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John Smith's Brewer Denies Tax Saving Claims

(c) Sky News 2013

Drinkers of John Smith's Extra Smooth may soon find they have to pay more for a pint of the popular bitter - just as its alcohol strength is reduced.

From next month, Heineken - which owns the brand - plans to weaken the beer's alcohol content in a move that would save it millions of pounds in tax under the Government's beer duty escalator.

At the same time, the firm plans to raise the price of a pint to wholesalers by 2.5p to help offset rising energy, duty and ingredient costs.

Heineken (Other OTC: HEINY - news) insists the decision to reduce the drink's strength from 3.8% to 3.6% alcohol-by-volume (ABV) was aimed at bringing John Smith's Extra Smooth in line with the strength of rival smooth beer brands, including Tetley's, Worthingtons and Boddingtons which already sit at or below 3.6% ABV.

Its statement said: "We will pass on a proportion of the duty savings to our trade customers while re-investing some cost savings in the brewing and marketing of our leading ale brand.

"Extensive research conducted with John Smith’s retailers and consumers consistently confirmed that a 0.2% reduction in ABV does not compromise on the taste and quality that has made the brand the UK's most popular ale and we are confident that John Smith’s Extra Smooth will continue to lead the ale category going forward."

According to the Financial Times, the annual duty saving would top £6.5m a year.

The beer duty escalator, which penalises drinks depending on alcohol strength, has been blamed for falling industry sales by the British Beer and Pub Association (BBPA).

It has added inflation plus 2% to duty bills since its introduction in 2008, meaning the figure has risen by almost 40%.

The BBPA has calculated that the Treasury now raises more than £9bn per year through beer and sale production - a figure it argues is killing off pubs as consumers opt to buy from cheaper supermarkets instead.

According to the lobby group Campaign for Real Ale (Camra), a third of the cost of a stronger pint is now pure tax.

Camra has begun a 'Save Your Pint' petition, while pub operators such as JD Wetherspoon (LSE: JDW.L - news) have said they are limiting investment in the UK as a result of what they call the growing tax burden.

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