Pressures of High Inflation an Ongoing Low for Alcohol Sector

Consumers will most likely be the ones to foot the $84 million bill for their favourite beer, wine or spirit due to the historic rise in inflation announced this week, according to the NZ Alcohol Beverages Council (NZABC).

The 6.9 percent rise in the Consumer Price Index (CPI) is used to increase the excise tax on alcohol. At $1.2 billion currently, this works out to be an additional $84 million of excise tax that producers and hospitality businesses are in no position to absorb.

“Businesses are already absorbing many increased costs – transport, fuel, cost of goods and services, regulatory and compliance costs, and excise tax. Shipping costs have trebled, aluminium has doubled, and minimum wage increases are being passed on through the supply chain,” noted Bridget MacDonald, NZABC’s Executive Director.

"There comes a tipping point where the pressure of rising costs means it’s no longer viable for a business to absorb those mounting costs, and they must consider passing some or all on to customers. Customers can’t outpace inflation either; they are also keeping an eye on expenses and tightening their belts.”

Excise tax applies to alcohol produced for consumption, but the tax paid is escalating despite alcohol consumption decreasing around 25 percent since the late 1970s. 2 Surprisingly, only around half of Kiwis (56 percent) realise that in addition to GST, there is an excise tax on alcohol beverages.

“We are waiting for confirmation on the increase for this year. It will be up to individual businesses to absorb costs or pass them on. But, right now, we’ve got businesses heading into a quiet winter weighing up whether to pass it onto customers who are already being careful with their spending during this time of economic uncertainty,” concluded MacDonald.