Alcopop maker fails to thwart tax increase

Leading alcopop maker Independent Liquor has lost a battle to persuade Australian MPs not to impose a 70 per cent tax hike on its ready-to-drink products.

The Australian Senate this week ratified a law change that has already pushed up the retail price of RTDs by around 25 per cent.

The Government announced the move in April last year, but it has taken more than a year to convince MPs that the tax hike would have the intended effect.

Independent Liquor owns the Independent Distillers Group. In May, the group warned that the impending law change might force it to move its manufacture of popular alcopops from Melbourne to this side of the Tasman.

Executive Peter Murphy said at the time the tax hike had sparked a sales downturn that had already cost 23 jobs. Sales had slumped 30 per cent, and the company was at risk of having to close its factory, he said.

Australian politicians were given a slightly different picture this week.

Distillers claim new data show sales of spirits and beer have since rocketed, and alcopops are already bouncing back. However, health organisations have accused the industry of using the data selectively, and MPs were unconvinced.

Independent Liquor is a market leader in alcopops in Australia, New Zealand and Canada. It was bought by Australian private equity firm Pacific Equity Partners, with Hong Kong-based Unitas Capital, for $1.2 billion.

The company has been renamed Flavoured Beverages, and accounts recently filed with the Companies Office show it made a $33.8 million loss in the year ending in September.

Its auditor, PricewaterhouseCoopers, warned that the only reason the company was able to meet its banking covenants in the subsequent December quarter was because of the possibility the tax hike might not go ahead. That would mean it would get to keep the money it had already put aside from price increases.

If the tax hike was confirmed, the company "faces the risk that it would breach its banking covenants in the future", said PWC.