The alcohol industry was out today trying to spin the line that the Federal Government’s excise increase on Ready To Drink products (RTDs) or alco-pops would see younger drinkers heading off for cheaper thrills, such as “drugs”. But it can’t disguise how its members have been flogging these cheap alcoholic drinks to kids as hard as they can for 12 years.
They have been using the pricing anomaly set up under the GST, to price the drinks as cheaply as possible and a doctors’ groups pointed to its influence back in 2003 in this document.
The increase is expected to raise more than $2 billion in extra revenue over the next four years and media reports yesterday said part of the extra funds would be used to fund Australia’s largest ever investment in preventive health, focusing on alcohol, smoking, diet and exercise.
Under the tax increase, the level of excise charged on RTDs has been lifted from $39.36 per litre of alcohol content to $66.67. It means RTDs will now be taxed at the same rate as spirits, closing a loophole introduced with the GST in 2000 by the Howard Government (and not closed) whereby the excise is lower when the product is purchased pre-mixed than when it is mixed fresh.
Brewers, Lion Nathan and Fosters are major manufacturers and distributors of these RTDs, as is Coca Cola Amatil and the international alcohol giant Diaego. For Lion Nathan, the impact will be small because RTDs and liquor are a minor part of its business: but it does distribute Bacardi. They are a major business for it in New Zealand.
Fosters has a much bigger involvement, but beer and wine dominate its operations, while Coca Cola Amatil has been pushing heavily into alcohol through premium beer and dark sprits and could be the company most impacted in the short term. And investors in Pacific Equity Partners funds which bought Independent Liquor in New Zealand for over $1.1 billion last year won’t be too happy either. Independent is the largest producer of RTDs in Australasia.
UK based Diaego’s owns Bundaberg Rum in Australia which is a heavy marketer of RTDs to younger male consumers through its support for Rugby Union and cricket and extensive marketing during games. Diaego also controls global vodka brand, Smirnoff, the Johnny Walker brand of whisky and Bailey’s Irish Cream, among other products. Johnny Walker is a major advertiser and sponsor during cricket games on Australian TV, aimed at young male viewers.
Coca Cola Amatil has made rapid strikes to building an alcohol division to go with its soft drink, fruit juice, water and food businesses. It is building capacity in premium beers and in RTDs.
Coca Cola Amatil has been the company pushing hardest to build its portfolio of brands and market share. The company has a strategy of marketing fizzy drinks to younger consumers, then alcopops as they got older, and water and coffee as they moved into the 20s and 30s and beyond.