With the kickoff of the Six Nations tournament, UK pub goers are preparing to buy nearly 130 million pints. According to the British Beer and Pub Association (BBPA), this could generate an uplifting £56 million more than typical weekends without major sports matches. Yet, even as the nation gears up for the rugby festivities, there’s another story brewing on the financial front—a stark reminder of the challenges facing the UK pub and brewery sectors.
Despite the anticipated surge in sales, UK consumers are, unfortunately, caught up in what Emma McClarkin, Chief Executive of the BBPA, described as the highest beer duty rates among competing nations. Pubs and consumers are facing the reality of paying three times more than drinkers across France and Italy. McClarkin stated, “With the expected additional 12 million pints poured during the tournament, worth £56 million more, I encourage anyone wanting to watch the match to head to the pub and support their local.” But the cheers for rugby may be muted by realities of excessive taxation.
The BBPA has loudly voiced concerns over this high tax burden, calling on the government to implement significant cuts to beer duty. They argue these changes are necessary to get closer to the European average and to alleviate the pressing financial strain on pubs and breweries, which reportedly make only 12 pence profit per pint at current duty rates. With impending rate increases predicted to cost the industry upwards of £650 million, pubs are pleading for urgent business rates reform.
Interestingly, this issue goes beyond just rugby and beer. The backdrop of rising prices and economic challenges is affecting the broader drinks market, most prominently seen through the eyes of industry giant Diageo. Under new CEO Debra Crew, Diageo has encountered increasing investor scrutiny following poor performance and global market trends impacting alcohol consumption.
Recent half-year results have become pivotal as investors watch closely, especially after the company issued its first profit warning since Crew took over the helm following the death of beloved former leader Ivan Menezes. Investors have become wary, particularly as younger generations are increasingly opting for lower alcohol consumption due to health-conscious trends, exacerbated by the popularity of weight-loss drugs such as Wegovy and Ozempic.
“Sales were initially rebounding strongly post-pandemic, but the recent trend has been concerning,” said one industry analyst. Indeed, after hitting £40 per share, Diageo’s stock plummeted nearly 30%, underscoring the troubling sentiment even as the pubs anticipate enjoying the boost from six nations matches.
While UK regulations have reportedly helped some aspects of the beer market—such as imposing lower duties on drinks below 3.4% alcohol by volume—many still struggle to adapt as their strengths lie within traditional high-alcohol beverage sales. Most of Diageo’s income relies on spirits like whisky and vodka, making them vulnerable when the market pivots toward non-alcoholic options.
Overall, the challenges faced by the UK pub and brewery industries are multi-faceted. For local establishments, high beer duty rates together with new council policies and increased costs create hurdles to remaining profitable. Meanwhile, major players like Diageo bear the brunt of shifting consumer preferences and economic headwinds. The industry is at a juncture where timely government intervention could significantly alter the current climate.
With the Six Nations now underway, the question remains: will the enjoyment of pints be dampened by high taxes, or will the industry find ways to ride the waves of change?