New economic report on drinks industry highlights

Thursday, 12 November 2015

    • Potential export growth valued at €2BN and further 13,000 domestic jobs over next 15 years
    • Government’s Foodwise 2025 strategic plan for drinks industry requires private sector investment of at least €1.15 billion
    • The imposition of high taxes, regulatory costs and barriers will place Irish-based businesses at a disadvantage to other jurisdictions, and fundamentally undermine the export-led economic growth of the sector

A new report on the drinks sector, by economist Ciaran Fitzgerald entitled “Sustainable Growth of the Drinks Industry”, commissioned by Alcohol Beverage Federation of Ireland (ABFI) was launched today.

In his report, Fitzgerald states that the industry has the potential to grow exports in excess of €2 billion over the next 15 years; and to create an additional 13,000 jobs – with the majority of those jobs in Ireland’s rural economy. Fitzgerald claims however that this potential expansion is being compromised by the ’double regulation’ of the industry which is undermining competitiveness and is at odds with the Government expansion plans for the sector.
  • Key highlights from Fitzgerald’s report: The drinks industry is very clearly a major driver of economic activity across the economy of Ireland at a macro and rural level. As a result it has been identified by Government as a key growth sector with the potential to grow exports to over €2 billion over the next 15 years and create and support an additional 13,000 jobs, predominantly in the rural economy.
  • Meeting the Government’s Foodwise 2025 targets would see the drinks industry grow exports by at least €700 million, creating an additional 7,210 additional jobs in the Irish economy. Meeting the industry ambition of growing the Irish whiskey sector to 24 million cases would see Irish drink exports exceeding €2.2 billion. This would generate additional direct and indirect employment of 13,390 jobs in the Irish economy, particularly in rural areas
  • In contrast to the sectors substantive contribution to the Irish economy, its route to market costs in the domestic market through imposed taxes and increased compliance/regulatory costs, are undermining the sectors capability to maintain its economic impact
  • Excise and VAT taxes on alcohol are the second highest in the EU and run at four times the average rate of tax on alcohol across the European Union. This is resulting in alcohol prices which are consistently in excess of 60 % higher than average EU prices as measured by Eurostat
  • Given the significant efforts made by the sector to collaborate with government in restricting access to alcohol by minors and promoting responsible consumption, the imposition of additional regulatory and compliance costs is completely at odds with the Governments stated principals of better regulation
  • Industry commitment to responsible consumption regulation costs €30-40 million/year beyond normal compliance costs
  • Layering of regulatory costs on top of compliance costs acts as a poor signal to multinational and domestic investors in the alcohol sector.
    Fitzgerald said:

    “There is a disconnect between the targeting of the sector for growth and expansion as per the Government’s recent Foodwise 2025 strategic plan, and the government’s policies on price, taxation and regulatory costs. This inconsistency will ultimately act as a barrier to local and inward investment. The imposition of high taxes and regulatory costs is not economically sustainable and will only serve to undermine the economic contribution of the sector and curb its growth.”

    Ross MacMathuana, Director, Alcohol Beverage Federation of Ireland said:
    “Ireland’s drinks industry includes iconic brands such as Guinness, Jameson and the brewing of Heineken. It is a very significant employer both directly and indirectly through its support of the Irish tourism, farmers and the rural pub. This report has highlighted that significant export growth opportunities exists with the industry having the potential to grow exports by at least 85% and potentially to over €2 billion, creating and sustaining an additional 13,000 jobs, predominantly in rural Ireland. If we are to realise these ambitions, we need to have a more consistent policy framework in place informed by evidence-based regulation. We welcome Ciaran’s input into the debate, and hope that it will encourage a more informed discussion on the drinks sector, its contribution to society and its regulation in this country.”

    Ciaran Fitzgerald will present highlights from the report at an event this evening in National Library of Ireland Hall, Kildare Street at 6pm.