Casey's Beer

Finally, finally sorted out premises for the brewery. It’s the place I first thought would suit. Of course I wanted to check out other places to be sure. It was more like a process of attrition rather than elimination.

It’s an older unit in a complex of eight in Jamisontown (South Penrith). There is plenty of room, good rent, easy access and gas has been connected to the building in the past.

Sorting out the lease was not easy. I had to get the owner’s approval for the necessary work, in particular putting in a sloping floor. At first it was OK, then it wasn’t, then it was OK with an extra bond of $10,000 on top of two months rent. In the end I put together an estimate to remove the floor – about $4,000, and that satisfied the owner. So now it is just a bond of $5,000 all up including GST.

Another issue was applying a SkyCool membrane to the roof. A similar story – yes, no, and in the end yes after sending information about SkyCool.

The structure of the lease also complicated matters. The lease is contingent upon the development application and liquor licence being approved. When they are approved I then get two months rent free. In the meantime I pay rent. So if everything falls apart I can walk away from it losing only several months rent.

The equipment comes out of storage this coming Monday.

The Henry tax review does contain some joy for the microbrewing industry. It notes that for small producers it is costly to comply with the current excise scheme. The review recommends streamling excise arrangements for small producers. Streamling would include relaxing excise licencing conditions, and relaxing rules about the calibration and testing of equipment. Instruments used to determine alcohol content, and all fermentation tanks must be calibrated through the National Association of Testing Authorities. The review also suggests excise liabilities be reported through the quarterly Business Activity Statement. Wine producers already report their Wine Equalisation Tax obligations through their quarterly BAS.

The Henry tax review was released this Sunday. The review recommends a single rate of tax on the volume of alcohol contained in a beverage. The review takes the postion that alcohol taxes should not be used for general revenue raising, instead they should only cover the costs of the damage caused by alcohol, the “spillover costs”.

Beer and spirits are already taxed by their volume of alcohol, albeit at varying rates. Wine, however, is taxed by its value, and cheap wine is taxed very lightly. Moving to a volumetric tax on alcohol would bring in a floor price for alcoholic beverages. This would help counter some alcohol abuse. In essence it would cost you much the same to get drunk regardless of the beverage you choose.

The review is very clear about the limitation of using the tax system to curb alcohol abuse. Yes increasing the price of alcohol limits consumption but it penalises drinkers who do not abuse alcohol. Alcohol abuse can be better combatted by specific programs and interventions. The review notes that if the costs of alcohol abuse fell then so too could the alcohol tax rate.

The preferred rate for a volumetric tax is the current excise rate for full strength packaged beer, including the first 1.15% of alcohol content being tax exempt. The rationale for this is that very low alcohol products would be taxed quite lightly. For beer of 3.3% alcohol only half of the alcohol content is taxed.

The review wants to see not only the end of the current Wine Eqaulisation Tax but the end of any concession schemes as well. The current WET exemption scheme means a lot of wine is essentially untaxed apart from GST. If the purpose of alcohol taxes is to pay for the damage done by alcohol, then exemptions and concessions undermine that. And those alcoholic beverages which are taxed have to make good the shortfall, to the disadvantage of their customers.

The review also argues against the WET exemption scheme because it keeps uneconomic wineries going. Indeed, many small wineries survive only because of the scheme which distorts the market.The WET exemption scheme is also open to rorting. If a small winery does not use the maximum value of its exemption, then the exemption is sometimes passed up the supply chain. As well, the WET exemption discourages mergers as there would be only one exemption for the business created by the merger of two or more smaller wineries. Merging is often a way for businesses to survive in tough times, and now with grape glut the wine industry is in a tough spot. The review notes that there are much better ways to deliver industry and regional assistance than through the tax system.

The Government has not embraced the Henry tax review in its entirety. It is very unlikely the proposals for alcohol tax will be adopted within the near future. The wine industry doesn’t like it and the wine industry is politically too powerful. Expect some serious lobbying. Nonetheless it might provide inspiration for future Government policy.

What does it all mean for the beer drinkers and the brewing industry? If the review’s recommendations were adopted, then beer and spirit drinkers would no longer subsidise the wine industry. The microbrewing industry has been lobbying for an excise exemption scheme similar to that enjoyed by small winemakers. The review argues against such schemes on various grounds. Although the review’s recommendations on alcohol won’t be taken up by the Government, they still set the tone for Government policy. They can also provide excuses. It now seems even less likely the microbrewing industry will get the excise concession scheme it wants.

You can find the review of alcohol taxes here. It is quite readable.

So the government has said the Henry tax review will be released next weekend. I wonder is there is any signicance in releasing a tax review on May Day?

Tax has always been a big topic for brewing. Over the centuries it has shaped beer styles. Not only has alcohol been taxed, so too has malt. When Arthur Guiness started brewing malt was taxed, so the use of roast barley, which was not taxed, rather than roast malt gave Guiness a strong financial advantage. In Japan both alcohol and malt are still taxed. This puts all malt beers at a disadvantage and explains the boom in “beers” with very little malt. Different kinds of pulses are used, as was once the case in Britain with “pease beer”.

The timing of when taxes are paid is also important. traditionally in Belgium the tax officer came round and calculated and collected the tax before the brewer started brewing. The brewer was naturally loathe to throw away any failed brews. Some say this explains some of the Belgian beer styles.

With any kind of tax there are always tensions. Economists and treasury officials want “rational” taxes. Politicians want to use taxes variously to influence public behaviour and social objective, gain votes and reward supporters.

Currently beer and spirits are taxed on their alcohol content, with spirits taxed at a higher rate. Beer is taxed at two rates depending on alcohol content, and at two other rates depending on container size. Wine is taxed on its value rather than its alcohol content.

Ken Henry, the Treasury secretary, is known to favour taxing alcohol content. The wine industry do not want this at all because it would mean the retail price of mass wines would increase hugely, while the price of high end wines would fall. If the current beer rate were used there would be about $15 of tax on a 4 litre cask, and $3 on a bottle of Grange. GST would still be levied.

Health goups favour this approach, they also favour the abolition of the Wine Equalisation Tax exemption for small winemakers. The wine industry are very nervous about all of this.

In their submission the Brewers’ Association said they are happy with things the way they are. However for small breweries the two big issues are container size and the prospect of an excise relief scheme similar to that enjoyed by small winemakers. The Austalian Hotel Association is dead set opposed to changing the differential excise rate based on container size.

Despite lodging a petition for an excise concession scheme with the Federal Parliament, I don’t think the Microbrewers’ Association made a submission to the Henry tax review. There is nothing to be found in the list of submissions. The Tasmanian Association did make a submission outling the cases for the excise consession scheme, and reducing the container size for the lower bulk beer excise rate.

Whatever recommendation Ken Henry makes, they still have to be taken up by the Government. I don’t like the chances of an excise concession scheme getting up either way.

However container size is very important and the size should be reduced from 48 to say 20 litres. As the Tasmanian association argued there are OH&S issues with 50 litre kegs.

From purely a beer perspective the problem with 50 litre kegs is turnover. For example my local pub has been recently tarted up. It now runs 3 Squires beers, Big Helga and Fat Yak, Coopers Green, Pure Blonde, Cascade Light in addition to the standard pub beers. The problem is that they don’t turn over enough beer to justify that number of taps. For the VB, Tooheys etc the turnover is fine, but for the rest it’s not. Last Sunday evening I ordered a schooner of Squire’s amber and it was tangy. Not the first time either. I complained about it and was told that they clean the lines every week – the previous licensee was notorious for not cleaning the lines. Even with the wonders of glycol cooling systems and regular line cleaning, the beer still needs to turn over it can’t sit there for weeks on end.

If a small brewery is lucky enough to get a tap in a pub it’s beer is not going to turnover like Tooheys or VB. How long will a 50 litre keg last before the beer starts to sour? Once the beer does sour Joe Punter trying the beer for the first time will conclude that is how the beer is supposed to taste and big surprise he doesn’t like it. Even worse he might conclude that all small brewery beer tastes like that. People won’t drink it and the publican is left with beer they can’t sell. With a 20 litre keg there would not be these problems except that at the moment the beer in the 20 litre keg has excise levied at a rate about 40% higher than the same beer in a 50 litre keg.

Anyway we will see next week what Ken Henry recommends. I wonder whether any of the online bookies are taking bets on it.

On Wednesday morning Andrew Larsen and I met at Johnstons at Smithfield. Together we went over the gear to check that everything was there, and for any damage. There was no damage so no need to lodge any insurance claims. There were however several things missing. These include a couple of post-mix kegs, a stainless trolley, some lab instruments, possibly a regulator or two and some other small bits and pieces. Andrew is trying to find out what happened.

Most of the small stuff had been placed inside several of the conditioning tanks. There were all the tri-clover clamps and fittings, hoses, instrument stand/rack (grrrrr no instruments), blades for the mash mixer, grist hydrator, internals of the malt conveyor, and the manual for the conveyer etc. The conveyor is a Cablevey drag conveyor.

Overall it is quite a nice system. There will be no lugging crushed malt from the mill up to the brewer’s platform to pour it into the top of the mash tun to then mix it by hand. Instead the crushed malt is taken from the bottom of the mill, a two roller Peerless, through the conveyort to a chute of top of the mash tun. It then passes through the grist hydrator and into the tun. The grist hydrator is essentially a short length of tube with water sprays. The grist is sprayed with hot water as it passes through. It reduces the possibility of clumping. As well, a lot of the valves on the brewhouse are operated using compressed air. Push button brewing.

From Johnstons we then went over to Penrith to check out a couple of premises. The first one I had looked at several times previously. It’s an older style industrial unit, about 10 metres wide and about 27 – 28 metres deep. The second place was just around the corner and about 250 square metres. Although the unit itself was OK, it looks like there is no separate metering for water and with motor repair shops on both sides not the most suitable neighbours. I had only seen this place on-line. Truck access would be a bit tight.

The main attractions of the first place are generous parking and access, it has a back door, and the availability of town gas. One unit in the complex has had the gas connected in the past. This is a major factor.

The brewhouse is steam driven and requires a steam boiler of about 120 kilowatts or 12 boiler horsepower. An electric boiler of that size needs 3 phase power of 168 amps per phase. Typical power supplies to industrial units are 3 phases of 100 amps each. Upgrading the power can be an expensive exercise – I had estimates ranging from $7,000 to $40,000 depending on what the mains supply in the street is like. Although a gas powered boiler is more expensive to buy and install, the running costs are significantly less.

The hourly running costs (no GST) for a 10 horsepower boiler are $7.15 for town gas, $15.50 for LPG, and $16.50 for electricity. I will need about 12 horsepower. A 12 hp electric boiler costs about $19.80 an hour to run. Gas boilers are either 10 or 15 hp, a 15 hp unit costs about $10.75 an hour on town gas and $22.45 on LPG.

You can see there are considerable differences. For a single brew the boiler will be running for about 4 hours, the difference between town gas and electricity is about $36.

As Andrew said both premisies lack the “wow” factor, but you can see why I am leaning to the first place.

AQIS – the quarantine people – had held the mill back for cleaning. Last Thursday I went out to Port Botany to pick it up the mill.

Francis who has done odd days in the old Faulconbridge shop for me lent me the Mountain Arks Wonder Ute for the day. The wonder ute is just that. It’s a 1984 Toyata ute with mag wheels, a small wooden steering wheel, slightly worked engine, a hoon horn and a drum full of straps and ratchets. It goes. Francis picked it up a couple of years ago in Lithgow.

Francis uses the Wonder Ute to transport Mountain Arks. If you do a lot of grain brewing then instead of maintaining the feral compost heap, what you need is a couple of chooks to turn the grain into eggs. The chooks of course will need a comfy home, which is where Mountain Arks fit it. Francis also makes homes for dogs and birds.

The day went smoothly. Drove out to Port Botany to the warehouse office, did the paperwork, over to the bonded warehouse, waited for about 10 minutes in a queue behind two trucks and then the warehouse guys took the paperwork and re-appeared several minutes later with the mill on a forklift. The forklift driver was also very keen to buy the Wonder Ute. From there straight back to Johnstons at Smithfield, the mill was taken off again with a forklift and put in the warehouse with the rest of the gear.

I regret not taking a photo of the Wonder Ute with the mill, a bright yellow, on the back.

Last Monday, the 12th, the second container of brewing equipment was taken to the Johnstons Transport Smithfield yard. There was the brewhouse and three fermenters. It all went smoothly. None of the mucking around of the first container. Well, not quite – AQIS held back the mill for cleaning.

Here it is:

Firstly, I wanted to put the brewing equipment into storage for a month or two because I was not quite ready. There are still some things to work through with potential premises. Utilities questions are fairly well sorted out, but there is still the floor to be worked out. A couple of other things also need to be worked out. As well, I wanted to round everything up, re-group and take a deep breath before proceeding. Certainly the hassles of the last couple of weeks have justified this pause.

The choice of Johsntons Transport came down to the fact that not many companies could do what I needed. Plenty of companies could do the transport, others the storage but still how to get the gear off of the truck and into storage? And then how to get it back on for tranport to premises? Just do it all with Johnstons. I also quizzed a couple of customers in the transport industry about Johnstons. The consensus was that Johnstons are “pretty good.” And they have certainly been more than “pretty good”.

There is also another reason for using Johnstons. They have been around for over 100 years. Their “home” depot is in Fitzroy St at Marrickville. If you have lived in the Inner West then you would have probably seen their green trucks. As a former Inner West denizen and cab driver I have been aware of them for a long time. I suppose you could say they are something of a Sydney institution. So it’s nice to do business with them in that respect. It’s an indulgence but it’s fun – like buying cheese from Cyril’s Delicatessen down at Cental.

After much stuffing around the two containers are here, have cleared customs and quarantine, and have been unloaded.

It took just over a week to go through the formalities for the first container to become available for delivery. It was due to be picked up on the morning of Thursday April 8. The plan was to have it delivered to the Johnstons Transport depot at Smithfield, with delivery time somewhere between 1 and 2 pm.

Of course that is nothing like what happened. Everything had been pulled out of the container for quarantine inspection, so it would just be loaded straight on to the truck and there would be no mucking about getting the empty container back. Wrong. I get a phone call late Wednesday afternoon from the customs broker, the gear was is on 14 CHEP pallets and I will need to have 14 CHEP pallets to send back. A phone call to Johnstons, they have not CHEP pallets to spare. So the driver will just have to wait while the gear is taken off of the pallets so they can be returned.

Thursday comes and before leaving for Johnstons I call the customs broker to check the delivery time. The transport is running late, it should arrive at Smithfield between 2 and 2:30. So I head off to Smithfield arriving just after 2. At quarter to three no truck, so another phone call to the customs broker. He rings the transport company and then rings me back. The truck is still at the bonded warehouse at Botany with three trucks in front to be loaded. There is no way that truck will make Smithfield before 5 pm, besides Johnstons yard staff finish at 3:30pm and after that it’s overtime rates.

So the new arrangement is for the delivery truck, with the gear, to go back to its depot at Chipping Norton and deliver it in the morning at a time to be arranged. Johnstons don’t have staff available to unload until after 11 am, but the delivery company wants to be there first thing.

The arrangement is that on Friday morning a time will be arranged for later in the day depending on how everyone is going. Of course Friday morning the truck shows up at 8:15 – but no can do, all the fork lift drivers are out on jobs. Come back at 11. The truck is back at 11. I get there shortly after. There are six conditioning tanks, one fermenter, a glycol chiller and not a bloody CHEP pallet to be seen – I couldn’t work out how they were going to get the tanks on to pallets anyway.

So here are all the conditioning tanks and the first fermenter:

The import permit from AQIS came yesterday morning, and the packaging declarations arrived this morning. All the paperwork is now with the customs broker.

With any project like this there is a fair amount of bureauracy to deal with: Australian Tax Office for excise, Australian Quarantine and Inspection Service (AQIS), Penrith Council and the NSW Office of Liquor, Gaming and Racing. Now it’s a popular sport to put the boot into public servants, but not only for this but for other matters I have generally found the people working in the public service to be competent, helpful and taking pride in being of service to the public. Of course you cannot expect public servants to make original decisions, that is not their job. That is the purview of politicians and other policy makers. Bureaucrats need to follow procedures and precedents. Sometimes that might seem tedious and tortuous, but it brings predictability, consistency and fairness. Sometimes counter staff can be run ragged, but dealing face to face with general public in any area can sometimes be hard work. It always impresses me how much advice and information you can get over the phone from government offices. I suppose this shows that I haven’t rung Centrelink.