin but neither offers the visitor a chance to actually visit a working brewery. Microbreweries bring two new tourist dimensions to brewing in this country. Firstly it offers the visitor a chance to see a working brewery on a craft scale, meet the staff and sample their wares in peak condition. Secondly, microbreweries enhance the tourist appeal of smaller towns outside of Dublin by creating appealing destinations. This potential regional tourist stimulation in varied areas of the country cannot be overlooked. Cheesemaking in Ireland, although a non-excisable industry, shows a parallel localised/regional stimulation on a craft level in terms of employment and regional interest. Interestingly, the advent of the small cheesemaker in Ireland has awakened the sleeping giants in the dairy industry who have since dramatically expanded their product lines. We believe local microbreweries, if stimulated through staggered excise, will offer even greater rewards to their respective local communities in terms of visibility and employment in addition to benefits for the Irish brewing industry in general.

6) The Near Monopoly State of the Industry Means that it is More Difficult for Microbreweries to Sustain Development.- Small brewers cannot afford large advertising and marketing budgets to instantly create brand recognition and thereby manipulate and penetrate the market.

7) Successful Microbreweries Will Lead to Import Substitution.- There is a significant demographic lifestyle shift underway. Irish people are beginning to look to imports in certain areas to meet their requirements of quality, whether that be real or merely perceived. There is no mandatory ingredient labelling on beer in Ireland and because of this, consumers cannot make a constitutional comparison and consequently cannot perceive the added value in microbrewed products. In spite of this, microbrewed products are often perceived as more wholesome and consequently better quality. Imported beers are also perceived this way and consequently command a premium price in the market. If we look at the early stages of the American model, we start to see a progressive decline in the consumption of imported beers, which continues to this day. Imported beers have lost a significant percentage of their market share in the US whereas large brewers have lost but a few percentage points. In other words, microbrewers will shift the premium end of the beer market from imported to domestically available beer. Surely this is a positive development worthy of stimulation. We believe this demographic shift will continue with the rise in disposable income and an increase in awareness of the importance of a healthy lifestyle in achieving overall health and well being

8) Microbrewed Beers Promote Moderation in Drinking Habits.- Microbrewed beers are, by their nature, beers of moderation. They are full-flavoured, wholesome beverages, which only remotely resemble the increasingly insipid mainstream beers that aim at a progressively juvenile average palate, created by market research departments. This may sell more beer but it corrupts and endangers important regional styles of beer like Dublin Stout and Irish Red Ales as well as coddling juvenile palates (read young drinkers) to consume their products. Microbrewed beers, in contrast, are designed with health of the consumer in mind. Because of their complexity and depth of palate, they often complement varied styles of foods; some are even designed with food in mind. Microbrewed beers exist in and of themselves. They are creations of individuals, assembled by their team of brewers and offered up to the trade as local interpretations of classic beer styles. Microbrewers are often creating new local styles of beer as well. Microbrewed beer is neither the result of extensive market research nor ultimately, market manipulation. The polarisation of the beer market, which was started by the microbrewers in the US reached its peak about four or five years ago, with one large brewer introducing "clear beer", the ultimate insult to beer lovers. This colourless, odourless and virtually tasteless "beer" was a complete failure and raised serious questions from the microbrewers about the ethics of its producer (a National brewer).

9) Microbrewers Promote Healthier Attitudes to Beer Consumption.- Microbrewers have an overtly healthier attitude than large brewers do to beer and drinking in general. We promote beer on its positive attributes, as a drink which can promote health in moderation as part of a balanced diet, as an accompaniment to food, and as a beverage with great historical and cultural contextual roles in Irish and all societies in general. We formally recognise in our charter (see attached Appendix II) the problems created by alcohol abuse for a small percentage of the population and accept our role in leadership and education in regard to these problems. In the same document we also eschew the types of advertising one often sees from large drinks companies as inappropriate.

10) Supporting Microbreweries Will Lead to More Healthy Competition and Less Unfair Trade Practices.- Large brewery control of the industry and domination of public houses (via ‘bribery’, coercion, interest free and low interest loans to publicans in exchange for near exclusive reselling agreements) restricts access to markets for small producers of beer in Ireland. This insidious system of exclusionary trade practices has been allowed to develop and dominate the industry in this country and others in the EU through legal exemptions originally designed to protect the domestic brewing industries of Europe from foreign, not domestic, competition. Since 1984, the EC Commission has accepted that single market regulations relating to competition do not apply to the brewing industry. Hopefully, this exemption will eventually be denied. A staggered excise would help mitigate the damages from this situation we find ourselves in.


Resistance to a staggered excise system

Two relatively powerful groups will resist this request for a staggered excise. The first of these groups are the large brewers. We can certainly understand this. Being in business ourselves, we recognise the idealistic state of existence for them in Ireland. Why would they wish to change the status quo especially if it means ultimately losing a small fraction of their market share? They obviously lack our foresight when it comes to the long-term health and global competitiveness of our industry but then again, as a single producer, you don’t dominate 80% of any market by being friendly to your competitors. Indeed one National producer, Guinness Ireland, has already made an overt attempt to recapture the small percentage of lost market share already. This attempt involved building and opening their own microbrewery, St. James’ Gate, and launching beers brewed on a craft scale. They spent £3 to 5 million in one year on the project, which was discontinued after the first year. The fact that the project was discontinued shows that they are not interested in getting into this market, as increasing consumer choice does not allow them to reap the level of benefits they currently enjoy from a near-monopoly market. If nothing else, this demonstrates their inability to service this developing market. The amount of money they spent on the project reinforces this argument. No microbrewer in Ireland has spent anything remotely resembling this figure and yet each one of them has had greater success than St. James’ Gate.

The second group which will come out strongly opposed are the neo-prohibitionists. About 20% of the population of Ireland would classify themselves as abstainers (National Alcohol Policy, 1996). These people abstain for many reasons, some for physical reasons, some for psychological reasons and some for religious reasons. Small portions of these abstainers believe alcohol to be the root of many problems in our society. They would argue that any decrease in excise would lead to higher overall consumption in the market place. We believe they are wrong on a number of points.-

Firstly, reducing the excise on beer Produced by by small producers will not reduce the price to the consumer, as the small producer will use this extra money in an effort to gain an even ground in spreading the availability of his/her beers. Cutting prices would be self-defeating, as the unit costs for small producers are already significantly higher than for large producers.

l Promoting microbrewed beers would actually promote desirable, moderate drinking habits. The relatively more flavourful taste of microbrewed beers means that they are not conducive to volume or binge drinking like the bland, mass-Produced by beers of the National brewers.

l Research has demonstrated that there is far greater price sensitivity in spirits and wine than there is in beer, especially in English speaking countries (National Alcohol Policy, 1996). Perhaps this is due to beer’s historical role as a staple in English speaking countries.

l We believe that the tragic abuse of alcohol has many fundamental causes, none of which have anything to do with the existence of beverage alcohol in our society.

Given that beverage alcohol has been an integral part of civilised culture for at least 6000 years, it must be relatively safe given we’ve been consuming it for so long and have still managed to evolve into a highly civilised society albeit not without its drink related problems. We believe that in most cases the abuse of alcohol is a symptom of someone's dysfunctional relationship with society rather than the cause of it. People come to depend upon the pleasing narcotic effects of alcohol for many reasons. Those reasons usually involve escape from another not so pleasing aspect of their lives whether that aspect be personal, marital, familial, work-related or in a small number of cases, an undiagnosed problem such as chronic pain or even depression. We also believe it is essential to work towards decreasing the level of abuse in our society through education at all levels regarding the historical, cultural and economic role of alcohol in western culture. In addition, we need frank and honest discussion with our youth about the positive and negative effects of alcohol on the body, the warning signs and dangerous consequences of abuse and where to turn when you recognise these warning signs.

The anti-alcohol abstainers are correct in one regard. It would mean, at least temporarily if not permanently, a reduction in excise collected from beer, specifically microbrewed beer, to the Exchequer. Under the current excise system, it is estimated that microbrewers will contribute in the region of $1.78 million to excise revenue in 1999. This represents approximately 0.5% of the total excise revenue from beer.


Total Excise Revenue from Beer
Year
1971
1981
1991
1997
£35,496,933
£189,609,684
£281,833,910
£353,873,143

(Figures courtesy of Revenue Commissioners Press Office, 1998)


Total Estimated Excise Contribution from
Microbrewers with Existing Excise Structure
Year
1999 £1,775,564 or 0.5% of total collected for beer in 1997

(Figure is an estimate assuming 60% of declared production capacity operating, not actual production.)


Total Employment
Year CSO Category National Level Brewers* Microbrewers**
1971 Distilling 340
Malting 410
Brewing 4970

Total 5720 0
1981 Distilling 697
Brewing and Malting 4805

Total 5502 0
1991 Distilling 187
Malting 1100
Brewing 2287

Total 3574 0
1996 Distilling - ?
Malting - ?
Brewing - ?

Total 3088 15
1998

not yet available 37
*National level employment numbers are from the Central Statistics Office, Census Industrial Production. For certain years, the statistics are combined numbers from a number of industries. According to the CSO this is done to protect the privacy of companies when there is a small number of producers.

**These numbers reflect brewing and distribution as do the figures from the Central Statistics Office does. Microbrewer employment levels do not include pub workers (bar staff, wait staff, kitchen and cleaning staff) from brewpubs as this employment might exist if it was just a regular public house. These numbers also do not include managerial, administrative, sales or marketing. These two groups represent another 95 employees.

Labour Utilisation Rates
Total Employees Capacity Number of Employees per 1000 HL output
Organisation
Guinness, Ireland
Irish Microbrewing Industry

2495
132
6.2 million HL
45 000 HL
0.402
2.933
(Irish Microbrewers employ seven times more people per hectolitre of output than large producers.)


The preceding charts graphically demonstrate employment trends in different sectors of the brewing industry in Ireland. Growth of the microbrewing industry means creation of permanent regional skilled employment in the brewing sector at a time when large brewers’ workforces are shrinking. Should staggered excise be instituted in this Ireland, we would see the numbers employed in the microbrewery sector grow at an increasing rate. It would not be surprising if that grew to include at least one local microbrewery in every county in Ireland. If stimulated effectively, the microbrewery market in Ireland will ultimately grow to represent about 5% of the overall domestic beer market in about 5 years time. It is unlikely that it will significantly exceed this level of output based on observation of worldwide microbrewery development. At 5% of the market, the microbrewing industry would employ between 800 and 1200 people. Staggered excise in the Irish system will be a very effective, inexpensive tool in skilled, permanent job creation and revitalisation of a once great Irish brewing industry.

This system we propose is based on the German model, but goes a step further to truly favour the small, cottage industry producer. Given it is such a young industry in Ireland, there are a growing number of these types of producers in the marketplace. We propose that each 10 000 HL of annual production would be taxed at intervals starting at 50% of the base rate according to the following table where the base rate is the current applicable rate of £15.65 per HL per cent (ABV). Such a model is allowed for in EC law (Council Directive 92/83/EEC). The EC parliament gave its opinion recently on a related report of the Commission (COM(95)285) in the VON WOGAU report (PE 218.610) which was adopted in September 1997 (Report: A4-0253/96). In the case of alcoholic beverages, Parliament reaffirmed that there should be no distortion of competition between different beverages and
suggested five guidelines for further action, one of which was the following: lower rates on small distillers' and brewers' products (European Parliament Fact Sheet 3.4.5/98).

Suggested Irish Model of Staggered Excise

Output Applicable Excise Rate
0-10 000 HL
10 001-20 000 HL
20 001-30 000 HL
30 001-40 000 HL
40 001-50 000 HL
50 001-60 000 HL
60 001-100 000 HL
>100 001 HL
50% base rate
55% base rate
60% base rate
65% base rate
70% base rate
75% base rate
80% base rate
base rate applies


Output for the above table is defined as beer Produced by which is liable for excise (finished beer which has left the brewery gate). The excise band in which a brewery operates in any given year is dictated by the previous years output figures registered with Irish Customs & Excise.

Since about 1860, the Government of Ireland (before and after the formation of the Republic) have tacitly observed the dying struggles of a diverse brewing industry and the consolidation of the remaining players to a near monopoly of three large foreign owned enterprises. It would indeed be tragic if given such an opportunity to redress the situation and return to a diverse and dynamically progressive industry, they again chose to do nothing. The government has two choices. They can ignore the issue and watch the microbrewing industry wither and die as the foreign multinational brewers in Ireland cream off sizeable profits for their shareholders, or they can be pro-active in their recognition and acceptance of both the problem and the solution.

Through the foresight of a small number of entrepreneurs, a fledgling microbrewing industry in Ireland has been established. Enlightened publicans and consumers in our previously identified target areas have warmly welcomed this new industry. We have begun to fill a vacuum that has existed in Irish brewing for more than one hundred years. However, like any fledgling industry, the first few years are the most vulnerable. We sincerely call upon the government to recognise our efforts and the potential benefits from our industry by providing the type of support, which will justifiably foster our development.

Appendix I

History of the Dublin Brewing Business

Over 300 years ago there were more than 1,500 alehouses and taverns in Dublin, serving a population of less than 70,000. There were also hundreds of breweries producing beers of every description.

By the end of the eighteenth century, with twelve breweries along the river Liffey, Dublin was home to a thriving and truly cosmopolitan brewing industry. At that time the oldest establishment in the city was housed on Usher Street. Founded in 1740, it was called the Anchor Brewery and rapidly became the second largest brew house in Dublin. In 1818 John D’Arcy bought the business for £35,000. After his death in 1825, the brewery was then passed to his son, also called John D'Arcy and then to his son, Matthew. Both were prominent figures within the Dublin business community. John was Lord Mayor of Dublin and Matthew was deputy lieutenant and magistrate for Co.’s Dublin and Wexford, as well as being a regular MP for the latter county.

John and Matthew had a close involvement with Daniel O’Connell, whose son also called Daniel was involved in the brewing business having acquired the Phoenix brewery in 1831. O’Connell and his partners temporarily changed the name to "O'Connell's Brewery". By 1832, the Liberator was forced to state that he would not be a political patron of the brewing trade or his son's company, until he was no longer a Member of Parliament. Particularly because O'Connell and Arthur Guinness were political enemies. Guinness was the "moderate" liberal candidate; O'Connell was the "radical" liberal candidate. The rivalry caused dozens of Irish firms to boycott Guinness during the 1841 Repeal election. It was at this time that Guinness were accused of supporting the "Orange system", and their beer was known as "Protestant porter". When the O'Connell family left brewing, the rights to “O’Connell’ Dublin Ale” was sold to John D’Arcy.

The nineteenth century was the high point for the Anchor Brewery. Their most famous brew was “D’Arcy’s Dublin Porter”. The whole brewery premises were considered unique for many reasons. Technically the company was at the forefront of the industry, with wells that could pump 30,000 gallons of water per hour (this had cost £20,000 to build). It also had one of the country's largest mill-rooms, the largest "mash-tun" in Ireland (25 foot in diameter) and the biggest copper vessel in the world. This copper had a capacity of 1,300 barrels and took 13 months and £3,000 to build. But they were also noted for their attention to quality, with emphasis on cleaning and correct temperature storage.

Of the ten breweries that were operating in Dublin in the 1870s, Anchor, was the second largest. It Produced by 250,000 barrels in 1886 (compared to over 1 million by Guinness), whereas the other breweries in Dublin Produced by no more than 100,000 barrels between them. Even in the 1920s this firm's premises covered a huge area, employing hundreds, and exporting its famous porter around the globe.

In 1926 the Anchor brewery closed down and in 1933, the City Corporation bought the premises on Usher St. where they started building the Oliver Bond Street flats.

The demise of D’Arcy’s Anchor brewery, also breweries owned by Brennan, Sweetman, Fortune & Co., Manders, Caffrey, Watkins, Greenmount and City of Dublin Brewery was chronicled by Dr. Daly, the foremost economic historian of nineteenth century Ireland. She believed that Guinness was both directly and indirectly responsible for the collapse of the independent brewing industry in Dublin. Indirectly because the company was simply so successful that it left little room for competition.

Guinness continually tried to undercut their competition in the nineteenth century, but it took some time before they were large enough to do so independently. The Dublin Brewers set down price regulations governing the whole trade in 1856, and Guinness initially adhered to them as they had done in earlier years. For example in 1855 Guinness signed a formal agreement with D'Arcy that they would not undercut the transport costs that Anchor charged on their customers in Co. Kildare.

In 1859 the Dublin Brewers signed another agreement stating that trade discounts would only be allowed to customers whose trade reached 100 hogs heads. But Guinness found a way to bypass this. The agreement explicitly excluded "agents" and they were the people who conducted much of Guinness's business throughout the country. Hence the agents could sell at lower prices.

But even this exclusive exemption was not enough. By 1862 Guinness unilaterally broke both the price and discount agreements, and without consulting any of their competitors introduced a flat discount of 1.25% to all their customers. Thereafter Guinness paid little attention to their rivals interests. Between 1860 and 1880 Guinness' profit margins went down by about 30%. The biggest price cuts took place in the 1870s. Their rivals simply could not keep pace with this sort of competition, especially when their tied houses were keen to break free and enjoy the bigger profits offered by Guinness.

The first casualty was the long-established Manders brewery. Manders left the price agreement in 1868 because of the pressure that Guinness was putting on their margins. In 1883 they were declared bankrupt. Lord Iveagh, the Guinness chairman demolished Sweetman’s brewery, in 1900 to make way for an old clothes market. Phoenix, the city's third largest brewery, built an ale plant in 1895 in an effort to escape Guinness's competitive clutches. But ten years later the company was declared bankrupt.

Other smaller firms were forced to merge in an effort to survive. For example in the late 1880s the North Anne Street brewery absorbed Jameson Pim and Co., and in 1904 they merged with Joseph Watkins. Findlater’s near Mountjoy Square was the last to close at the end of the 1940’s, thereby reducing the great brewing tradition of Dublin to the output of just one stout.


Appendix II
Brewers and Malsters Guild - Founding Charter

Monday 21st of October 1996, 3pm.

We, the Brewers and Malsters Guild of Ireland, being persons engaged in the trade or mystery of brewing on the 300th anniversary of the original founding of the Brewers and Malsters Guild present herein, certain beliefs we hold to be true. These beliefs constitute our charter and as such, all members of our alliance agree to adhere to and actively encourage others to support such beliefs.

We believe:

i) Beer is fundamental to our culture. It is historically, both in our society and in others, a staple dietary element.

ii) In its pure form, beer is a healthful beverage when consumed in moderation. It is the least potent of all alcoholic beverages, less than half as strong as wine and about one eighth the strength of most spirits. Beer, like bread, can be considered an accessible, easily digested, wholesome source of energy and nutrition. In addition, beer is a rich source of most of the B-vitamins.

iii) The best quality of beer is Produced by from pure water, cereal grains, both malted and unmalted, yeast and hops. Certain speciality beers contain other sources of flavour and fermentables. Most notably, the best quality of beer is not Produced by by supplementation of the natural process with any of the following:
a) Added preservatives and antioxidants - i.e. sulphites, ascorbates, benzoates, pyrocarbonates.
b) Industrial enzymes - i.e. amyloglucosidase (glucamylase), beta-glucanase, alpha-acetolactate decarboxylase.
c) Foam enhancers/stabilisers - i.e. alginates, gums.
d) Sweeteners, viscosity enhancers - i.e. glycerol.

iv) Beer is a perishable commodity that is sensitive to environmental conditions. Beer should be protected from extremes of light and temperature. Most beers are designed to be drunk fresh. The best quality beers are unpasteurised to preserve the delicacy of flavours and also the nutritional components there in.

v) Honest education, at all levels, about the use, historical context, danger of abuse, physiological and psychological effects of beer and other alcoholic beverages is the best defence against the tragic misuse or abuse of alcohol by the youth and other segments of our culture. We believe that as producers, we have an obligation to make every effort to assist in this education process.

vi) Honesty in all elements of public interaction is critical in the creation of a healthy industry with long term stability and public acceptance. ‘Lifestyle’ advertising and other forms of marketing imagery, which fail to focus on the product itself, will undermine our charter. The ‘image’ we need to create rests primarily on our quality of product and our desire to serve the best interests of our consumers.



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