Alcohol excise rates change regularly in both New Zealand and Australia. The systems and timing are different, but for producers the commercial question is much the same:
What happens to your margin when excise keeps increasing but the price you can charge does not rise at the same rate?
In New Zealand, alcohol excise rates are adjusted annually on 1 July, based on movements in the Consumer Price Index over the relevant 12-month period. The most recent adjustment took effect on 1 July 2026.
Australia works differently. Excise rates applying to products such as beer and spirits are indexed twice a year in line with CPI, generally around 1 February and 1 August.
For producers, the issue is not simply that tax goes up. It is that excise can increase even when the selling price of a bottle, can or case stays the same.
That puts pressure on the amount left between the selling price and the cost of producing and selling the product.
Why a predictable tax increase can still hurt your margin
A predictable cost increase is not necessarily an easy one to absorb.
Imagine a producer selling a beer for the same wholesale price as last year. If the excise attached to that beer increases, the producer receives the same revenue but has a higher tax cost attached to each unit.
If the selling price rises at the same time, some of that increase can be passed through to the customer. – But what happens when it cannot?
Producers may be dealing with retailers that resist price increases, consumers who are already sensitive to higher prices, or long-term wholesale agreements that make it difficult to change prices immediately.
For smaller producers, there may also be less negotiating power.
A large producer supplying a major retailer may have more ability to negotiate a price increase, while a small winery, brewery or distillery may be reluctant to risk losing an account over a relatively small increase per unit.
That means the question is not simply:
“Can we put our price up?”
It is:
“How much of the increase can we realistically recover through our selling price, and how much will come out of our margin?”
What this looks like for wine
The July 2026 New Zealand adjustment provides a useful example.
For a standard 750 mL table wine at 13% ABV, the applicable excise category is more than 9% but not more than 14% alcohol. The rate increased from $3.7836 to $3.8999 per litre of beverage on 1 July 2026. This is what it looks like in numbers:
|
Before 1 July 2026 |
From 1 July 2026 |
|
|
Excise rate |
$3.7836/L |
$3.8999/L |
|
Increase across 100,000 bottles |
~$8,722 |
What this looks like for beer
For many common beers in New Zealand, excise is calculated using litres of alcohol rather than simply the volume of finished beer.
Using the same example of a 330 mL beer at 5% ABV:
|
Before 1 July 2026 |
From 1 July 2026 |
|
|
Excise rate |
$37.836/L alcohol |
$38.999/L alcohol |
|
Excise on 330 mL, 5% beer |
~$0.624 |
~$0.643 |
|
Increase across 100,000 units |
~$1,919 |
For an individual can, 1.9 cents may seem insignificant. However, across 100,000 units, it becomes almost $2,000. And if the producer cannot increase its selling price, that additional cost reduces the margin on every unit sold.
The same principle applies to Australian beer, although Australian excise calculations depend on factors including alcohol strength and container type. The important commercial point is the same: producers need to understand what an indexed tax increase means for the margin on each product.
Spirits make the effect even easier to see
The effect becomes more obvious as the amount of alcohol in each unit increases.
Consider a 700 mL bottle of gin at 40% ABV in New Zealand.
|
Before 1 July 2026 |
From 1 July 2026 |
|
|
Excise rate |
$68.915/L alcohol |
$71.034/L alcohol |
|
Excise on 700 mL, 40% gin |
~$19.30 |
~$19.89 |
|
Increase across 50,000 bottles |
~$29,666 |
At this point, the increase is much harder to dismiss as a minor cost movement. A producer selling 50,000 bottles at the same price would have to absorb almost $30,000 of additional excise based on this example.
The question becomes whether the business can recover that amount through pricing, find savings elsewhere, or accept a lower margin.
What this looks like for Australian beer
In Australia, excise rates for many packaged beers are indexed twice a year. The increase on 3 August 2026 provides a practical example of how a relatively small change can affect a brewery’s margins.
Consider a 330 mL can of beer at 5% ABV, packaged in a container smaller than 8 litres. The applicable rate is based on the alcohol content above 1.15% ABV.
|
Before 3 August 2026 |
From 3 August 2026 |
|
|
Excise rate |
$63.75/L of alcohol |
$65.03/L of alcohol |
|
Excise per 330 mL can |
~$0.809 |
~$0.825 |
|
Increase across 100,000 cans |
~$1,626 |
For a brewery selling 100,000 cans at the same price, this increase represents around $1,626 in additional excise. If the brewery cannot pass the increase on to customers, it comes directly out of the margin available to cover other costs and generate profit.
The impact on individual cans may seem small, but it becomes more significant when a producer operates on tight margins or sells large volumes through wholesale customers. Australian draught beer has different rates, and some draught beer rates are temporarily frozen, so the calculation depends on the product and packaging format.
What this looks like for Australian spirits
For Australian distillers, the effect can be more substantial because excise on spirits is calculated per litre of alcohol.
Consider a 700 mL bottle of gin at 40% ABV. The general spirits excise rate increased from $107.99 to $110.15 per litre of alcohol on 3 August 2026.
|
Before 3 August 2026 |
From 3 August 2026 |
|
|
Excise rate |
$107.99/L of alcohol |
$110.15/L of alcohol |
|
Excise per 700 mL bottle |
~$30.24 |
~$30.84 |
|
Increase across 50,000 bottles |
$30,240 |
For a distiller selling 50,000 bottles at an unchanged price, the increase represents approximately $30,240 in additional excise. The business must decide whether it can recover this through higher prices, reduce other costs, or absorb the increase through a lower margin.
The problem when prices rise more slowly than excise
This is where excise indexation becomes a broader commercial issue.
If excise increases by 3% but a producer can only increase its wholesale price by 1%, the two changes are moving in different directions. The producer may be able to recover part of the additional cost, but not all of it.
For a smaller producer, this gap can be particularly difficult.
A producer may have limited control over:
- the price a major retailer is prepared to pay
- how much consumers are willing to pay
- wholesale price negotiations
- existing distributor agreements
- competitor pricing
- how quickly price changes can be introduced.
This means “just increase your price” is not always a realistic answer.
Pricing power is itself a business asset, and it varies considerably between producers.
A producer with a strong brand, differentiated product and direct relationship with its customers may have more room to adjust prices than a producer heavily dependent on a small number of large wholesale accounts.
That makes margin management important even when the business knows exactly when the next excise increase is coming.
It is not just what you make — where the stock sits matters too
Excise is a movement-based tax rather than simply a tax on making or selling a product. This distinction matters when thinking about inventory around an excise change.
For producers with stock held across bonded and non-bonded locations, having a clear view of what is where can help with decisions ahead of an annual or twice-yearly excise change. If stock can be moved and excise paid before a rate increase, there may be an opportunity to bring that cost forward and avoid paying the higher rate later.
That does not mean moving everything early is automatically the right choice. Paying excise sooner also affects cash flow, so the decision depends on how much stock is involved, when it is likely to move, and whether the potential saving outweighs the cost of tying up cash earlier.
The important point is having enough visibility to make that decision. If you know which products are held under bond, where they are located, how much stock is available, and when it is likely to move, you can assess the options rather than discovering the impact after the rate has changed.
How much pricing power do you actually have?
Before an excise increase arrives, producers can look beyond the tax calculation itself and ask a more commercial question:
How much of this increase can we realistically recover?
For example, suppose excise increases the cost of a product by 10 cents per unit.
There are several possible outcomes, for example:
- The producer could increase its wholesale price by 10 cents and recover the full increase.
- It could increase the price by 5 cents and absorb the remaining 5 cents.
- It could decide that the market will not accept a price increase and absorb the entire amount.
- Or it could look for production, packaging, freight or other efficiencies that offset part of the increase.
The important point is that these are commercial decisions rather than purely tax decisions.
Could excise indexation be calculated differently?
There is also a broader question about whether using general CPI is the most appropriate way to index alcohol excise.
New Zealand’s alcohol excise indexation is linked to movements in the Consumer Price Index. The 2026 adjustment was based on the movement in the CPI All Groups index, excluding the credit services subgroup, over the 12 months to 31 March 2026.
That creates a straightforward and predictable mechanism.
But it also raises a question:
Does the cost environment facing alcohol producers necessarily move at the same rate as the overall economy?
A possible alternative would be an index based more closely on the costs or prices associated with the products being taxed — for example, a specific index covering beer, spirits or other relevant beverage categories.
That would be a different policy approach, and it would have its own questions around which products and costs should be included and how the index should be constructed.
Build excise into product costing
One of the most useful things a producer can do is translate the official excise rate into a number that makes commercial sense.
“$71.034 per litre of alcohol” is important for calculating the tax.
But when deciding whether a product is profitable, this is often more useful:
Excise on this bottle = $19.89
Or:
Excise on this production run = $198,895
That number can then sit alongside other direct costs such as:
- raw materials
- fruit, grain or spirit
- packaging
- bottles and cans
- labels
- closures
- labour
- storage
- freight
- contract processing
- production losses.
Once excise is incorporated into the cost of each SKU or batch, it becomes much easier to model what happens when the rate changes.
Review pricing before the increase arrives
Knowing that an excise increase is coming gives producers an opportunity to examine their pricing before the change takes effect.
But the objective should not simply be to add the tax increase to the selling price.
Instead, consider:
- What happens to our margin if the price stays unchanged?
- What happens if we can recover only half of the increase?
- What price increase could the market realistically absorb?
This creates a more useful picture than assuming the entire tax increase can automatically be passed on. It also helps producers understand the commercial value of even small pricing changes.
Know what stock will cross an indexation date
Inventory should also form part of the calculation.
Producers can ask:
- How much excise-unpaid stock is likely to be held when the next rate takes effect?
- Where will that stock be located?
- What is its excise status?
- What rate will apply when it is moved into a duty-paid location?
- Could a large bottling or packaging run change the amount of excise exposure sitting in inventory?
This is where production planning and tax forecasting begin to overlap.
Don’t forget cash flow
Excise also represents cash that eventually needs to leave the business.
A producer may understand the annual cost of excise but still experience cash-flow pressure if a large amount of product becomes duty payable around the same period.
Forecasting should therefore consider both:
- What does the rate change do to our margin?
- When will the business actually need the cash to meet the liability?
As production volumes increase, a small change per unit can become a significant cash requirement.
A practical excise-planning checklist
Before the next rate change, producers can:
- Confirm the tax treatment of each product.
Know which excise rules apply and how each product is classified. - Translate the tax rate into a per-unit cost.
Calculate the cost per bottle, can, case, keg or other meaningful unit. - Model the margin impact.
Look at what happens if the selling price stays the same, increases partially, or increases enough to recover the full change. - Understand your pricing power.
Consider how much control you actually have over wholesale prices and how quickly those prices can be changed. - Identify inventory around the rate-change date.
Understand where excise-unpaid stock is held and when it may become duty payable. - Include excise in cash-flow forecasting.
Understand not only the total liability but when the cash will be required. - Replace planning assumptions with the official rate.
Forecasting helps with preparation, but actual returns must use the applicable official rate.
