Record-low alcohol consumption raises questions over Treasury’s excise projections
Tuesday, 9 June 2026
Beer volumes and consumption levels have taken a dramatic tumble.
Stats NZ data shows consumption of alcohol has fallen to 7.24 litres per person in the year to March - the lowest level ever recorded.
And the total volume of beer, wine and spirits available for consumption was 447 million litres, down approximately 10.7% when compared to levels recorded in 2020.
The Brewers Association of New Zealand says the accelerated decline in consumption levels could be attributed to the current economic state of affairs, with consumers having less discretionary income to spend, coupled with a continuation of an overall ongoing decline in recent years, and a growing appetite for low or no-alcohol drink options.
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While times are no doubt tough for the brewing industry, association executive director Dylan Firth said the levels of decline in beer consumption - 7.6% in the year to March - was slower than elsewhere in the alcoholic drinks market, and beer remained the country’s preferred choice, by quite a margin.
“There's a lot of cost pressures in the market that's not only putting prices of things up for the consumer, it's also meaning the consumer is looking generally at everything they're spending on. That discretionary spend they have for hospitality purchases and a couple of beers at the end of the week isn't necessarily there, or they're thinking twice about it; whether or not fuel is going to be costing an extra 10 bucks for a tank of gas, and whether they've got that extra bit of money to have a beer.”
Firth said it was possible producers were making less alcohol because production costs had risen, but the decline was more likely driven by falling demand.
He put the slower decline in beer consumption down to more innovation - namely more zero and low-alcohol beer options available.
However, he said rising ingredient and transport costs remained a major bugbear for brewers this year, alongside the ever‑growing excise tax, which he warned risked stifling innovation.
“In the last five years there have been rampant excise tax increases based on inflation, and that's hit the cost of production. Anything that's a higher-alcohol product when it's brewed gets higher excise tax, so if you're deciding whether to brew a 7% IPA versus a 5% IPA, one's going to cost you much more to make.
“As a ratio of the percentage of tax on the item when it's produced versus the profitability of it, that's shifted as well. While excise tax has gone up, people haven't necessarily put their prices up in line with it, they've absorbed it a lot, so profitability has changed,” Firth said.
He said an average keg sold to a hospitality business carried excise tax of about a third of its value, and once GST was added, nearly half the price paid by a bar owner was tax. That level of taxation, influenced what bars chose to buy and how much they charged customers for a pint.
Firth said he was disappointed to see no excise reform in the recent Budget. Like many in the industry, he wanted a framework to prevent excise tax rising faster than inflation.
The excise rate is set to rise again by 3.09% on July 1.
Question marks over forecasts
According to the Government, Budget 2026 forecast total alcohol excise revenue of $1.308 billion in 2026/27, rising to $1.486 billion by 2029/30, a trajectory that assumes growing alcohol volumes.
However, the Stats NZ data shows total beverage volumes have fallen 10.7% since 2020, and declined 4.9% in the year to March.
Firth said that by applying the scheduled 3.09% excise tax increase to what he described as unrealistic volume assumptions, the Brewers Association estimated Treasury was overstating alcohol‑excise revenue by up to $180 million a year by 2029/30.
He said Treasury had “miscalculated” what was happening in the industry, and was effectively “overtaxing” an “under-performing market” because of its incorrect estimations, causing a “snowballing” decline across the sector.
Even under the most optimistic estimates - that volumes stabilised at current levels - the overstatement reached $105m.
Firth said Treasury’s import excise forecast was a particular outlier, projecting a $49m or 10.9% jump in a single year against a backdrop of rising unemployment and sustained cost-of-living pressures.
He said that each time he looked at the Budget, the numbers didn’t seem to align with actual consumption patterns. Consumption had been flat or declining for years, he said, while excise continued to rise by 2-3% annually. With volumes stagnant, some extra revenue was expected - but he argued Treasury was still predicting far more than was realistic, even after accounting for the excise increase.
However, a spokesperson for Treasury said it did not consider that its alcohol excise forecasts were miscalculated.
“While we acknowledge recent Stats NZ data showing declines in some beverage categories and total volumes over certain periods, it is important to assess the full alcohol market and distinguish between short‑term volatility and longer‑term trends.
“The latest annual alcohol consumption data show smixed movements across categories in the year to June 2025: beer volumes increased by around 1.5%, spirits by 2.8%, while wine declined by 5.9%. In terms of revenue contribution, beer accounts for just under 40% of alcohol excise revenue, spirits a similar share, and wine just over 20%. Treasury’s forecasts therefore reflect developments across the entire market, not just one segment,” the spokesperson said.
Treasury said its forecasting approach used a long‑run assumption for alcohol‑volume growth rather than relying solely on recent year‑to‑year changes, which had been volatile during and after the Covid‑19 period. It considered a long‑run growth assumption of about 2% a year to be appropriate, taking expected population and GDP growth into account.
The spokesperson added that the Budget 2026 forecasts did not assume immediate growth. They incorporated a 2.4% decline in total alcohol volumes for the year to June 2026 before returning to longer‑term growth rates. That reflected recent softness in consumption trends.
“Given the need to base forecasts on medium‑to-long‑term drivers rather than short‑term fluctuations, the Treasury considers its current forecasts to be reasonable and appropriate.”
New Zealand’s beer industry is worth $3.58 billion, contributing 0.9% to GDP. It employs more than 35,000 people, 1.3% of the country’s workforce.
Brian Watson, director of Hamilton-based brewer Good George Brewing said he believed continuing to increase excise tax was making it much harder for both brewers and operators in the hospitality industry.
“It's unnecessary to continue to increase it, they just do that because that's the way it's always been done … it would be good to have a freeze on it, just to give us a bit of a chance,” he said.
Watson said the rising excise burden was hurting brewers, because each increase forced them to lift their prices which then flowed through to supermarkets, leaving brewers increasingly priced out of the market.
“Everything's going up. It is an incredibly difficult time, but as it is for everybody in the country, not just the brewing industry.”
Watson would like to see a 50% reduction on draft excise for keg beer, similar to Australia.
Watson said a change to excise settings would also give hospitality businesses a chance, as they were under even more pressure than brewers because of rising costs. He said some Auckland venues were already charging about $15 a pint, and prices would keep climbing, making it less worthwhile for people to go to the pub — something he described as a sad prospect given its place in New Zealand’s social fabric.
“Frankly, the Government needs revenue and needs income, and they see excise tax as an easy way to continue to increase their income.”