For years, alcohol excise was framed as a public health tool, a nudge to moderate consumption. New Zealand’s distillers say it has quietly become something else entirely: the biggest single cost in the bottle. On a 700ml bottle of 40% spirits retailing at $100, excise now exceeds ingredients, packaging, freight and labour combined. For most members of Distilled Spirits Aotearoa, it accounts for more than 30% of bottle revenue.
Rates rose again on 1 July 2026, up roughly 3.07%, the latest in a decade of automatic annual increases. Spirits and beverages above 14% ABV now attract $71.034 per litre of alcohol, up from $68.915. Over the past decade, excise costs have climbed 30% for New Zealand distillers. The industry body is now warning of nothing less than the collapse of an industry.
Pay the tax now, sell the stock later
The most damaging part of the excise regime is not the rate itself but its timing. Excise is due when product leaves the distillery, not when it clears the retail shelf. As Sarah Bonoma, chair of Distilled Spirits Aotearoa, notes, a small distiller filling a batch pays the full tax immediately, then waits three to six months for stock to sell through and payment to flow back.
For a capital-constrained small producer, that is not a cost problem, it is a working capital trap. Cash goes out the door before a single dollar comes back. It is precisely the kind of mechanic that big brands with deep balance sheets can absorb and small craft manufacturers cannot, which is why the burden falls hardest on exactly the segment the country would want to grow.
The Australia comparison the government would rather not discuss
Across the Tasman, distillers can access excise remission of up to AUD$400,000 a year, roughly offsetting the tax on the first 13,000 bottles for small producers. The results speak for themselves. Australian spirits exports have grown 68% since 2012. Over the same period, New Zealand’s spirits exports have fallen by a third.
The NBR reported in February 2026 that distillers are explicitly calling for a scheme modelled on Australia’s, arguing the sector could follow wine’s path from domestic curiosity to serious export earner, if it survives long enough to get there. The alternative, in the industry’s own blunt phrasing, is remaining “cute and irrelevant”. The Australian model is not flawless, and one producer warned the remission scheme has a “darker side”, but the export numbers are hard to argue with.
Jo James, founder of Juno Distillery, put the domestic squeeze plainly. Even holding her own wholesale price, “every single bottle store is going to put that excise increase on to the cost of my bottles”, pushing spirits further out of reach for consumers and costing her domestic sales while she is taxed more on what she does sell.
Not just distillers
This is not a distillery-specific gripe. The craft brewing sector is under the same strain. 1News reported in June 2026 that brewers face sustained financial trouble from compounding cost pressures, with excise one component alongside freight, ingredients and subdued consumer spending. When two artisan manufacturing sectors are flashing the same warning light, the policy question stops being about one industry and starts being about how New Zealand taxes small-scale manufacturing.
The revenue defence and the discretion nobody is using
The government’s position rests on money. Customs and excise duties on alcohol brought in $1.29 billion in 2022/23, and any remission, even a capped small-producer scheme, dents that. There is a genuine public health argument too: the 2024 Ministry of Health alcohol levy review put alcohol-related harm at $9.1 billion a year, and excise remains a primary lever for moderating consumption.
But the distillers’ counter is that premium craft spirits are not the cheap high-volume alcohol driving that harm, and a thriving export sector generates jobs and tax through other channels. That argument is not yet well made in the policy debate, which leaves it vulnerable.
Here is the part that should sharpen the focus. Under the Customs and Excise Act 2018, the annual CPI adjustment happens automatically by Order in Council each 1 July. Parliament does not vote for it. The increase simply occurs unless the government steps in to set a lower rate, and the legislation gives it exactly that discretion. It has chosen not to use it.
That is the real story. The government is not being forced by law to raise excise every year. It is choosing to let the default run while acknowledging distillers’ concerns and citing revenue as the reason it will not act. The question for a sector already losing exports to Australia is simple: will Wellington use the discretion it already holds, or wait until more distilleries close before deciding the revenue was worth less than the industry?
Sources
- Distillers warn rising alcohol tax could ‘collapse an industry’ (2026-07-01)
- DSA calls for excise remission scheme (2026-06-10)
- ‘Years of challenges’: Is this the end for the craft beer revolution? (2026-06-04)
- Excise and Excise-equivalent Duties Table (Alcoholic Beverages Indexation) Amendment Order 2025 (2025-05-30)
- Independent Review of the Alcohol Levy (2024-08)