- Alcoholic beverages
- Approximately 40 per cent of submissions received for this inquiry were from the alcohol industry. The submissions predominantly focussed on the rates of taxation of alcohol in Australia and its effects on the industry. Submissions and evidence from the industry also canvased investment, challenges in exporting, and the need for representative bodies.
- This chapter will discuss issues relating to the beer, wine, and spirits sectors that are relevant to the Terms of Reference for this inquiry.
Industry overview
7.3The Committee heard that Australia’s alcohol manufacturing sector is a significant contributor to Australia’s economy:
- the beer sector contributes, directly and indirectly, $16 billion to the economy and supports approximately 100,000 jobs throughout the sectors supply chain
- the wine sector contributes, directly and indirectly, $45.5 billion to the economy and supports approximately 160,000 jobs throughout the sectors supply chain
- the spirits sector contributes, directly and indirectly, $15.5 billion to the economy and supports approximately 105,000 jobs throughout the sectors supply chain.
- Australian alcoholic beverages are world renowned and have received international recognition and awards. Australian beverages, including those using native botanicals, are sold globally as premium products.
- Alcohol consumption trends are changing as consumers become more health-conscious. As consumers drink less, Australian alcohol manufacturers are responding by producing higher quality and innovative products—a trend known as ‘premiumisation’—aligning with consumer preferences for quality over quantity. Premiumisation is occurring in all the beer, wine, and spirits subsectors, strengthening Australia’s reputation as a producer of quality products.
The need for a spirits representative body
7.6The Australian spirits sector strongly advocated establishing a central representative body to act as a backbone for the growth of Australian spirits, both domestically and internationally. Submitters titled this body as ‘Spirits Australia’–similar to ‘Wine Australia’–based on comparable principles.
Wine Australia
7.7Given the references in submissions to Wine Australia, it may be useful to briefly describe its structure and purpose. Wine Australia is set up by the Wine Australia Act 2013 and is the representative body for Australian wine. It acts as the wine sector’s statutory body for research and innovation, marketing, and regulation. The Act prescribes the bodies functions including, but not limited to:
- coordinating or funding grape or wine research and development activities
- facilitating the dissemination, adoption and commercialisation of research and development results
- promoting the consumption and sale of grape products, both in Australia and overseas
- controlling the export of grape products from Australia
- implementing, facilitating and administering programs – as directed by the Minister for Agriculture, Fisheries and Forestry – in relation to wine and international wine tourism, and services, products and experiences that complement international wine tourism, and
- administering grant programs in relation to wine as directed by the Minister for Agriculture, Fisheries and Forestry.
- Wine Australia is funded through a combination of government funding, levies, and user-pays charges by grape growers and winemakers. Submitters from the spirits sector pointed to the work of Wine Australia as a key reason for the success of Australia wine both domestically and in export markets.
Spirits Australia
7.9The Committee heard that the establishment of ‘Spirits Australia’ would form a foundation for future success of the Australian spirits industry, and should be supported by the Australian Government. The sector considers that such a body will enable Australian spirits to overcome the challenges the sector is currently facing, including access to international markets, access to research and innovation, addressing alcohol definition issues and quality and safety standards within the industry. Spirits Australia would also support the growth of Australian spirits and would have the capability to provide tailored support for distillers seeking to export their products.
7.10Submitters considered the responsibilities of such a body should include:
- fostering and supporting the growth of profitable, resilient and sustainable Australian distillers
- encouraging research and innovation within the sector
- building markets, disseminating market information and knowledge (and developing a ‘Brand Australia’ approach to the export of Australian spirits)
- growing industry networks domestically and internationally
- encouraging adoption and ensuring compliance of quality and safety standards within the industry.
Exporting
7.11Submitters were enthusiastic about the export potential of Australian alcoholic beverages. In 2022, the value of spirits exports was $210 million, with this revenue concentrated in a small number of domestic brands. However, the potential export value of the industry could be $1 billion by 2035, according to the Spirits industry sector competitiveness plan, a report prepared by Mandala on behalf of the Australian Distillers Association, Bundaberg Rum, and Diageo.
7.12In comparison, the Australian wine industry’s export value in the year ended September 2024 was $2.39 billion. Australian wine is currently exported to 113 nations worldwide. Australian Grape & Wine advised that there are about 200 million wine drinkers across seven key export markets. However, only 100 million of these are aware of Australian wines, and only 42 million drink them. Australian Grape & Wine considers there is a significant opportunity for growth in these markets.
7.13The Committee heard that it was difficult for Australian producers to be competitive overseas. One inhibiting factor is the import tariffs on Australian alcohol. Recently, China removed import duties for Australia wine, which has been welcomed by the Australian wine industry. However, submitters called for governments to secure more beneficial trade agreements, identifying India as a growth opportunity for Australian wine exports. Currently, India imposes 150 per cent import duties, compounded by state/territory level taxes. While recent tariff reductions under the Australia-India Economic Cooperation and Trade Agreement have led to improvements, submitters called for further government action to secure a more prosperous trade relationship.
7.14Spirits industry submitters linked market access difficulties with the current high level of spirits taxation in Australia and argued that high taxation limits the capability of businesses to pursue export opportunities.
7.15Australian spirits are also not well recognised internationally, compared to more established spirits manufacturing countries such as Scotland and Japan. Australian spirits manufacturers face difficulties in marketing products internationally, despite Australia’s general reputation for quality and safety in food and beverage manufacturing.
7.16Australian spirits manufacturers are also constrained by market access costs as well as unfamiliarity with the international markets. The high cost of entering a new market can be a challenge for many Australian spirits manufacturers, compounded by unfamiliarity with export processes as well as the commercial complexity of accessing new international markets.
7.17Submitters considered there is a lack of Australian Government support for spirits manufacturers accessing export markets. The Australian wine sector has support through Wine Australia and Austrade; however, the Committee heard that the spirits industry is not offered similar support. Mr David Vitale, Vice President, Australian Distillers Association and Founder, Starward Whisky told the Committee:
I've got a live example of being told: 'We don't have any budget or support for spirits at the moment. Our focus is solely on wine.' That's an Austrade quote from an email, and it's got to stop. We've got to have the ability to have representation.
Alcohol definitions
7.18The Committee heard that improved regulation on definitions and labelling would better support Australian alcohol products, pointing out that other countries protect the reputation of premium products by heavily regulating production and labelling standards of alcohol.
7.19Various submitters argued that improved regulation would benefit the industry by providing quality assurance and therefore increasing consumer confidence in Australian-manufactured products. The Tasmanian Whisky and Spirits Association, Spirits & Cocktails Australia, and the Australian Distillers Association also argued that the benefits of improved regulation in the longer-term would ‘enable further intellectual property rights that build value in domestically manufactured products, like certification trademarks and Geographical Indication’.
7.20In contrast, New World Whisky Distillery is of the view that Australia’s relaxed approach to the definition of whisky enables innovation. New World Whisky Distillery considers that innovation makes Australian manufacturers internationally competitive.
7.21There may be an opportunity for Australia to improve its regulation while maintaining the ability to innovate. Mr Satya Sharma, Board Member, Spirits & Cocktails Australia, and Chief Executive Officer, Lark Distilling Co. told the Committee that:
I think we've got a unique opportunity to set our own standards which are uniquely Australian, protecting what we believe is important from the perspective of innovation that allows us to have our own distinct fingerprint as we take that to the world. Those unique things are things we want to protect, as opposed to stifling innovation and growth, and they would be things that we would come together and hopefully get buy-in as well as enforcement in order to make sure that we've got descriptors which are truly descriptive of Australia.
7.22A new spirits representative body would be well placed to consider regulatory standards for Australian-manufactured spirits. It would be able to consult with businesses and work with government to develop and implement industry-informed regulation.
7.23Cider Australia commented on definition issues affecting cider, arguing for a tighter definition in the Australian New Zealand Food Standards Code (FSANZ). Cider Australia suggested reforms to the current FSANZ standard 2.7.1 which sets out requirements for labelling of alcoholic beverages and food containing alcohol. Suggested reforms include minimum juice requirements, alcohol by volume limits and the introduction of specified definitions for different types of cider. Cider Australia considers that these changes will improve product integrity, consumer understanding, and trust in cider products.
Competition
7.24Submitters drew attention to the limited competition in the Australian beer sector. Two major foreign national companies Lion (owned by Kirin) and Asahi dominate the market, brewing 85 per cent of Australia’s beer.
7.25The Independent Brewers Association (IBA), which represents 600+ independent craft brewers, discussed competition issues in its evidence to the Committee. IBA considers that inflationary pressures are pushing consumers to purchasing cheaper beers produced by foreign multinational owned breweries, with locally made beers becoming out of reach for many consumers.
7.26Ms Kylie Lethbridge, Chief Executive Officer, Independent Brewers Association and Mr Callum Reeves, Board Chair, Independent Brewers Association commented on market access for small brewers:
… the main issues that are affecting our business is being locked out of sales opportunities due to the contracts that the foreign-owned multinationals have over the vast majority of beer taps around Australia.
I would love to see better labelling. I would like it to be very clear who the owners are. I'd also like to see ways of reducing the stranglehold that those major brewers have over so many of the taps. More than ninety per cent of the beer taps around Australia are contracted to those breweries. Then you've got the other 600 independent brewers fighting over the 10 per cent that are left. In many cases, the contract might say that 90 per cent of taps are contracted to their beers.
… we're not only fighting for tap space; we're fighting for fridge space because the fridges in a venue are contracted.
No-Lo alcohol products
7.27No and low alcohol (NOLO) products are a growing beverage category for increasingly health-conscious consumers seeking alternatives to alcohol. Australian alcohol manufacturers are producing lower and no-alcohol alternatives to their conventional products across the beer, wine, and spirit categories.
7.28Pernod Ricard Winemakers discussed the growth of NOLO wine, noting that NOLO wine sales are increasing despite an overall decline in still wine. The Millennial and Gen Z demographic are attributed as the major consumer groups driving this trend.
7.29Pernod Ricard Winemakers highlighted the challenges of making NOLO products, stating that further research and development is required to overcome barriers such as taste and cost of production. This is complicated by consumers being unwilling to pay extra for NOLO products.
7.30Australian Grape & Wine considers that there is an opportunity for Australia to be a global leader in research and innovation with a focus on NOLO wines, as well as other grape products. However, they also point out the challenges of NOLO wines, particularly reproducing the quality and ‘mouthfeel’ that customers expect.
7.31Australian Grape & Wine believes that Australia’s advanced wine science expertise gives an opportunity to lead the world in innovation using advanced fermentation technologies and advances in flavour chemistry. This would require investment in new technology and research but, if achieved, the Australian wine sector will be positioned to develop high quality NOLO wine products before its international competitors.
Committee comment
7.32The Committee acknowledges the concerns raised by the alcohol industry about domestic industry growth and accessing international markets. The spirits and beer sectors (particularly the independent brewing industry) are both facing inflationary pressures that inhibit growth.
7.33The Committee felt that its Terms of Reference for this inquiry did not enable it to give full consideration to the complex issues raised by the alcohol industry, including taxation. Although taxation is one part of it, any change to alcohol taxation must also consider the public health aspects of alcohol consumption. A detailed investigation into health, along with changing consumer preferences for alcohol and market competition, is outside the scope of this inquiry.
7.34However, the Committee agrees with industry that an in-depth review is needed of all aspects of the alcohol industry to provide a comprehensive path forward. Given that such an inquiry would cover a range of subjects, the Committee recommends that a Select Committee be set up to focus solely on the alcohol industry, and how to best support this sector of food and beverage manufacturing in Australia.
7.35The Committee supports the Australian spirits industry’s call for the establishment of ‘Spirits Australia’ as a support body for the industry. Wine Australia has proven a to be successful model, and a similar model could be utilised in the spirits sector. Any new body should be industry-funded.
7.36The Committee recommends the formation of a new House Select Committee to inquire and report into all aspects of Australia’s alcohol industry.
7.37The Committee recommends the Australian Government work with industry to establish a new body, ‘Spirits Australia’, similar to the existing statutory body, Wine Australia. The new body should be developed in consultation with industry stakeholders and be industry-funded.