Coopers fears excise costs will prove unpalatable
The twice annual increase in the excise the government slaps on beer could cause a deep wedge to emerge between Australian drinkers and their favourite glass of amber, and force shoppers to look for cheaper alternatives such as cask wine.
Coopers managing director Tim Cooper, the head of the nation's biggest Australian-owned brewer, has warned beer was price sensitive, and the days when consumers would drink beer no matter what the price were over.
"Our worry is now that beer is an elastic commodity and consumers can shift to other products like cask wine," Dr Cooper said on Friday.
"We can't just forever be increasing the price of beer and expecting people to keep on buying it in the same volumes."
Beer sales in Australia are stubbornly stuck at their lowest levels since World War II. Sales volumes have been falling for three years.
Adding to the pressure on beer sales are competitive threats from other beverages such as cider.
For the time being the slump in beer does not seem to be hurting Coopers, however. The South Australian brewer brushed aside the troubles in the sector to post record turnover, profits and sales volumes.
Coopers, which has a 4.5 per cent share of the Australian market, said in the year to June 30 its turnover rose by 16.1 per cent to $216 million.
Profit increased by 13.4 per cent to $30.8 million and beer sales were up 8.3 per cent to 69.7 million litres - a rise from 64.3 million litres last year.
Dr Cooper said three-quarters of that volume was driven by strong contributions from its new international brands Carlsberg, Sapporo and Kronenbourg, while sales revenue in the brewing products division, which includes Coopers DIY home-brew kits, was up 7 per cent.
Strong sales for its home-brew division was driven by the acquisition of Mr Beer in the United States, which increased revenue by 12 per cent.
Mr Beer contributed $2 million to Coopers' bottom line.
Coopers said it had absorbed the August 1 beer excise increase for its packaged beers, which would have added roughly 12¢ a case to the price. It was the first time Coopers had absorbed the tax in more than six years.
Dr Cooper said the decision had helped support volume in the first few months of 2013-14, and the extra sales should potentially help to cover some of the lost margin. "This is certainly helping volumes but of course it's at the expense of price. My view is if we can grow volume then we are spreading the overheads over a bigger volume and that helps us with the bottom line."
He said the "'jury was out" on the benefits of absorbing the excise, and that it might be repeated one more time in February.
It was easier to absorb the tax in a low inflation environment but the brewer still faced cost pressures especially in packaging and malt prices, he said.