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«A report commissioned by The Brewers of Europe and conducted by Europe Economics ISBN 978-2-9601382-6-9 EAN 9782960138269 Europe Economics is ...»

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The Contribution made by Beer

to the European Economy

EU Report - January 2016

The Contribution made by Beer

to the European Economy

EU Report - January 2016

A report commissioned by The Brewers of Europe

and conducted by Europe Economics

ISBN 978-2-9601382-6-9

EAN 9782960138269

Europe Economics is registered in England No. 3477100. Registered offices at Chancery House, 53-64 Chancery Lane, London WC2A 1QU.

Whilst every effort has been made to ensure the accuracy of the information/material contained in this report, Europe Economics assumes no responsibility for and gives no guarantees, undertakings or warranties concerning the accuracy, completeness or up to date nature of the information/analysis provided in the report and does not accept any liability whatsoever arising from any errors or omissions.

© Europe Economics. All rights reserved.

Except for the quotation of short passages for the purpose of criticism or review, no part may be used or reproduced without permission from The Brewers of Europe.

4 The Contribution made by Beer to the European Economy Economic Contribution of Beer to the European Economy Chapter Tablehere of Title contents Table of contents 5 Table of contents Table of contents

Foreword by the President of The Brewers of Europe

Executive Summary

1. Introduction

2. The scale of the European beer sector

3.The economic impact of the European beer sector

4. The economic impact in agriculture and supplying sectors

5. The economic impact in the hospitality and retail sectors

6. Government revenues

7. Sources and methodology

6 The Contribution made by Beer to the European Economy Economic Contribution of Beer to the European Economy

–  –  –

What we are seeing is that, as confidence returns to the There is also a continuing drift of beer consumers from the wider economy, confidence is also returning to the beer more labour intensive bars, pubs and restaurants to the retail sector. And this is not a one-way relationship by any means, sector, which impacts directly on the ability of beer to create with a flourishing beer value chain capable of making an jobs in the wider economy. A sympathetic and supportive important contribution to strengthening Europe’s whole tax system that recognises the economic importance of economy. both beer and the hospitality sector therefore doesn’t just help brewers but also helps the whole beer value chain to It is notable that beer in Europe now generates an estimated build upon the early stages of economic recovery, to the

2.3 million jobs throughout the value chain, from grain to benefit of the European economy as a whole.

glass. Indeed, 1 job in a brewery generates on average a further 17 jobs - 2 in supply and agriculture, 2 in retail and Finally, it would be remiss of me not to mention Germany, 13 jobs in the bars, pubs, cafés and restaurants of Europe. which in 2016 is celebrating the 500th anniversary of the Reinheitsgebot (the German Purity Law). And what One of the most remarkable phenomena of recent years is interesting to see today is how, within the rules of the has been the growth in the number of breweries in the EU, Reinheitsgebot, many German brewers are also innovating with an increase of over 900 breweries since 2013. The EU to meet consumer interest in beer diversity, showing how now counts over 6,500 breweries, adding to what is already beer is as relevant today as it was half a millennium ago. So, an extremely diverse beer scene, stretching to all corners of whilst there are many words to toast a beer in Europe, this the European Union. year I say “Prost!” Brewers across Europe are investing heavily in new product innovation to satisfy consumer interest in a wide variety of beer styles, including lower- and non-alcohol versions.

The level of investment involved is a sure sign of growing confidence amongst brewers, helping to lift the wider Demetrio Carceller economy out of the recent downturn. Whilst consumers President of The Brewers of Europe often like to drink local beers, they also increasingly try new tastes, with exports now making up around 20% of European beer production. Over a third of those exports are going to destinations outside the EU, satisfying the world’s thirst for European beer, with Europe’s status as the traditional heartland of modern brewing, its reputation for quality and the increasing focus on innovation and diversity.

Ensuring that the importance of Europe’s beer sector is recognised in the EU’s trade negotiations can help support this improving trade balance.

8 The Contribution made by Beer to the European Economy Economic Contribution of Beer to the European Economy

–  –  –

Executive Summary The EU is the second largest beer producer in the world, after China. There are over 6,500 active breweries, which produced around 383 million hectolitres of beer in 2014.

Domestic consumption has declined over a number of years, affected by wider macroeconomic trends, but is increasing in 2014 in line with the early stages of economic recovery.1 Total consumer spending was over €110 billion in the EU in 2014.

In part this reflects companies innovating with new craft and specialty offerings appealing to changing consumer tastes.

On-trade consumption has continued to decline in most countries, but there are more exceptions now than before (e.g.

Spain and Italy both saw an increase in the on-trade share of consumption in 2014).

The brewing sector in Europe is also a major exporter. EU countries sold over 27 million hectolitres of beer outside the EU in

2014. Some countries’ exports (intra and extra-EU) represent more than half of their total production (notably Belgium, the Netherlands and Denmark). Most countries import significant amounts of their consumption and export significant amounts of their production (10% or more of consumption is imported and similar shares of production are exported).

Enormous numbers of jobs depend on the continued success of beer in Europe. The total contribution of beer to employment

was around 2.3 million jobs in the EU (around 1% of total EU employment) in 2014, which includes:

• nearly 130,000 jobs in the brewing sector alone (this is in companies producing beer);

• a further 290,000 jobs in supply sectors (in industries like agriculture, packaging and services, which depend on the €16 billion spent on domestic purchases by brewing companies); and, • 1.65 million jobs generated by beer sales in the on-trade hospitality sector (e.g. bars, pubs and hotels) and over 270,000 jobs in the off-trade retail sector (e.g. supermarkets or specialist shops).

Significantly, nearly 95% of beer-generated employment occurs outside the brewing companies themselves. In fact, 1 job in the brewery creates over 17 jobs in the wider economy.

These workers make a significant contribution to economic growth. The total contribution to value added in the EU in 2014 was around €51 billion. This would be comparable for instance to the total GDP of Croatia or Luxembourg.

In the EU, in 2014 there was:

• nearly €16 billion in value added in the brewing sector itself;

• a further €8 billion in value added generated in the supply sector; and,

• over €23 billion in value added generated in the hospitality sector (the on-trade) and over €4 billion in the retail sector (the off-trade).

The contributions to employment and value added have increased from 2013 to 2014. The largest increases occurred in the new Member States and, among the major EU economies, Italy and the United Kingdom.

Governments gain significant revenue from taxes on products (VAT and excise duties) and labour incomes earned in the

supply chain. The total contribution of beer to government revenues was nearly €42 billion in the EU in 2014:

• VAT charged on beer sales produced around €19 billion in revenues (almost €13 billion on-trade and over €6 billion off-trade);

• taxes on labour income earned by workers in the brewing sector, supplying industries and the on- and off-trades produced around €12 billion in revenues; and,

• excise duties charged on beer sales produced around €11 billion in revenues (the highest excise duty rates are currently charged in Northern Europe and rates have increased the most in recent years in Northern European countries).

All of this evidence provides a persuasive case that the beer sector is large and successful, making a material contribution to the meeting of overall goals for economic policy in EU Member States. However, the environment could be challenging if volumes decline as a result of difficult economic circumstances, and there is a need to constantly innovate to be able to supply changing consumer tastes and competitive global markets. Governments can maximise the economic impact of the sector with policy choices including a moderate tax burden.

1 Economic recovery began in Europe in the second quarter of 2013 and is expected to continue spreading across countries and gaining strength progressively.

10 The Contribution made by Beer to the European Economy Economic Contribution of Beer to the European Economy

–  –  –

1. Introduction This study was commissioned by The Brewers of Europe, who wishes to understand the economic impact of the beer sector across the EU and in some non-EU countries, in terms of its impact on value added, employment and government tax revenues. This EU report focuses on the findings for the EU but country reports have also been produced, including for Norway and Switzerland. This is the 6th study estimating beer’s contribution to the economy in Europe.2

1.1 Economic impact

This report aims to quantify the economic impacts of beer in the European economy. Beer creates value in European economies in a number of ways: it has a direct utility value to consumers, who enjoy consuming beer and prefer the choice of a diverse range of beers; it has a social value in many countries as people meet over a beer in a bar or pub or at home; and it has an existence value as even many non-drinkers value the beer traditions of their countries. Many of those sources of value are growing in importance in an environment in which, as we shall see later, premium beers, craft and other specialty beers are becoming an increasingly valuable part of the overall market – the value for a given volume of consumption is rising.

Equally, the production and distribution of beer creates a range of economic impacts for different stakeholders involved either directly or indirectly in the supply chain. In this report, we quantify the value of the economic activity associated with

that supply chain, which produces beer and distributes it to customers. Three kinds of economic impact are assessed:

• direct impacts in the beer sector – value added, employment and government revenue impacts in businesses brewing beer in Europe;

• backward linkages in supplying sectors3 – value added, employment and government revenue impacts in the businesses supplying the beer sector itself; and

• forward linkages in the on- and off-trades4 – value added, employment and government revenue impacts in the businesses selling beer, particularly the hospitality sector (representing the on-trade) and the retail sector (representing the off-trade).

There is more information on how these impacts were estimated in the final chapter (covering sources and methodology).

Crucially, the direct impacts in the beer sector and the backward linkages in the supplying sectors relate to beer produced in Europe (excluding imports, including exports), whereas the forward linkages in the on-trade and the off-trade relate to beer consumed in Europe (including imports, excluding exports). This methodological choice provides a complete picture for the economic impact of beer.

1.2 Structure of the report The report first sets out different aspects of the beer sector at an aggregate European level.

• In Chapter 2, we set out the scale of the sector and its impact on intra- and extra-EU trade.

• In Chapter 3, we describe the economic impact of the sector overall.

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