Tax hikes hit beer drinkers
By : Magdalena Wierzchowska
The next few months could be a testing time for Poland's beer lovers prices are expected to increase after the government slapped an 8% tax on beer at the start of February.
Get it while you can: Tax hikes on beer will push prices higher."
It's the first of three tax increases scheduled for this year. A further 10% tax hike is expected in June and another one is set for September. Breweries admit that consumers will have to carry the costs of the price rises.
According to Bogda Sikorska, an analyst at CDM Pekao, small and medium-sized breweries (such as Perla or Dojlidy) will increase beer prices most. Within the next two weeks they may rise by as much as 8%. Meanwhile, larger companies, such as the Zywiec Group or Kompania Piwowarska, will probably only push up prices marginally, she added. "Smaller breweries are much less profitable, and they can't absorb costs," Sikorska said. "Bigger ones are able to minimalize the costs of production and advertising."
Finance Ministry spokeswoman Anna Sobocinska said the ministry estimates beer prices will increase by 2.3% this year. She said that by the end of the year, excise will be only zł. 0.06 more per half-liter of beer than last December from zł. 0.36 to zł. 0.42.
But brewery owners are adamant the increases will hurt business. Managers of breweries together with the labor unions have tried to negotiate smaller tax hikes for this year, said Krzysztof Rut, a spokesman for the Zywiec Group. Even in January, brewery managers and unions tried to lobby for postponing the June increase to September, and replace the 10% increase with the excise calculated on the amount the budget will receive in eight months, Rut said. "We haven't received any answer yet," he said.
Sobocinska said the Finance Ministry has a tough job finding money for the budget. This year, the ministry estimates it will receive zł. 1.9 billion ($463 million) from beer excise. "The budget is imposed on the ministry by the Sejm and we have to implement it," she said.
The tax on beer could even result in a drop in state budget income as beer sales drop, Sikorska said. If beer prices rise by 1%, sales fall 1%, according to a beer industry report published by market research company CASE-Doradcy.
Meanwhile, the ministry said this argument was too simplistic. "Such a simple comparison that if excise on beer is increased the sales will go down can't be made," Sobocinska said.
Elsewhere, breweries hit by regular excise hikes and rapidly increasing advertising costs have had to restructure, which includes laying off staff, beer industry analysts said. Zywiec Group had to sack 400 people last year and plans to dismiss another 300, Rut said. "If the sales fall, jobs will have to be reduced even further," he said. Out of the 35-40 small breweries, probably 10-15% will go bankrupt, he added.
