The bill to introduce the artisan producer licences has been released and we have set out the key features below.
Definition of Artisan Distillery
An artisan distillery is licensed premises producing up to 450,000 litres of spirits per financial year, whether that is under the authority of an artisan producer licence; a producer/wholesaler licence; or an equivalent licence issued under the law of another state. This mirrors the existing definition of a craft brewery.
Interim Arrangements for Artisan Distilleries
Amendments to the Liquor Act have already commenced to allow artisan distilleries whose annual production is within the thresholds below to sell their own product, for consumption on or off the licensed premises, free of the restrictions under section 75. These arrangements will discontinue once the artisan producer licence is available.
New Licence Types
The amendments will create a new licence type, artisan producer, with subcategories of beer and spirits. Interestingly, a licensee can hold a licence that is in either or both categories. The introduction of the new licence is aimed at promoting the commercial viability of local craft brewers and artisan distillers. Although the process was started in 2017, the proposed changes are also intended to assist with economic recovery in this sector post COVID-19.
To be eligible for this licence an applicant’s production must sit within the following thresholds each financial year:
- Beer – at least 2,500 litres at the licensed premises, but no more than 5 million litres at the premises or elsewhere through a related body corporate.
- Spirits – at least 400 litres at the licensed premises, but no more than 450,000 litres at the premises or elsewhere through a related body corporate. Artisan spirits includes liqueur produced using spirits produced in an artisan distillery. Therefore, premises may be eligible for an artisan producer licence (spirits) without distilling spirits on the premises.
A related body corporate, which is defined in the Corporations Act 2001, essentially means companies that are connected to each other through their ownership structure. For example, a holding company and its subsidiary company are related bodies corporate, as are companies that have the same holding company.
Additionally, a licensee company must not be related to a large brewer (producing more than 40 million litres each financial year, e.g. Lion Nathan or Carlton United) or a large distiller (producing more than 2 million litres each financial year, e.g. Diageo, owners of Bundaberg Rum, Johnny Walker and Smirnoff). For the purposes of this provision, an artisan producer will be “related” if 20% of its shares, or 20% of the votes that may be cast at its general meeting, are owned or controlled by the large brewer or distiller.
Authority of Licence
On Premises Consumption
The licence authorises the sale of the following liquor products for consumption on the premises:
- The licensee’s craft beer or artisan spirits produced on the premises;
- Craft beer or artisan spirits produced by another artisan producer licensee or a relevant producer/wholesaler licensee;
- Wine produced under the authority of a licence issued under the Wine Industry Act 1994 (Qld);
- Cocktails using at least one of the licensee’s artisan spirits (spirits producer only).
A relevant producer/wholesaler is a licensee whose premises meet the definition of an artisan distillery or craft brewery and who has a condition on their licence authorising the sale of artisan products to artisan producers.
Off Premises Consumption
The authority of the licence limits off premises sales to the licensee’s products produced on the licensed premises. Orders for off premises consumption can be taken through the licensee’s website.
Sale of Liquor at Promotional Events
There are provisions for the sale of takeaway liquor at promotional events. This authority must be endorsed as a condition of the licence and will allow sales of up to 9 litres of beer or 1.5 litres of spirits per transaction, unless a different amount is specified on the licence or in the regulations.
Notably, licensees will be able to charge for samples to be consumed at promotional events, which is specifically prohibited under the current craft beer provisions. This approval may include a limit on the volume that may be sold to each person and the volume in each individual sample. The bill is silent on what these limits will be but 15ml for spirits and 150ml for beer appear reasonable.
Artisan Product as a Percentage of Sales
In each financial year at least 70% of the total liquor sales (by value) must be artisan product produced on the licensed premises. The total sale price of a cocktail is used for this calculation.
Next Steps for Licensees
The bill provides for eligible licensees to convert an existing producer wholesaler licence to one of the new licences without charge. Licensees who meet the criteria are likely to be contacted by OLGR once the bill passes into law.**
Wholesale authority under an artisan producer licence is limited to products produced on the licensed premises. Therefore, licensees who meet the definition of artisan distillery or craft brewery, but wish to maintain a wholesale business selling product other than that produced on the premises, must decide whether to:
- Keep their existing licences – in which case they may wish to obtain a condition allowing the sale of artisan products to artisan producers; or
- Split production and wholesale operations and operate under separate licences – this will bring new retail opportunities without limiting wholesale operations, but creates additional administrative requirements for the business owner, including maintaining separate areas for each licence.
The bill is due out of committee on 12 February 2021. As the amendments are uncontroversial the bill should pass quickly after that. Parliament’s next sitting date is not until 23 February 2021, so commencement will hopefully be shortly after that.
** Liquor & Gaming Specialists will also provide an opportunity for eligible licensees to register their interest. It is unlikely that applications for new licences will be accepted prior to the bill’s passage into law, but again, LGS will accept instructions to prepare applications either for the existing producer wholesaler licence or in advance for the new artisan producer licence.