State can aid craft cider brewers replicate beer boom

Cut in excise duty and introduction of minimum unit pricing would help level playing field

With a market share of just 6.9% of the Irish beer market, the entire Irish cider category is seen as beer’s poor relation, but there’s more to its potential than meets the eye.

With a market share of just 6.9% of the Irish beer market, the entire Irish cider category is seen as beer’s poor relation, but there’s more to its potential than meets the eye.

 

This autumn, with three key Government and EU decisions to be made, the Irish craft cider sector is on the cusp of a windfall that would see it grow fourfold from 12 to 46 producers across the country, emulating the growth craft beer producers have enjoyed since 2005.

The benefits would extend beyond craft cider producers with rural jobs, tourism, contributions to Ireland’s carbon sequestration goals and gains in exchequer returns all flowing from the three potential decisions, and one in particular.

The biggest decision is whether the Government chooses to implement a 50 per cent reduction in excise duty on craft cider in Budget 2022. This would level the playing field enjoyed by craft beer since 2005. Another decision for the Government is whether to proceed with minimum unit pricing of alcohol as provided for in the Public Health (Alcohol) Act. Finally, the EU is considering the adoption of a legal definition of cider. All three decisions are likely to be made before Christmas.

Cider Ireland defines “craft cider” as cider produced using pressed apple juice and nothing else. Craft cider uses four times the amount of apples to make one litre compared with mass-produced versions, which use large quantities of sugar syrup to bulk up products.

According to the EU, a craft producer is an independent entity making less than 15,000 hectolitres per annum. There are 12 craft cider producers in Ireland, compared with 75 brewers of beer (up from three independent breweries in 2005).

With a market share of just 6.9 per cent of the Irish beer market, the entire Irish cider category is seen as beer’s poor relation, but there’s more to its potential than meets the eye.

In the UK, cider enjoys almost three times the market share that it does in Ireland with an 18 per cent share of their beer market. A large cohort are small producers that have thrived because of targeted supportive fiscal measures – so there is room for improvement in Ireland. The UK is the largest cider market in the world with a value of €1.52 billion – so Irish producers have a massive target to aim for. The UK’s excise rate on cider (45.66p per litre) is less than half the Irish rate (94.46 cent per litre – the second highest in Europe) – so reducing the rate can only help.

Cider is on a strong growth path globally. It’s compound average growth rate (CAGR) of 5 per cent in the last five years, is superior to beer (0% CAGR), wine (2%) and even spirits (4%).

So, grounded in strong fundamentals, there is no reason to believe that Irish craft cider can’t do better – if it’s nurtured.

Let’s look more closely at the trio of potential game-changing measures.

A 50 per cent excise reduction is in the gift of Government following the EU’s passing, in 2020, of the Structures Directive 2020/1151 which gives permission for all EU member states to offer a 50 per cent excise relief to independent small producers of a range of drinks, including cider.

A 50 per cent reduction would improve the viability of the existing 12 craft cider producers, all bar one of whom are still under 10 years old. It would also encourage new entrants, just as it did in the craft beer sector. We see potential for the number of craft producers to increase from 12 to 46.

Because craft cider accounts for just 1 per cent of both the Irish cider market and the €53 million in duty raised annually on cider, the exchequer would stand to lose just €265,000 from a 50 per cent reduction. These monies would soon be replaced and improved upon through increased tax receipts from an expanding sector.

Also, if craft beer can secure 3.4 per cent share of the beer market, then craft cider can grow from its 1 per cent share of the cider market.

If the Government implements minimum unit pricing, as part of the Public Health (Alcohol) Bill, it would limit the effect on craft ciders from heavy discounting by mass-produced ciders. It could be introduced as soon as 1st January next year.

Finally, the EU is considering establishing a definition for cider for the first time. The lack of a definition leads to disparity in the legal and trade frameworks governing the sector across the EU. This feeds into a lack of confidence at consumer level, suppressing the sector overall.

With traditions going back centuries in Ireland, Britain, France, Germany, Spain, Belgium, Scandinavia and Poland, there is a lot of regional variation in the types of cider produced in Europe which stymies the development of a definition. The European Cider and Fruit Wine Association (AICV), which includes Cider Ireland’s members, has adopted a code of practice committing to the use of fermented fruit juice. It has made a submission to the EU for the adoption of a limited definition of cider.

From an environmental perspective, Ireland imports six million tonnes of dessert apples every year. Sector growth would encourage increased orcharding, contributing to reducing our national carbon footprint.

Craft cider producers also have a much lower carbon footprint per litre than mass producers who consume significant energy through transportation of imported apples and ingredients for bulk quantities of glucose syrup and apple juice concentrate.

Beer and whiskey producers have shown how strong visitor attractions in every nook and cranny of the country can be established.

It is high time to level the playing field and support rural communities by giving craft cider producers the same breaks as craft beer.

Daniel Emerson is chair of Cider Ireland, and chief executive of Nohoval Drinks Company, producers of Stonewell Cider

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