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Creating a hospitable environment for hospitality – what needs to be done




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Millions of Europeans are employed in the tourism and hospitality sectors, and they will need continuous, targeted support to recover and revive their industry, which has been among the hardest hit by the COVID crisis, writes Ulrich Adam.

Lockdown restrictions did not just create large-scale unemployment by closing millions of hospitality businesses. They also meant that governments lost out on enormous sums in tax revenue: in Europe, the hospitality sector normally contributes more than €125 billion annually to government treasuries in excise duties, VAT and other taxes.

Politicians will be eager to ensure that treasuries benefit from the reopening of hospitality and socialising venues. However, they must balance the need to generate revenues with the need to ensure that businesses in these sectors can flourish and self-sustain in the immediate post-Covid period. Premature additional tax burdens might do the opposite, and delay the recovery by acting as a drag to job creation and financial health of the sector.


As governments plan for a successful reopening and full recovery, they need to think creatively about how they can give ailing hospitality businesses a boost, while also bringing excise and VAT policies into the 21st century.

VAT reductions have worked

A recent study in Germany showed that temporary reductions in VAT relieved financial pressure on households in every income bracket.


To cope with the blow from Covid, some countries such as the UK and Ireland have offered VAT reductions to the hospitality sector. Belgium, for example, brought in a reduced rate of VAT for the restaurant sector and catering services in June 2020, which provided a strong boost to sectors which were particularly hard-hit by the lockdown restrictions.

Policies such as these need to be maintained and extended to help the sector at a time when cash reserves have been badly depleted, and businesses just started to break even. With hesitant consumer confidence and premises operating below capacity due to lingering restrictions, targeted stimuli are still required.

But in order to ensure that the revival of hospitality happens quickly, we need to go beyond this and examine more far-reaching policy changes, particularly when it comes to excise.

Tax troubles and possible remedies

The hospitality sector has also long struggled with outdated rules when it comes to how alcohol is taxed, rules which already hindered the sector pre-Covid, but which are a much heavier burden at a time when we are trying to help bars and restaurants to reopen successfully.

To encourage people to get out, socialise, support their local economies and accelerate the recovery, we need a new approach.

Governments need to consider steps such as extending the freezes in excise duties which have been introduced in some jurisdictions, while also equalising how different products are taxed.

For example, huge discrimination exists against spirits in most European taxation systems. Spirits products contribute more than twice as much as their ‘fair share’ in excise according to relative volumes consumed versus wine and beer.

This inefficient fiscality means that customers pay very differently for products in their choice portfolio, it also has a detrimental impact on related industries.

A glaring disparity like this which blatantly contradicts public health science creates perverse incentives which damages the hospitality sector (which is disproportionately reliant on the spirits trade given that these products are more valuable for hospitality venues) and Europe’s many craft distilleries, who are also struggling because of the hit to tourism.

The Institute for Fiscal Studies recommends that all alcohol should be taxed at an equivalent rate per unit, unless compelling evidence can be found to justify treating comparable products in radically different ways.

The public health bodies share this view. In a 2020 report on alcohol pricing, the World Health Organisation (WHO) stated that “there is little justification for any approach other than specific taxation, through which the tax payable on a product is directly proportional to its alcoholic content,” before going on to argue that “[t]ax rates should generally be similar for different types of alcohol (e.g. beer, wine and spirits).”

Despite some alarmist headlines at the beginning of the pandemic flagging increasing alcohol sales in grocery stores, overall alcohol consumption in 2020 was substantially down almost everywhere v 2019. Interestingly, volumes of spirits consumed often increased, indicating that consumers switch between beer, wine, cider or spirits. Current taxation puts a lid on these natural consumer choices because spirits are over-taxed compared to beer and wine in every member state of EU27.

As economic activity resumes and normal life is restored, the tax burden on hospitality needs a radical rethink.


Top brewers toast easing of pandemic curbs with zero alcohol beer




While many drinkers may celebrate the easing of pandemic restrictions with a beer or glass of wine, the world's biggest brewers will be urging them to try new zero alcohol lagers, write Philip Blenkinsop and Joyce Philippe.

Having lost market share to craft beers and hard seltzers - or alcoholic fizzy water - top brewers like AB InBev and Heineken are betting on a new generation of non-alcoholic beers to help regain ground by tapping into healthy-living trends.

But the pandemic cancelled business lunches, emptied sports facilities and left no one driving back from parties or bars - all prime territories for sales of zero alcohol drinks.


Global non-alcohol beer sales fell 4.6% in 2020 in value terms to $11.6 billion after 9% average annual growth in the previous four years, according to market research provider Euromonitor International.

The ending of restrictions in the United States and Europe is now making it easier for brewers to get drinkers to try out new zero alcohol versions of their top-selling brands - something they believe will be crucial to ramping up sales.

"The main barrier for consumers is expectations, as in that they do not expect it to taste good," said Borja Manso-Salinas, vice president for marketing of the Heineken brand in the United States.


At a sampling session at the Pier 17 concert and dining venue in lower Manhattan this month, Heineken (HEIN.AS) broke that barrier for some passers-by, including Cary Heinz who brought over a regular Heineken from a nearby stand to compare.

"I can't tell the difference. And I'm a real drinker," he said, with a can in each hand.

Previously, many zero beers were effectively cooked to evaporate alcohol, spoiling the taste. Brewers often now use a vacuum chamber so alcohol comes off at a lower temperature and sometimes seek to blend back escaped esters that are central to the flavour.

The world's second largest brewer launched Heineken 0.0 in the United States in 2019 and planned to distribute 10 million free cans last year, but managed less than half that because of the pandemic.

The Dutch brewer believes it is back on track in 2021, with around four million free samples going to offices alone. Other samples are bound for music festivals, apartment buildings and shopping malls.

Anheuser-Busch InBev (AB InBev) (ABI.BR), the world's and the United States' largest brewer, also launched a zero version of its flagship Budweiser lager in the United States a year ago.

"Historically, one of the barriers to overcome is taste," said Todd Allen, global marketing vice president of the Budweiser brand.

"It's really important for people to try the product."

Cans of Heineken non-alcoholic beer are seen at a sampling event at Pier 17 in New York City's Seaport District, New York, U.S., July 15, 2021. REUTERS/Joyce Philippe
Shelves with non-alcoholic beer are seen at a supermarket in Brussels, Belgium, June 19, 2021. REUTERS/Philip Blenkinsop

Europe represents almost three-quarters of non-alcoholic beer drunk, market research company insightSLICE says. In Spain, zero alcohol beers make up 13% of all beer sales.

In Japan, where nearly 5% of beer sales contain no alcohol, brewers are launching new brands and forecasting steep growth. Read more.

However, the United States is almost virgin territory, with zero alcohol's market share just 0.5%, according to Euromonitor.

IWSR Drinks Market Analysis says 2019 marked a turning point, with growth after three years of decline.

For the five years to 2025 it sees a near tripling of U.S. non-alcohol beer volumes, far outpacing global expansion of around 60%, helped by new launches and health trends. US beer sales as a whole are seen down 18% over the same period.

Such growth could be vital to the big brewers which have faced battles on two fronts in recent years - from craft brews, now some 12% of U.S. beer, and from hard seltzers, which have doubled US sales each year since the market took off in 2016.

Zero alcohol is different. The major brewers are front-runners rather than late arrivals and their new products may take share from soft drinks rather than the core beer market.

Non-alcoholic drinks also typically offer higher margins, with a higher cost of production offset by lower excise tax.

Allen said the category performed proportionately better among the new generation of drinkers, a clear positive.

Brewers highlight beer has "natural" ingredients, unlike many soft drinks. Budweiser Zero campaigns also stress it has no sugar and its calorie count is a third that of regular Bud.

Consumers are no longer just drivers, teetotallers or pregnant women, brewers say, with most also drinking alcohol, but just choosing to abstain according to the occasion.

Brewers see big potential at US sports events, many of which ban alcohol sales towards the end of a game, but also see zero alcohol beer entering new territory.

Trevor Stirling, senior beverage analyst at Bernstein Autonomous, said the key was for brewers to make non-alcoholic beer a lifestyle choice, for example replacing a morning soda at work, rather than just a beer substitute.

"It's a massive opportunity, but difficult to do. They need to change the frame of reference so that, for example, consumers see it less as a beer with no alcohol but a non-alcoholic drink that tastes of beer, an adult soft drink," he said.

Heineken Chief Executive Dolf van den Brink believes non-alcoholic beer could account for about 5% of the global beer market over time. It was around 2% by value in 2020, according to Euromonitor.

"The biggest mistake we could make would be taking our foot off the gas. We're still only early in this journey," he said.

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Trends in alcohol consumption in Europe continue their positive course



Over recent months, we have seen very welcome findings on drinking behaviours released by leading health authorities across Europe, particularly with regards to the decline in underage drinking. This contrasts sharply with misleading coverage which often suggests that overall consumption is dangerously on the increase, in particular since the pandemic started, writes spiritsEurope Director General Ulrich Adam.

The World Health Organization’s 2019 status report showed that average alcohol consumption in Europe fell between 2010 and 2016, and that there were particular decreases in average consumption and drinking rates among young people, as well as an 11% decrease in the prevalence of ‘heavy episodic drinking.’ 

This was not the only sign that positive changes are taking place across Europe: the latest ESPAD (European School Survey Project on Alcohol and Other Drugs) report shows steady decreases in lifetime alcohol consumption among young people between 1995 and 2019 in the EU.


Compared to 2003, overall alcohol consumption fell by 22% and declined in nearly all Member States. Heavy episodic drinking fell by 19%, and 86% of the respondents reported never being drunk in the past month. 

We have just published a useful summary of this ESPAD survey highlighting the key findings. But these statistics do not cover the period since the arrival of Covid-19.

So how has the pandemic affected overall consumption trends?


Over the last year, concerns have been raised about how Covid-19 and the resulting lockdowns could threaten recent progress.

Thankfully, far from giving rise to more irresponsibility, Covid has not altered the positive long-term trends when it comes to alcohol consumption and misuse. In fact, all the indications are that people have, overall, been drinking much less. Sensationalist reports focused on higher sales in some retail outlets ignored the dramatic declines in sales in bars and restaurants, where most drinking traditionally occurs.

For example, data from IWSR Drinks Market Analysis showed significant declines in alcohol consumption during the pandemic in most markets including across Europe. 

A growing body of independent evidence also points to a broader decline in all other social settings over the last year. 

A YouGov survey in 2020 – involving more than 11,000 people across a number of countries including France, Germany and the UK – found that 84% of drinkers were not consuming more alcohol than they had been before the lockdown, and more than one in three had cut down on their drinking or quit entirely. 

Meanwhile in the Netherlands, new figures from the Trimbos Institute showed that 49% of people aged 16-35 cut down on their drinking during the first lockdown compared to the same period in 2019, while another 23% consumed the same amount.

Simply put, regardless of those misleading headlines, all of the evidence points to a continuation of the long-term downward trajectory in both alcohol consumption and misuse. 

Of course, that does not mean that there is not more work to be done – far from it. 

There is no acceptable level of underage drinking, just like there is no acceptable level of the sort of heavy drinking which is detrimental to health. As an industry and as a society, we need to reflect on what we have accomplished, and the work that still lies ahead. 

The consistent progress which societies in Europe have made in reducing alcohol-related harm in recent years – and the continuation of this progress during the lockdowns – shows that we are on the right track and that the long-term positive trends are set to continue, as we start to reopen vital sectors of our economies.

One thing which millions of Europeans are looking forward to is the ability to enjoy a drink in bars and restaurants once again, safely, socially, and responsibly. 

spiritsEUROPE will continue to work with our partners in the hospitality sector to ensure that that reopening is achieved safely, and so that we can all continue to maintain the positive course towards a more moderate drinking culture across the EU.

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Commission publishes public consultation on the taxation of cross-border alcohol and tobacco purchases in the EU



The Commission has launched a public consultation on the taxation of cross-border alcohol and tobacco purchases in the EU. Under current rules, excise duty on alcohol and tobacco bought by a private individual for their own use and transported to another EU country is only paid in the country where the goods were bought. This is the case even if they bring these goods into another member state.

For both alcohol and tobacco products, the misuse of cross-border shopping rules for private individuals is a source of concern for several EU countries due to lost revenues and the negative impact on the effectiveness of national public health policies. The current EU rules of cross-border shopping of alcohol beverages and tobacco products by private individuals are being reviewed to ensure that they remain fit for purpose to balance the objectives of public revenues and health protection.

This is particularly important in the context of the European Action Plan against Cancer since taxation plays a pivotal role in reducing alcohol and tobacco consumption, in particular when it comes to acting as a deterrent to stop young people from smoking and abusing alcohol. The public consultation aims to ensure that all relevant stakeholders have an opportunity to express their views on the current rules and how they might work in the future. It includes questions on the effects of the current system, along with possible changes. The public consultation is available here and remains open until 23 April 2021.

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