Australian craft brewing at-a-glance
The current state of Australia’s craft brewing industry is one of uncertainty and strain. While the sector has experienced significant growth over the past decade, the combination of economic and regulatory pressures have exposed its vulnerabilities.
According to the Independent Brewers Association, there are over 600 independent breweries in Australia, employing more than 5,000 people. However, many of these businesses are fighting for survival, with some experts predicting a wave of closures and consolidations in the coming months.
The broader implications of this crisis are significant. Not only do craft breweries contribute to the diversity and vibrancy of Australia’s food and beverage culture but they also play a vital role in supporting local economies, particularly in regional areas.
As small, independent breweries struggle to compete with the resources and market power of large, multinational corporations, they become increasingly vulnerable to takeovers. This consolidation trend threatens to erode the unique culture and community ties that have made craft breweries so beloved by Australians.
The loss of independence may lead to changes in product quality, variety and authenticity, as the acquired breweries become subject to the priorities and strategies of their new corporate owners.
The urgent need to support the craft brewing sector goes beyond preserving individual businesses; it is about protecting the diversity, creativity and entrepreneurial spirit that have driven the industry’s growth.
Without targeted action to level the playing field and create a sustainable environment for independent craft breweries, we risk losing a vital part of our economic and cultural landscape.
Black Brewing Co’s collapse
The recent collapse of Black Brewing Co, a craft beer group based in Margaret River, Western Australia, provides a stark illustration of the challenges facing the industry.
According to reports, the company appointed administrators after the Australian Taxation Office (ATO) demanded payment of $1.2 million in overdue debts. The ATO has since reiterated its hardline approach on debt collection, even if it means sending companies broke.
Black Brewing Co’s directors used payments due to the ATO to help fund its operations, a practice that worsened over time as the company struggled with cash flow difficulties. The business also suffered from a theft of $25,000 from an office safe.
The consequences of Black Brewing Co’s collapse are far-reaching. Unsecured creditors, including suppliers and bridal clients who had booked the venue for weddings, are owed around $2.1 million. The company’s assets are now being liquidated and around 100 trade creditors are affected.
Significant sector problems
While the specific circumstances of each craft brewery’s struggles may vary, there are some common underlying causes that need to be addressed:
- Uneven playing field: The dominance of large multinational brewers makes it difficult for independent breweries to compete on price and distribution. This is exacerbated by the lack of consumer awareness about which brands are truly independent.
- High excise taxes: Rising excise taxes on beer in Australia places a significant financial burden on craft breweries – which often operate on tight margins. The industry has called for a tiered excise tax system based on production volume, which would provide some relief for smaller breweries.
- Cost-crisis: The rising costs of raw materials, utilities and labour are squeezing profitability across the sector. Craft breweries need to find ways to optimise their operations and supply chains to mitigate these pressures.
Resilience tips for Australia's craft brewers
For resilient brewers, the formidable set of challenges faced by the industry does not have to signal the end. By adopting a proactive and strategic approach, it is possible for craft brewers to navigate this difficult period and emerge even stronger.
Cash flow management: a critical focus
Maintaining a close eye on cash flow is paramount. Developing detailed forecasts to anticipate potential shortfalls, cutting non-essential expenses, negotiating favourable terms with suppliers, as well as exploring new revenue streams like takeaway and delivery services are crucial steps towards ensuring financial stability.
Engaging with the ATO: open communication is key
Ignoring tax debt is never a wise strategy. Instead, proactive communication with the Australian Taxation Office (ATO) is essential. Discussing your situation openly with the ATO may lead to mutually beneficial solutions, such as payment plans, deferred payments or access to other forms of assistance.
Seeking professional guidance: a sound investment
Partnering with a reputable small business debt advisory firm like AVA Advisory provides invaluable support. For example, we can thoroughly assess your financial situation, develop a strategic plan tailored to your specific needs and explore options to improve your financial position, such as tax debt negotiation and business restructuring.
Rethinking the business model: embracing innovation and adaptability
Taking a critical look at your current business model is crucial. Consider diversifying your product range, exploring new distribution channels or partnering with other businesses to reduce costs and enhance efficiencies.
Leveraging community support: building strong partnerships
Australia’s craft brewing industry thrives on its strong community ties. Leverage these connections by hosting virtual events, collaborating with other local businesses and offering special promotions to loyal customers. Fostering a sense of community will bolster resilience during challenging times.
By proactively managing finances, communicating openly with the ATO, seeking professional guidance and embracing adaptability, Australia’s craft brewers can turn adversity into an opportunity for growth.
Quick tax debt strategies for craft breweries
By taking proactive steps to manage tax debts, craft breweries can continue operations during these challenging times and avoid issues such as costly penalties or Director Penalty Notices (DPNs).
Negotiating a payment plan: If you cannot settle your tax debt in full, approach the ATO to discuss a payment plan that allows you to manage repayments in manageable instalments over time.
Applying for a hardship variation: In cases of severe financial hardship, you may be eligible to apply for a hardship variation. This may result in the ATO temporarily reducing or suspending your tax debt.
Offering assets as security: Providing the ATO with assets such as property or equipment as security for your tax debt can grant you additional time to settle the debt and potentially avoid further action from the ATO.
Seeking professional advice: Small business debt advisory firms like AVA Advisory can provide invaluable assistance on tax debt management, negotiating with the ATO, as well as developing a plan to improve your financial situation and avoid future tax debt.
By taking decisive action, we can weather the storm together and ensure craft brewers emerge stronger and more resilient. The resilience and creativity of craft brewers, combined with the passion and loyalty of their customers, provides a solid foundation for recovery and growth during these troubling times.
Contact AVA Advisory today at 1300 181 220 for a private, obligation-free discussion, or easily reserve a consultation through our online booking platform.
