Poland: Parliament mulling yet another increase in excise duty on beer
Just a few days after the adoption of the act increasing the excise duty on beer by 10 percent from the new year and by another 28 percent over the next five years, Poland’s MPs began work on another project assuming an increase in excise duty on sweetened flavored beers, the Spark Chronicles reported on December 10.
According to industry representatives, it will lead to an increase in beer prices and a further decline in its consumption. And this will impact not only breweries, mainly smaller ones, but also farmers and small shops that live off selling beer.
“Last year we were surprised by the pandemic, which caused a few percent of the market decline. This year, despite the fact that we were counting on a rebound, we faced an even deeper decline. We have lower sales than last year – the decline is over 5 percent compared to 2020. Beer consumption in Poland is at the lowest levels in the last 10 years: over 3.5 million hectolitres of beer disappeared from the market in three years,” said Bartłomiej Morzycki, general director of the Union of Brewing Industry Employers – Polish Breweries.
“This year the brewing industry was surprised by a sudden increase in excise duty rates – by 10 percent from January 1 of the new year and almost 30 percent for the next five years. Only a few days later, the parliament started to work on the second excise tax increase - this time for sweetened beers,” he added.
Three years ago, the brewing industry was at its peak. Beer production exceeded 40 million hectolitres, and Poland was on par with European beer giants. But then came the cool summer of 2019, the excise tax increase from 2020, and then a pandemic that especially hit the gastronomy. As a result, consumption fell to 93.6 litres per capita.
“We are currently dealing with another excise tax hike on all alcoholic beverages, except for cider and perry, and an additional increase, which will only hit de facto flavored sweetened beers. The excise duty is to apply to the total amount of the product, including ingredients added to the finished beer, e.g. juice or sweetener.”
This increase is the result of the amended European Union directive, all member states have until 2030 to apply it. Meanwhile, the Polish parliament has the intention of introducing these changes at the earliest possible date, i.e. from the beginning of 2022.
As estimated by Bartłomiej Morzycki, last year flavored beers reached an almost 9 percent share of the beer market and are showing an upward trend. Depending on a specific product and its composition, the excise tax increase is estimated to reach from 20% to even 60%, which will translate into the final price for the consumer, and for the entire brewing market it means about 3% increase in tax paid to the budget. The industry estimates that this amount may reach up to PLN100 million during the year.
“We would like to have a break, because we are the industry that suffered the most during the pandemic. Lack of collective consumption translated into declines on the beer market and these declines very severe, and also the unprecedented scale of inflation, which increases production costs and puts strong pressure on the increase in the average beer price, all of this accumulates at the same time with the excise tax increase, which has just been adopted by the parliament, and the excise tax increase for flavored beers, on which work is just beginning,” lists Bartłomiej Morzycki. “Let me remind you that a smaller beer market means lower purchases from farmers, lower turnover in shops, especially small-area stores where 2/3 of beer is sold, a loss of jobs and a loss of value in the entire supply chain.”
Smaller craft and regional breweries also perceive this year as even more onerous than last year.
“We assume that, compared to last year, it may be a drop of even several percent, between 3 and 5 percent,” estimates Andrzej Olkowski, president of the Association of Regional Polish Breweries.
“In addition to the pandemic, the industry was damaged by poor summer weather, the lack of foreign tourists and the fact that many Poles have chosen holidays abroad this year. As a result, less beer was sold on the domestic market. The third reason was the increase in excise tax, which hit us painfully and strongly affects the final price of beer.”
According to Andrzej Olkowski, the increase in the tax on flavored beers may cause greater damage in the segment of small breweries, because the share of flavored beers in regional breweries is higher and ranges from a dozen to even 20%. In his opinion, the effect of introducing these changes may be counterproductive, i.e. sales in this segment will drop so much that less money will go to the state budget than before the excise tax was raised.
“We, as regional breweries and the entire industry, are calling for this increase to be postponed to the next year. We already have a road map in the excise tax policy, according to which it will be a 10 percent increase in the first year, while in the following years, 5 percent. If this increase in excise duty on sweetened beers were to be postponed for a year, there will be no such accumulation in the next year, because it will be only a 5 percent increase on sweetened beers,” says the president of the Association of Regional Polish Breweries.
10 December, 2021
