Research and analysis

Understanding small cidermakers in the UK

Published 26 January 2023

Research conducted by the independent research agency Databuild between January and February 2016. Prepared by Databuild for HMRC.

Report Authors: Adrian Talbot, Catherine Field

Disclaimer: The views in this report are the author’s own and do not necessarily reflect those of HMRC

HMRC Research report number 686

Reporting note

This report was written in April 2016. The content and writing style reflect the opinions of participants and policy context at that time and do not reflect any changes that have happened since it was written.

Acknowledgements

We would like to thank HMRC and HMT for their support in conducting this research. We would also like to thank the National Association of Cider Makers and its affiliated bodies for their cooperation and assistance provided to the research team in providing contact details and access to their members, including the Welsh Perry and Cider Society, the South East of England Cidermakers’ Association, the Three Counties Cider and Perry Association, and the Armagh cider makers Association.

Glossary

Term	Definition
Carbonation	Incorporating excess carbon dioxide under pressure to add bubbles to the product. This can be achieved by dissolving carbon dioxide into a finished product using specialist equipment, or through allowing fermentation to complete after the product has been packaged.
Exempt cider maker	A cider maker currently producing less than 70 hectolitres (7,000 litres) of cider for sale per annum, and therefore exempt from paying alcohol duty to HMRC for the cider that they produce
Filtering	A stage in cider production to remove yeast or other particulates from the cider mixture for the purpose of e.g. refining the taste or making the mixture less cloudy
Hectolitre	Abbreviated to hl. One hectolitre = 100 litres
Hydrometer	Hydrometers measure the specific gravity or density of a liquid. With apple juice products they give an indication of the sugar content, which in turn will give an indication of the potential alcohol content of the fermented cider.
Keeving	Keeving is the removal of nutrients from the juice by combination with pectin at an early stage, to ensure a long slow fermentation which finishes and can be bottled while still sweet and without any fear of excessive re-fermentation later.
Malic acid	The natural acid present in apples and pears. Malic acid can be added to cider or perry to increase the acidity (which will give the product a sharper taste)
Milling	The process of breaking the material down into a pulp prior to pressing
Non-exempt cider maker	A cider maker currently producing more than 70 hectolitres of cider for sale per annum, and therefore required to pay alcohol duty to HMRC for the cider that they produce
Pasteurisation	The process of heating the cider to a certain temperature and holding it for a time at that temperature in order to kill the yeast cells (which halts fermentation). This can be done for the purposes of conditioning the taste of the finished product or to lengthen the storage life of the product.
Pressing	Compressing the broken-down apple material produced by milling to extract the juice. This can be achieved using a variety of press types.
Specific gravity	The concentration of sugar in water
Sulphites	Any ingredients such as sulphur dioxide, or sodium or potassium metabisulphite, which can be added to cider or perry pre-fermentation to kill the natural yeast that is present in the juice. The cider maker can then add their own yeast which can help ensure a standardised product and less risk of wastage. Sulphites can also be added as a preservative to increase storage life.

Executive Summary

Introduction

Actions initiated at EU level may require HMRC to remove a duty exemption given to cider makers producing under 70 hectolitres (hl) annually. HMRC commissioned Databuild to conduct research with those in the industry to understand how the industry operates and how changes to the duty regime might affect these cider makers. The work was commissioned to help HMRC understand the markets and behaviour of cider makers with the goal of helping HMRC make informed decisions in relation to any changes to tax rules and regulations. Forty qualitative interviews, 10 face-to-face, 30 by telephone, were conducted in January and early February 2016 with micro-SME cider makers (less than 10 employees including those who were exempt and those above the exemption threshold), and with NACM affiliated regional bodies.

Key Findings

There were 3 main types of business models identified in the research for cider makers; hobbyists, business minded individuals for whom cider is their primary income, and business minded individuals for whom cider production is just part of a diversified set of activities.

Motivations for beginning to produce cider varied; and motivations did not always neatly map to business models. The research did find hobbyists were more likely to be those who were already producing a small amount of cider for personal consumption or friends and family and then decided to produce commercially. Business minded cider makers were found to produce cider as a diversified interest, for example, farms that saw an opportunity to begin producing cider as one of a range of other things that they do.

There were consistencies in the core processes and ingredients used; for all cider makers certain core steps were necessary and always part of the process, milling, pressing and racking off. There was some variation in how these steps were achieved. As businesses grew they tended to incorporate more automation and purchase more and better equipment. SME cider makers predominantly used pure juice and this was felt to be one of their key selling points. They felt they were producing craft products using traditional ingredients and processes, in contrast to very large national cider makers.

The core markets for the cider products of all types of cider makers tended to be local; such as selling to local pubs, farm shops and at local festivals. Some cider makers, particularly those already above the exemption threshold, tended to sell further afield. Export of products by SME was found to be low.

Barriers to growth tended to be logistical and practical, for example, having the space for increased production. Access to finance to grow was also cited as a key challenge for small cider makers, with some noting they had struggled to access finance. Some cider makers suggested there was a ‘psychological’ challenge presented by the exemption threshold around cider makers’ perceptions of what will be required to break through this barrier and grow.

Costs to produce cider and sale prices (profit margins) varied considerably; depending on a whole range of factors such as the equipment, processes and ingredients being used, how much fruit was purchased (rather than sourced from their own orchards or donated), and pricing in the market that the product was going to be sold in. Overall, this suggested that the duty exemption was more important for some exempt cider makers than others.

Effect of changes to the duty regime

Would a removal of the duty exemption lead to fewer new cider makers beginning to produce, cause some cider makers to cease production, or have any wider impacts?

Some suggested that the current exemption was important for cider makers starting out. Some did question whether removal of the exemption might help encourage growth by removing a psychological barrier

Some suggested that removal of the exemption would mean they would stop producing altogether, others said that they would examine commercial viability and consider stopping, citing the expected impact on profit margins. Those who would consider stopping explained that they would do other things with the fruit, such as producing apple juice and selling the fruit. Cider makers who tended to be more business focussed suggested that they were planning to grow anyway and would just start paying duty sooner than expected.

Most exempt cider makers in the study were not employing staff or only employing small numbers at busy periods of the year, so the impacts of a removal of the exemption on levels of direct employment were likely to be low. One cider maker noted that there would be knock on impacts in supply chains, such as for equipment suppliers. Some participants discussed other impacts, like the effect on orchards and maintenance of rare or historic fruit varieties. Other cider makers felt the impacts would be small, for example they would maintain orchards anyway without producing cider, sell the apples or produce other things like cider vinegar, or continue producing cider for personal consumption, friends or family.

Would the introduction of an exemption for ‘traditional’ cider be welcomed by the industry, and does this pose a risk of larger cider makers being able to take advantage?

Participants thought that this was an idea worth exploring further as they see their products as distinct from mass-produced ciders. There was some confusion as to how this would be defined and enforced, particularly because most exempt cider makers were using the same, or very similar, ingredients and processes. There were some comments and concerns that medium and large cider makers may be able to take advantage, but most simply noted that care needed to be exercised in arriving at the definition. Some cider makers felt that the use of pure juice was a possible factor on which a definition could be developed by HMRC, because larger cider makers tended to use concentrate whilst small cider makers started from fresh juice.

Other ways to support the cider industry

Participants were asked to suggest things that they felt may encourage growth within the industry. As well as comments related to the duty exemption, other comments were generally around access to finance and ideas such as labelling or standards to show that cider makers are ‘traditional’.

Introduction

Background

At the time of the research, the EU had a system of excise duty rules for alcohol aimed to prevent trade distortions in the Single Market, ensure fair competition between businesses, and reduce administrative burdens for operators. Cider makers in the UK producing up to 70 hl a year (around 12,300 pints) were exempt from paying duty. The NACM calculated that this accounted for about 80% of the UK’s 480 cider makers. In February 2015, the European Commission issued a formal request to the UK to amend its excise duty legislation, removing the exemption for cider and perry made by small cider makers, arguing there was no allowance for it under EU law.

According to CAMRA in 2015, small cider makers were typically hobbyists, or made cider as a side business, earning less than £10,000 a year. Introducing the duty on cider makers could lead to a tax of up to £2,700.

In the Summer Budget 2015 the government committed to retain the duty exemption for small cider makers until and unless a replacement scheme was established.

Objectives

This research aimed to provide accurate insight to support Ministers in their decisions relating to the small cider makers’ duty exemption. The main aim of the research was to understand existing production in the small (up to 70hl per year) cider market and how this differed from larger cider makers. Additionally, the research was needed to understand the adaptability of companies to changing market conditions (for example, ability to absorb cost increases). There were two key objectives for this research:

1. gather factual information about the nature of small cider makers, including production processes, business models, market and pricing

2. test the potential impact of possible policy options; gaining an understanding of how the market may react and the cost of policy change to businesses

Methodology overview

A qualitative methodology was selected to address HMRC research questions. This type of research is exploratory and seeks to understand the range of opinions that are found within a given research audience. The approach used both telephone and face to face depth interviewing. Data collection took place between 14 January 2016 and 9 February 2016.

Based on our understanding of the distribution of cider makers within the sector, the majority of cider makers fell below the duty exemption threshold, with a high number just below (between 60hl and 70hl). There were relatively few cider makers producing at levels over 5,000hl. There were also relatively few cider makers directly just above the exemption threshold (between 70hl and 100hl). This informed a sampling approach where interviews were conducted with:

• Duty exempt cider makers, to understand how these, relatively small (up to 70 hl annually), cider makers operate and make decisions, and how changes to the duty regime might influence their participation in the industry

• Non-exempt cider makers, those who are above the exemption threshold, to again understand how they operate and also to explore drivers and barriers that encouraged them to grow and increase their production above the exemption limit

Participants were screened across the following criteria using an agreed recruitment and screening script:

• different types of cider produced

  • Cider or perry

  • Still or sparkling cider

  • Multiple products or single product – with or without differing abv content

• different ages of the business

  • Newer businesses, less than 3 years old

  • Well established businesses, three or more years old

• those for whom cider is the main source of income vs. those for whom it is a diversified interest or hobby

• ‘Traditional’ cider makers using traditional methods or limited ingredients, vs. those not choice constrained in this way

• those producing every year vs. those producing infrequently

• using apples or pears from their own orchard vs. being supplied by someone else

• member of affiliate body vs. non-member

A total of 40 interviews were conducted, 10 face-to-face with cider makers, 27 by telephone with cider makers and 3 by telephone with NACM affiliated regional cider bodies. Regional membership organisations representing cider makers in specific locations and providing a community for supporting members with resources, information and networking opportunities. These were not the primary focus of the research but were interviewed to provide useful market level insights and context and were able to speak from their own significant expertise in relation to how changes to the duty regime might influence the industry more widely.

Interviews were conducted using a semi-structured topic guide that allowed the researcher to probe and explore interesting data from participants. Interviews ranged in length from approximately 40 to 90 minutes, depending on the depth of information that participants were able to provide.

In addition, a telephone conversation with the NACM was conducted as part of methodology development to develop an understanding of the policy context and the sector that informed both the sampling approach and the development of the topic guide for use with participants.

Further information relating to sampling and screening, along with the recruitment script, screening script and topic guide for the work, can be found in Appendix 1.

Guidance for readers

Qualitative research is an exploratory and illustrative method. The depth and richness of the data allow for a detailed picture of the range of responses and behaviours to be developed. The findings of this research are intended to provide insight into cider makers and scenarios that might arise if policy changes are made. The research was not trying to estimate or quantify the impact of policy changes. The results of the study are reported in general terms throughout this report rather than using percentages as it is not appropriate to infer conclusions about the precise number of small cider makers in the market who would share the same attitudes or behaviours.

Due to the small sample of cider makers engaged, there may be some risk of bias in the reported findings, but through the screening process that was conducted, Databuild are confident that a typical mix of cider makers were engaged in the research. Although this is qualitative research and the sample size is small, all participants were able to give information about the amount of cider produced and most were able to give information on pricing, turnover and profit. While this information has not been used for the purpose of market level analysis and extrapolation, we are able to use this information to give an indication on ranges of some things in our sample.

When examining several variables within the report, there was frequently found to be little variation between how cider makers were operating, even in some cases when comparing small duty exempt cider makers with large non-exempt ones. Where possible we draw out any interesting distinctions and variations identified. Where distinctions have not been drawn, the reader should assume that there were no distinct differences between how different types of cider makers were operating.

Where quotes are provided, these have been attributed to whether the cider maker was duty exempt or non-exempt and their business model.

UK Cider Market Characteristics

Market information

Within the research there was found to be a broad range of volumes of production, with some clustering of production just below the duty exemption threshold, and few cider makers producing between 70 and 300 hl annually.

Duty exempt cider maker production ranged from 9 hl up to the 70 hl threshold annually. Approximately half of cider makers were at or below 45 hl produced annually, with the other half above this figure.

Our research interviews with non-exempt cider makers suggests that their production ranges from 100 to 6,000 hl. Approximately half of our participants were at or under 500 hl produced annually, with the other half of cider makers above 500 hl.

In a few instances cider makers reported that they were making no profit. These cider makers were effectively investing any profit that they made into cider equipment or other capital items for the business so that they didn’t have to pay tax.

Business models

Participants were asked whether cider production was their main source of income or not. Primarily from this information, 3 business models were identified.

Cider production is a hobby separate to their main occupation (‘hobbyist’)

Some cider makers in this category were found to be retired but might be those working full time. This included those who had moved to a cider producing area and had been drawn into the local culture. Some hobbyists had orchards or access to apples which they didn’t want to see go to waste. A couple were supplying their apples to other cider makers and decided it would be enjoyable to begin making their own product. Some examples of comments included:

“Well it was a hobby, something I enjoyed” (Duty exempt cider maker)

“I wanted to do something creative with food and drink, I had moved to the west country, looked into what would be feasible for me to do and thought and I had some land to plant on” (Duty exempt cider maker)

“I was drawn into it slowly, hobby which got out of control” (Duty exempt cider maker)

All of the cider makers for whom production was a hobby were duty exempt . Some of these cider makers said that they deliberately made a decision to begin producing cider, whereas for most the decision was more organic. For example, based on them identifying an opportunity or beginning to produce for personal consumption initially, then deciding to upscale when they discovered that people liked the cider that they were producing.

Cider production is one component of the business (‘part of business’)

This may be a business that already produced wine or liquor and had expanded to include cider production, a small additional income where another member of the household was the main breadwinner, or more often, one diversified interest within a larger farm business that comprised one or more of the following:

• Beef or dairy farming

• Operation of a campsite

• Bed & Breakfast

• Farm shop

• Local public house

Two routes to becoming this type of cider maker were identified. One was driven by a need to diversify and so they had deliberately planned to become a cider maker. The other was less deliberate, with cider production an opportunity people had either happened across or felt compelled to explore as it was traditional to the local area. Some quotes from cider makers included:

“The farm business wasn’t doing well, we had the orchards and I saw that this acreage gave the best return” (Non-exempt cider maker)

“All my working life was on a farm and I don’t like to see something going to waste. Knew nothing about it initially but it was something I knew I could do with the apples” (Non-exempt cider maker)

About half of the organisations that fell into this group were duty exempt, whilst the other half were already above the exemption threshold. One cider maker commented early in the interview that within their motivations, the duty exemption had been a factor that encouraged them to look into producing cider.

Cider is the main source of income (‘main source of income’)

This group was made up of people who had started to make cider as a hobby, found that they made a saleable product and decided to make a business out of it. These types of cider maker already had their own orchard or land and nearly all had deliberate plans for expansion, rather than growth happening organically, linked to demand. Other groups sometimes mentioned location, for example, cider production was the ‘done thing’ living in that area. Nearly all of this group were non-exempt, with just one cider maker below the exemption threshold who had very definite plans to grow. Most of this group had begun producing cider deliberately. Some comments from cider makers include:

“Personally I like to have my own business, also this is a perfect spot for cider making because the location is really good for growing apples. It was a good use of these premises which we already had as it was a family home and also a lot of people come into the area as well” (Non-exempt cider maker)

“I had been making it for a long time beforehand for myself, was something I was interested in and I could always sell it” (Non-exempt cider maker)

“I had experience in the field and looked as if we could make money” (Non-exempt cider maker)

“Living in Somerset it was what one did. Cider and Somerset seemed like an obvious connection” (Duty exempt cider maker)

Motivations

A range of motivations for producing cider were described by participants, and we can broadly group these into the following categories:

1) convenience – for example, the cider maker has access to apples and knew there was some demand for their product

2) opportunity to make money – cider makers for whom the main aim was to make money and for whom cider was a convenient and enjoyable path to do this

3) general cider enthusiast – possessed a passion for one or more of the following; trees, orchards, cider, culture and heritage, waste minimisation

Many cider makers said that they really enjoyed drinking cider, and this was something that encouraged them to try and produce their own. Most said that they might keep back a certain portion of what they produce for personal consumption or for friends and family.

Exploration of motivations alongside business models

Motivations did not easily map to business model type, with cider makers within all of the business model types specifying a mixture of motivations that often overlap. Motivations such as being passionate about cider or living in a cider producing area and felt it was the ‘done’ thing, were expressed across the whole range of business models. While acknowledging that motivations were found across the spread of business models, we attempt to explore combinations of motivations emerging from the interviews in more detail below.

For some it was the love of cider often combined with the desire for a hobby associated with cider production, for example, tree husbandry, that had seen them begin production. These people had discovered that their product was saleable and found they produced more than they could drink. Some example comments from cider makers included:

“I did a business start-up scheme in 1999 – cider is more like an addiction than a hobby! I make it because I enjoy it and it’s fun to sell something that other people are prepared to ingest and that they also enjoy. I also have great interest in the trees, the care of, pruning of and grafting of” (Duty exempt cider maker, hobbyist)

“I first started making cider in my teens, I also work in a home-brew shop as well, so I was aware of what I would have to do but ultimately it is something I have a passion to do” (Duty exempt cider maker, hobbyist)

“It started as a hobby, none of our local pubs sold ‘real’ cider. Most of the apples we use are what people don't want - redundant orchards, from peoples’ gardens. I realised I could build a business for the family” (Non-exempt cider maker, part of business)

Some already had, or previously had, a business or a job but fortunes had changed over time. Some participants mentioned being made redundant from their primary job and were looking for opportunities to earn money. With low barriers to entry, cider production was started either as a supplementary income or with a view to helping cover living costs. Some example comments included:

“We had a family run dairy farm with 65 acres including some apple and pear orchards that became contract orchards for a larger cider maker. The farm business wasn’t doing well, we had the contract orchards and often left over apples so I decided to produce my own cider” (Non-exempt cider maker, cider is a part of business)

“We run a farm here and we were looking to diversify - we only have a limited amount of acreage so there was a limit to how much we could expand our livestock. A friend suggested we could make cider” (Non-exempt cider maker, part of business)

Some had their own orchard or land and were based in a cider making area of the UK such as the South-West or southern Midlands. Therefore, with low barriers to entry, cider production was largely seen as a means to capitalise on an opportunity. Comments included:

“I resurrected a tradition that was here when my grandfather was alive. Also this is a perfect spot for cider making because the location is really good for growing apples” (Non-exempt cider maker, main source of income)

“I was selling fruit to [a larger cider maker] and they got difficult about small quantities. The local college was running a course on cider making so I went to that. Started to sell in 1997 as I’d been building up towards having a saleable product” (Duty exempt cider maker, hobbyist)

A few wanted to build a business or make some money and had experience or opportunity, for example, access to land or apples, that encouraged them to realise these ambitions through cider production:

“When the kids got to a certain age my husband said I should go back to work. We have 10 acres of land and some orchards. So I thought let’s try cider” (Duty exempt cider maker, part of business)

A few had experience or opportunity to move into cider production but were additionally motivated by the volume of apples that were being left to waste and decided to give cider production a try. Comments included:

“I bought a smallholding which had a couple of small orchards and lots of apples, and I didn’t want them to go to waste, so I ended up making cider and won 1st prize in a local show which inspired me to carry on” (Duty exempt cider maker, hobbyist)

“I didn’t like to see the apples going to waste. All my working life was on a farm and I don’t like to see something not being used. I knew nothing about cider initially but it was something I knew I could do with the apples” (Non-exempt cider maker, part of Business)

Obstacles and challenges to production

Over half of the participants interviewed said that there weren’t any distinct obstacles they were able to identify that had discouraged them from cider production. However, it should be noted that everyone in the group that was interviewed had already overcome any obstacles to the degree that they had been able to begin producing cider. Had we interviewed those who had considered producing but not gone ahead, or ceased producing due to being unable to overcome obstacles, then other challenges may have been identified.

A few cider makers considered that legislation had been an obstacle to them setting up their operations – these included environmental health, health & safety or licensing in order to sell alcohol from the premises:

“Mainly the legislation - food hygiene and environmental health, not all inspectors understand cider very well” (Duty exempt cider maker, Hobbyist)

A few said that learning how to make a ‘good’ cider, understanding things like length of time for fermentation and when to add things like sweetener to ensure an enjoyable final product was the main challenge when setting up:

“Learning the process of making cider, in order to produce it on a bigger scale. I got advice from the cider society and went to as many courses as I could” (Duty exempt cider maker, main source of income)

Other challenges that were mentioned by a small number of cider makers included:

• being able to identify and maintain a fruit supply

• costs of insurance

• general bad press given to alcohol

• being sold the wrong type of tree

• generating initial sales

Some cited the high cost of investment or capital outlay needed for equipment as a barrier, such as mills and presses or even for fermentation containers. However, these people had been able to overcome this either with money from their own savings or they had inherited money. There were some isolated cases where a small number of cider makers identified this as a critical obstacle. These isolated cases came from both duty exempt hobbyists and non-exempt cider makers for whom cider was the primary source of income.

Production process

The typical cider production process as described by the cider makers we interviewed was highly seasonal, with harvesting of fruit taking place from September to November. Milling and pressing started at harvest time and might continue into December. From this point until approximately April, the cider was left to ferment. Specific gravity was checked on a regular basis. Cider was racked off to remove sediment that occurred during the fermentation period. There was then a period of packaging and selling which might include seasonal events and festivals.

Whilst this was broadly the process followed by everyone, there were a few variations:

• some leave their product or some of their products to mature for a further 12 months before they consider it to be ready

• two participants used keeving as part of their process and these were both duty exempt hobbyists

Cider is then allowed to ‘ferment to dry’, until there is no fermentable sugar left in the cider. Other steps mentioned by a few cider makers included:

• filtering

• pasteurising

• carbonation

While there appeared to be a core set of processes used to make cider, the differences between cider makers were to be found mainly in their premises, use of equipment, storage, testing, packaging and ingredients.

Greater complexity in the production chain, including steps like pasteurisation, tended to be mentioned by those cider makers who were more commercially focused or producing larger quantities. Steps such as filtering, carbonation and keeving, and voluntarily leaving products to mature for a much longer period, were all down to the personal preferences of the cider maker and the final product which they liked to enjoy. Some cider makers mentioned that early production attempts were experimental and it could take time to get it right and arrive at a product they felt was distinct and to their tastes.

Premises

There was a wide variation in the premises that people were using for cider production. Exempt cider makers and those non-exempt but at the lower end of the production spectrum were more likely to be operating from their home or somewhere like a barn or other outbuilding on a farm. Those at the higher end of the production spectrum, and those for whom cider was their main income or part of a business, might also base production on a farm, but use more space for this. This group were more likely to rent dedicated space for equipment such as fermentation vats.

A few cider makers said that most production steps did not necessarily require much space, but storage of the cider while it fermented had the largest space requirement.

Equipment

Participants used a range of approaches to mill apples (this is the process of breaking the material down into a pulp prior to pressing). The smallest exempt cider makers, hobbyists and those for whom cider was a part of their business, were sometimes doing this by hand, using a bucket and some kind of tool to break down the apples, using simple kitchen equipment, or a small hand mill. As production volumes increased there was then a need to automate this with larger electric mills.

Following milling, the next step in the process was pressing. There existed a variety of press types used by the cider makers we interviewed, including:

• rack and cloth

• stone press

• belt press

• bladder press

• hydraulic press

In terms of variations, one participant had a combined mill and press and one pressed their apples through straw. A few used presses that were more than 20 years old that they bought second-hand and refurbished. To keep setup costs to a minimum, 2 participants had made their own press.

Some participants had a range of new and sophisticated equipment, these were a mixture of duty exempt cider makers and non-exempt. The non-exempt were all business minded and the exempt cider makers were keen hobbyists with money to invest.

A couple of participants filtered their cider and had their own filtration system, with a couple owning their own pasteuriser. These were mostly cider makers for whom cider was the main income, or part of their business.

Some carbonated their cider and a few of these had their own carbonation equipment. There were no key trends in terms of business model here, suggesting this is down to preference.

A few had their own bottling equipment, though a number said that they sent their cider away for bottling, sometimes as part of a packaging and distribution service offered by slightly larger cider makers or alcohol distributors. Most of these were cider makers for whom cider was their main income or part of the business, though there were several duty exempt hobbyists in this group also.

Storage

Most cider makers were storing cider in 1000L intermediate bulk container (IBC) cubes. A few used 50-gallon barrels or even 5 gallon plastic barrels. A few, mainly duty exempt cider makers, used oak barrels, although it was noted this was never the case for perry which was more prone to ‘going off’.

Some cider makers used stainless steel tanks, half of these were exempt cider makers and the other half were non-exempt.

Testing

All participants monitored original and specific gravity using a hydrometer and for some this was how the abv of the final cider was measured. Where cider was sent away for bottling, the abv tended to be tested by the bottler and labels produced accordingly.

In general, the larger cider makers in our sample and those for whom production was more of a business activity rather than a hobby, tended to place more rigour around testing and ensuring levels of standardisation within their products. Smaller cider makers or hobbyist cider makers, in comparison, were in a few cases only taste testing or using a hydrometer, meaning that there might be higher levels of variation in both taste and abv from batch to batch.

Packaging

The participants that we interviewed were using a range of methods to package their products, and the modes of packaging that were used often correlated to the end markets. There did not appear to be a solid relationship between the type of packaging chosen and whether exempt, non-exempt, or business model. The usual packaging methods were:

• ‘Bag in box’ produced in volumes of 5L, 10L and 20L which could be sold to consumers and breweries or pubs but tend to have a shorter shelf life than bottled products

• ‘Bottled’ cider makers were using a range of bottle sizes, from 500ml up to wine bottle sized containers which might typically be sold to local individuals or through farm shops, use of glass bottles meant that products could be transported safely and with a longer shelf life to be sold further away

• ‘Barrels’ typically 5 gallon was a more infrequent packaging choice and was more frequently mentioned by either non-exempt cider makers or those distributing through pubs and breweries

Some were doing the packaging themselves while others were making use of the bottling or packaging equipment owned by others and sent their product to be packaged by those who had the correct equipment.

This product might then either be distributed by the company that packaged the cider or another distributor, or packaged products would be sent back to the cider maker for them to distribute. Exempt cider makers were more likely to do some or all of their own distribution. This could mean putting bottles of cider or bag in boxes in their car or van and taking it themselves to wholesalers or other outlets like farm shops and pubs.

Ingredients

Nearly all participants were using pure juice as the foundation for their cider production. Use of concentrate was found to be very infrequent within the duty exempt and non-exempt SME cider makers interviewed, with only one participant using any concentrate in their products; the rest used pure apple or pear juice. This was noted to be a key selling point, in comparison to the large national cider makers who have to use concentrate and could produce a product very quickly.

Some cider makers noted that it will never be as pure as 100% juice due to steps like washing, but most aimed for as high a juice content as possible. One participant indicated that they sometimes added water in order to reduce abv.

In terms of other ingredients, many indicated that their ingredients were limited to apples and yeast. Cider makers and their use of ingredients tended to fall into two categories.

The first category being those adding nothing at all, just using juice and yeast. These were more likely to be exempt cider makers. Some of these indicated that they were passionate that ‘real’ cider should use few ingredients, as opposed to ingredients used by large cider makers, which may include preservatives.

The second being those using some further ingredients, limited to a few specific things linked to their processes; fermentation, adding preservatives, and making the cider taste the right way and have the right balance. The use of preservatives was most frequently used by business minded cider makers, including those producing cider as part of a larger business and those for whom cider is their sole source of income. Cider makers producing larger quantities of cider were also more likely to use preservatives:

• calcium might be added if keeving is included in the production process

• yeast or sulphites (to remove unwanted microbes and preserve the product) might be added at fermentation

• sugar or sweetener might be added pre- or post-fermentation

• malic acid may be used to balance acidity

• sweetener, sugar or apple juice to taste

Markets

Nearly all participants were selling the majority of the cider they made. The remaining cider was for personal consumption or given to friends, relatives, and people who helped them during production. In a couple of instances cider makers said that they sometimes traded some of their cider product for apples for next year’s production, usually on a relatively informal basis.

There was an isolated case where an exempt cider maker was giving away two thirds of their cider and only selling a small proportion. They explained this was because they had a lot of family and friends helping out during pressing season, and personal generosity to thank them for their assistance.

Marketing

Most of the cider makers that were interviewed had a website, though some of these were more user friendly than others. The larger exempt, and non-exempt cider makers, who were more likely to be business minded, were more likely to have a ‘professional’ looking website that they had sometimes spent money to develop.

Cider makers typically reported that they did not tend to do much active marketing. For most, word of mouth was initially relied on as the primary means of raising awareness of their product. Many cider makers were selling in very small, local markets, so word of mouth over time meant that they felt able to sell their product with little or no effort. Some participants did use social media and these tended to be the non-hobbyists.

“We have an old website. We have no time or need to improve it but I know I ought to” (non-exempt cider maker, main source of income)

“I don’t really do any marketing but I should do more. I do have some basic leaflets and a website. But at the moment I can sell everything I make so there is no need to do any marketing” (Duty exempt cider maker, part of business)

“We have a website but in terms of marketing I know what I should be doing but I’m not doing it” (Duty exempt cider maker, hobbyist)

A few cider makers entered and won awards for their products which could be beneficial for awareness of, and interest in, their product because they were then able to describe their cider as ‘award winning’. However, these activities appeared to be undertaken as much for the fun and sense of personal accomplishment this could result in.

Several cider makers raised awareness and knowledge of their product through the marketing opportunities offered by affiliate bodies. Through this mechanism details might be listed on the website of the affiliate bodies and they would also be able to network and raise awareness of their products with other cider makers.

Other websites and forums existed, including the Cider Workshop, an online community and forum where cider makers could network, share experiences and provide or receive advice to assist with cider production and distribution.

Market proximity and outlets

A range of approaches to selling products emerged from the research interviews. This included those that were selling on a local scale right up to those that were selling some products in London (themselves being located outside of London) and outside of the UK.

Most of those selling only locally were exempt cider makers, with a few non-exempt. The majority of the exempt organisations were hobbyists. These were also much more likely to be organisations that were doing at least some of the distribution themselves, and therefore their markets were limited by how far they were able and willing to move their product, and in what volumes depending on the vehicles they had access to.

Those selling both locally and nationally typically involved others in the distribution chain, for example, wholesaler or brewery chain. Both exempt and non-exempt cider makers sold in this way. These cider makers were more likely to be those for whom cider was a part of their business or main income.

There was little evidence that the UK SME cider makers interviewed were selling outside of the UK. In the sample interviewed only one artisan cider makers sold to Europe and produced ‘high end’ products for which he had been able to develop demand from the continent.

Typically cider makers used a variety of routes to market. There were no clear trends in terms of product outlets linked to specific business models. Routes which emerged were:

• selling to retail outlets such as farm shops

• selling through wholesalers

• selling directly to public houses

• selling at festivals – a mixture of local food and drink festivals up to county level and national or regional cider shows

Few cider makers were selling products online, with just a couple of non-exempt cider makers indicating that they had this facility. Several cider makers had licenses to sell directly to the public from their premises or own shop, of which a couple only sold directly from their premises or own shop.

Prices

As we would expect for small cider makers facing varying levels of production cost, and subject to other factors such as the size of local markets and scale of demand, prices were highly variable.

Those selling at the lower end of the spectrum were more likely to be duty exempt cider makers selling locally. Some products were reported as very high in price per litre, an example being a well-established non-exempt SME selling a champagne-cider style product. These types of products attract a higher rate of duty which was a contributor to higher costs. The production of this type of product was not something commonly encountered within this research

Some organisations reported that bottling, particularly if sending the product away to be bottled, resulted in an increase in prices.

In general, perry products were slightly more expensive to buy. Participants indicated this was because pears were less readily available and the majority of orchards have apples. Also, pears needed to be handpicked which made the process more labour intensive, and perry was much more sensitive to ‘going off’ so higher costs arose from needing to include preservatives, and to cover the fact that there were more likely to be batches wasted.

Costs

Depending on circumstance, scale, business model and the steps included in production, costs varied amongst the cider makers that were interviewed. Capital outlay costs could include equipment and purchase of sheds or barns in which to produce the cider.

Ongoing costs included:

• fruit prices, some cider makers were using donated fruit, or fruit that would otherwise be going to waste, others were also needing to purchase some or most of their fruit from orchards and suppliers

• other ingredients like sweeteners and preservatives

• packaging and labelling

• transport and fuel depending on the extent to which they need to move or distribute their products

• electricity costs to run equipment, lighting and temperature control

• staff and labour costs

• insurance linked to factors such as whether the cider maker has any employees

• duty and other business rates

Business growth

The research sought to understand from non-exempt cider makers the processes and stages through which they had been able to grow their business, to understand drivers and barriers to growth. There were a variety of strategies that were discussed, but on some points there was general agreement, for example, to break through the exemption boundary some said there was a need to be equipped to grow rapidly in order to offset the added cost of paying duty.

Most of those cider makers who had grown and ‘pushed through’ the exemption boundary explained that they had always had goals of growing and anticipated or invested for the fact that one day they would be paying duty. Only one cider maker felt that they had made the conscious choice to grow to meet increased demand a while after they had started production.

Participants were able to talk around the importance of the duty exemption within their own strategies for establishing a business and growing. Many felt that the exemption was, or had been, important in this respect, though a few disagreed. Some comments from cider makers included the following:

“I think the exemption is a big incentive for people starting up. It certainly was for me. We were small for the first 3-4 years. Then [when] we had such a high footfall coming to the farm to buy we just increased. Production rose quite sharply over 2 years and then plateaued. Now we have doubled from £40k-80k in the last year. I’ve managed about 30% profit throughout. The biggest barrier to growth was cash flow and money to invest in more kit” (Non-exempt cider maker, part of business)

“One year after I started I went through the limit. Had to grow to 70,000 litres before I got my first employee and we are now producing 500,000 litres. Had to put a lot of work in bringing in sales in order to grow” (Non-exempt cider maker, main source of income)

“In relation to the duty exemption level, you can’t make a business out of 70 hl - to make it work I think you have to go to at least 10,000 litres a year to be really profitable. Either lift the limit to 10,000l or remove the limit altogether there is no incentive to grow at the moment as you’ll be penalised” (Non-exempt cider maker, part of business)

“We have been paying duty for at least 5 years - the first 5 years we produced less than 70hl. We had to make a huge leap once we decided we wanted to make more, as it wouldn’t have been viable to grow slowly. We had to invest a lot of money and grow it sharply, in order to produce enough to warrant us paying the duty” (Non-exempt cider maker, main source of income)

“I don’t think the exemption is healthy for the industry, which may not be a popular view. It creates a glass ceiling for the industry - a lot of cider makers want to become bigger but they would have to go from 7,000 to 20,000 litres to overcome paying the duty” (Non-exempt cider maker, main source of income)

Several cider makers and affiliate bodies explained that cider production, from their experience, only becomes cost-effective once production reaches a level of approximately 200 hl. For this reason, cider makers often tried to break through the exemption limit and achieve production of 200 hl and above in a very short space of time. Then cider makers aimed to increase to 300 hl or above again in a short space of time, where economies of scale and efficiencies were really felt to emerge.

Finance was often a barrier for those who grew. Cider makers who grew more successfully, or in a shorter time span, were generally those with access to funds, such as savings from sale of other business, or money from divorce or redundancy. Though some did just push through with hard work initially, for example by not purchasing the equipment to automate and make production easier, just putting in more hours and effort to increase production using the same processes. Some cider makers were able to access finance, but others stated that production can vary due to the biannual nature of apple trees and that one year can produce a bumper harvest while the next will be much smaller. Comments included:

“Cash flow is still an issue and I’m hunting around for any grants. The investment money this last year came through my divorce settlement.” (Non-exempt cider maker, part of Business)

“Access to money to invest. I still rent as I have all the money in the business as I couldn’t get a loan to expand. I borrowed money off friends and family. I worked hard.” (Non-exempt cider maker, main source of income)

“I didn’t get any grants to help me grow. All the investment has come from myself. Banks were hopeless and didn’t want to lend. Most of the equipment is on finance.” (Non-exempt cider maker, part of Business)

“I knew I would pay duty when I went over the limit and so I just factored it in. I think the biggest barrier for anyone is their own limitation. People who won’t get stuck in until they get funding” (Non-exempt cider maker, main source of income).

It is worth noting in this section that some exempt cider makers did not want to grow. There were comments from both exempt and non-exempt cider makers, and both those that did and didn’t want to grow, that the exemption can create a barrier in their minds. While some of this may have been psychological, the main concern was generally around the fact that it was accepted that to be profitable the cider makers had to quickly double or triple production.

“There is a huge leap that has to be taken if you go over 70hl and some feel that the 70hl exemption is a real barrier to growth. If you decide to grow you really need to go up to 50,000l. In order to really grow you need to start introducing concentrate, water, yeast etc. and it compromises everything I went into cider for.” (Duty exempt cider maker, hobbyist)

For some, staying under 70hl production was a choice, for example older hobbyists who were content with their lifestyle or had plans to retire soon.

A few exempt cider makers indicated that they would not be able to grow because of other limiting factors, including their location and the location of their markets:

“It’s mainly the logistics of transport and delivery that prohibit upscale to be honest”. (Duty exempt cider maker, part of Business)

Participants were asked to suggest things that they felt may encourage growth within the industry. The responses included maintaining the exemption or raising it to a slightly higher threshold. Some said that removing the exemption altogether might help remove the perceived psychological barrier.

Other comments were generally around access to finance (suggestions discussed with respondents included loans, equipment leasing schemes to help overcome capital costs, and whether there could be VAT exemptions for equipment purchases), labelling or standards to show that cider makers are ‘traditional’, and knowledge, understanding or training for cider makers:

“There is also no structure to the market....…you can call all sorts cider now even fermented banana.… there are no fixed guidelines and I think we need these back. We need a body to oversee the quality of cider production and cider practice.” (Non-exempt cider maker, part of Business)

“Quality of product is the biggest barrier. Many small people make a poor cider as a small-scale thing. This affects the growth of cider in general in the country. The limit is also a barrier as people try to stay under it.”(Non- exempt cider maker, part of business)

“If you want to grow a big business and that’s your plan, you need to look at the rules and regulations that are out there and bear this in mind” (Non-exempt cider maker, main source of income).

“In order to grow beyond 70hl, they need to have access to a lot of money because of the duty they would immediately have to pay, and they need to be prepared to invest into the business and to spend a significant amount of money on production and storage methods to make the large leap” (Non-exempt cider maker, main source of income)

“There is no compulsory labelling that is required for cider, I can't prove that I am using and producing the way I am and that others aren’t doing what they advertise they do.” (Duty exempt cider maker, hobbyist).

A couple of cider makers commented that the duty regime was set up in a way that penalised cider makers who wanted to produce fruit cider blends. Adding a small volume of fruit juice to a cider does nothing to change the abv of the product but can attract a significantly higher rate of duty as the product is then treated as a made wine.

Ability of cider makers to pay duty

Focusing on the views of duty exempt cider makers, HMRC were keen to understand whether there exist any barriers to the practical tasks of paying duty. There were no particular trends identified linked to business models.

In terms of ability to pay online, nearly all participants reported that they had internet and email access, though few specifically noted that they had broadband. There were no instances of duty exempt cider makers indicating that they struggle with the use of IT equipment.

Some duty exempt cider makers were using a combination of maintaining records on paper and using databases on a computer. A few mainly kept paper records, but this by itself did not give an indication of whether they would struggle to do things electronically:

“I keep a log of everything that goes on in these books [shows pile of yellow exercise books]. I have to be able to demonstrate that we are making less than 70 hl, so I record all amounts at each stage of the process. I do have internet and use this for some things like my banking” (exempt cider maker, hobbyist)

“I keep some notes on paper, sales records are kept electronically, and all my costs are on a spreadsheet” (exempt cider maker, hobbyist)

“Keep records of everything that goes out. Email or hard copy. Keep my own notes of what has been pressed and when it was” (exempt cider maker, hobbyist)

There were just a couple of mentions that paperwork associated with paying duty were perceived as potentially complex. Participants did not suggest this was a critical barrier, more that they were unaware of what paying duty might entail.

Only one exempt cider maker was using a bookkeeper to handle finances, and this person was a hobbyist rather than a business minded individual.

There were a few comments specifically in relation to paying duty, with some of those already doing this noting that the process was not particularly onerous.

Policy impact

Scenario A - exemption removal

Possible Responses

Participants were asked how they might respond if the duty were removed altogether.

Some of the exempt cider makers interviewed said they would definitely cease production. Some said that they would do other things with the apples, such as selling them or producing apple juice or cider vinegar. For this group cider was not the main source of income and a couple indicated that they would be stopping production anyway due to other reasons, such as retirement.

“It would depend a lot on the reaction from the wholesalers but I guess they wouldn’t pay me more either so in reality I would probably stop selling. We would move to making just apple juice I think.” (Duty exempt cider maker, hobbyist)

“If the exemption disappeared it would not be viable to continue and I would have to stop. Putting the prices up isn’t really an option as people already think my product costs a lot” (Duty exempt cider maker, hobbyist)

“We would give up, it’s that simple. We would keep the orchard and we would just use that to produce enough for ourselves and friends - say 90 litres” (Duty exempt cider maker, hobbyist)

Some cider makers said they would need to consider the viability of their operations moving forwards before reaching a decision. Most of these were hobbyists and for the remaining couple, cider production was part of a wider set of business activities.

“It would add a layer of cost to me for sales and I would struggle to recover that cost by increasing prices. Most customers wouldn’t pay much more to cover the duty costs, unless prices increased across the board. I don’t know if I would carry on, would like to try to” (Duty exempt cider maker, hobbyist)

“If duty was removed then I probably wouldn’t invest in the new equipment, and I may not even continue. I may grow apples and sell the apples, or turn them into cider vinegar.”(Duty exempt cider maker, hobbyist)

“Don’t know if I would still produce, would depend on the amount I’m still able to make after paying the duty. Would have to reconsider if it would be worthwhile”. (Duty exempt cider maker part of business)

Some said that they would likely continue producing if the duty were removed. There was an even mixture of those for whom cider was the main source of income and those that it was part of a wider set of business activities. Some of this group had plans to expand, with one noting that if the exemption was removed then they would certainly proceed with their expansion plans.

“Rather than bottle I would take 20l containers to shows and sell by filling plastic containers as a takeaway type of thing. I can sell a 2 l plastic container costing 8p which is equivalent of 4 bottles and could make a saving. It would be a slightly different customer but I would be able to still sell it “(Duty exempt cider maker, part of business)

“I don’t think we could afford to reduce the profit margin and so would have to pass extra cost on to our suppliers. I think they would pay as we would all be in the same position. There would be more paperwork which would be daunting I think but we could probably work around it.” (Duty exempt cider maker, hobbyist)

The findings suggested that hobbyists were more likely to say that they would cease or consider ceasing production altogether. Cider makers for whom cider was the main source of income were more likely to indicate having plans to expand their operations, and that the removal of the duty wouldn’t really affect these plans.

Within the analysis we have attempted to explore what the removal of the duty exemption would mean, based on the cost and profits data supplied by these cider makers.

Some cider makers estimated they would begin to make a loss and would likely cease or consider ceasing production if the exemption was removed. One cider maker would make a very small profit margin but said that they wouldn’t give up anyway. This cider maker would change containers to reduce costs elsewhere and look for other cost saving opportunities to ensure business sustainability. Some cider makers would achieve a level of profit which could allow them to sustain their activities and generate a modest profit, though there was more of an impact on profits for some rather than others.

Cider makers already above the exemption threshold were asked how they felt that removal of the exemption would affect the markets and smaller cider makers. About half of this group provided comment. Some thought that, from their experience of how important the exemption had been for them when starting out, that exempt cider makers would be most likely to cease production. One participant felt that this may be the outcome, and a couple of others felt that many would not give up (but again linked to their own experiences). The remainder didn’t feel able to comment. Comments from cider makers already above the threshold included:

“It would make no difference to me but it won’t be good for the smaller cider makers. There will be a financial impact on the small business who will likely stop producing and this will impact the local economy” (Non-exempt cider maker, part of business)

“I don’t think people will grow unless they want it as main income so I think they will give up or go underground.” (Non-exempt cider maker, main source of income)

“I think a lot of them would stop making it as it wouldn’t be cost effective for them to continue. They would have to put their prices up, which would make them uncompetitive and we would see a reduction in the steady growth of small scale craft makers as I think it would put people off from starting in the first place.” (Non-exempt cider maker, main source of income)

“I think that the ones who are dedicated to make cider and have a passion for it will continue to make it but ones who are in it for money will probably stop. I don’t think it would have much impact on the market, there are enough who are registered over the limit like we are” (Non-exempt cider maker, part of business)

“I don’t think it would affect them at all as they don’t rely on it as a business. It would make a level playing field. We have 3 other cider makers locally, we are the only one paying duty. They always moan it would penalise them but mostly they have city jobs and are doing it as a hobby” (Non-exempt cider maker, part of business)

“I think that the smaller cider makers would moan initially but I would be surprised if more than 10% of them actually stopped production. We think that the exemption should be removed as anyone producing alcohol should have to pay a duty on it. I think it is wrong for them to pay nothing and I think that the exemption makes it harder for them to expand and doesn’t encourage development as the cider makers would rather stay below the limit and not pay any tax on it.” (Non-exempt cider maker, main source of income)

A few non-exempt cider makers indicated that they would see the removal of the duty exemption as beneficial. In their opinion this would remove competition and allow them to control a larger stake of local markets.

The affiliate bodies provided contrasting thoughts on how removal of the exemption might influence duty exempt cider makers. Two bodies said that removal of the duty exemption could harm the industry and make it less likely for cider makers to start out. In contrast, another body felt that the impact would likely be less pronounced.

“If you make 50p a bottle instead of 25p then you can invest in equipment, staff or new orchards… I suppose this is less important if it’s just a hobby though. I expect that those interested in cider will still grow” (Affiliate body)

Economic impact

A few cider makers and one of the trade bodies felt that removal of the exemption could prevent new cider makers entering the market.

There was little discussion of wider impacts, with just one participant raising concerns over the impact on equipment suppliers and those supplying replacement trees as well as fencing and hedging contractors. They felt there could be a significant multiplier effect in areas of the country like the South-West where cider production is a more prevalent activity.

In terms of employment, duty exempt cider makers were typically not employing staff, or only using a small number of seasonal staff at very specific times in the year. A small number of cider makers mentioned they would not employ staff for a large portion of the year. For this reason, impacts on overall employment within the cider industry and more widely are likely to be low.

Non-economic impact

Participants suggested that there may be other impacts for HMRC to consider if removal of the duty were to go ahead. These included; loss of orchards (in particular older varieties of apples and pears. Orchards may be removed and replanted with different fruits or turned into pasture or arable land), impacts around general maintenance of orchards and waste (there was sentiment that small cider makers help to maintain small orchards which supports wider ecosystems and biodiversity. Without the exemption there was a feeling that some apples would go to waste and orchards would fall into disrepair) as well as cultural and historical impacts.

Some hobbyists broadly explained that they would still make cider, but only what they could consume themselves or give away. Some cider makers were focused on using historic or rare varieties of fruit and believed it was important that these varieties were maintained. Some others were not particularly focused on the use of historic or rare fruit varieties and were using ‘eaters’ or crab apples. So, there could be less impact in some areas than others. A few cider makers were passionate about trees and apples so would continue to maintain the orchards anyway.

In terms of cider apples, while some suggested losses of particular varieties of fruit, some were using common varieties anyway, so the loss could be more around disappearance of certain varieties and any biodiversity knock-on effects. While some cider makers did make a point of using rare or historic varieties, the research generally suggested that those new cider makers who were entering into production were for the most part opting to plant and use common varieties. It was unclear how much impact overall there could be for rare and historic fruits. There could be some impact and this remained a key concern for some cider makers, but this research did not find conclusive evidence to robustly conclude what the impact would most likely be.

Scenario B - exemption for ‘traditional’ cider

Possible responses

Maintaining some form of exemption based on cider makers working to some kind of set criteria was discussed with participants and affiliate bodies. This was welcomed by those currently exempt, with no variations linked to business model.

A key concern for some cider makers and affiliates was that most cider makers are using few ingredients and doing things in broadly the same way, so it would be challenging to set the criteria for exemption. For example, all of the cider makers interviewed considered that they were ‘traditional’ in some way or other and that any exemption for ‘traditional’ cider could also permit medium and large businesses to take advantage of the exemption and potentially flood the market and price out the small cider makers.

Some cider makers questioned how ‘traditional’ could be defined without unintentionally helping more established parts of the industry, as well as how HMRC would police any regulation or criteria to ensure that larger cider makers were not taking advantage.

Economic impact

Further questions for this analysis were understanding, following the possible implementation of a ‘traditional’ exemption, which of the exempt cider makers would expect to grow (as they expect to remain exempt within any plausible definition of ‘traditional’), and who would want to or be able to adapt or change their production methods in order to meet any set criteria for exemption.

The key distinction between smaller and larger cider makers seemed to lie in a combination of the use of concentrate and speed of fermentation. The cider makers we interviewed explained that large cider makers were able to make large quantities of cider cheaply as they buy in concentrate (to satisfy their demand, as local fresh juice production would not meet their needs), ferment it in as little as 10 days, and then water down. In comparison, for the craft type cider that the cider makers we interviewed were making, the starting point was 100% juice (in all but one case) and fermentation took a minimum of 3 months, with some cider makers leaving one or more of their products to mature for a further 12 months.

The key considerations for cider makers were that:

• larger cider makers are able to make significantly higher profits due to economies of scale and having the capacity to do so

• smaller cider makers making craft cider are doing so because they feel it is a higher quality and ‘different’ product to mass produced cider from large manufacturers, and they actively want to do it in this way

Although concerns were raised, there was not wide certainty that the bigger companies would take advantage of an exemption and start making lots of traditional cider. Some thought that this could happen and therefore care needed to be taken in how any criteria would be established. The cider makers said they would not necessarily upscale production or change their processes in order to qualify, though a couple noted that they might begin producing stronger products that attract higher rates of duty which some find prohibitive.

“The product we have works and I don’t think we would change - we are known for what we produce. We wouldn’t change to be duty exempt.” (Non-exempt cider maker, part of business)

“If an exemption for traditional cider were introduced and I became exempt then I would probably start to make more of the stronger, wine strength, cider. At the moment the duty in this is cost prohibitive for me but if I paid no duty on the lower abv ciders then I would definitely produce the stronger stuff.” (Non-exempt cider maker, part of business)

In spite of raising concerns some duty exempt cider makers felt positive that HMRC were interested in understanding whether an exemption for a ‘traditional’ product might appeal, and most were positive about this possibility and the effects it would have. Some cider makers said there could be several ways that ‘traditional’ could be defined. One idea was around minimum pure juice content, and that the percentage juice should be clearly declared on labelling for all products so that consumers would be able to understand which products were really ‘traditional’.

In terms of response to an exemption for traditional cider, two main responses emerged. The first was that some might produce more cider if an exemption of this type was introduced and a small number of cider makers were already planning to grow.

“I am looking at going to 25000l and I won’t be able to go over that due to space mainly - I think that is the level I want to reach in terms of volume.” (Duty exempt cider maker, hobbyist)

“It could be an opportunity to grow. I wouldn’t make much more but if the limit wasn’t there then I might make up to 10,000L. I wouldn’t want to grow too much though. I want to keep it at a size I can manage myself comfortably. I don't want to get into employing people.” (Duty exempt cider maker, part of business)

The second response included those that would not increase their production if the exemption criteria changed to a definition of ‘traditional’. Reasons for not wanting to increase production were not wanting to employ staff, or that cider for them was just a hobby and they wanted to keep it that way.

“We have no desire to upscale - we haven’t got a big enough market demanding the product as we only sell locally, and there would be no advantage to making more unless we could sell more and for us we want to provide traditional cider in a traditional way and there is nothing more traditional than getting it off the farm from the person who made it.” (Duty exempt cider maker, part of Business)

“I don’t really have the capacity or desire to upscale - I am happy with the quality of life as it is and I have enough money to get by on. It would mean I would have to start doing things like employing someone, investing more in bigger premises and equipment and it’s not worth it - it would be too expensive and too much of a hassle, and I don’t want to be sat in an office running a business” (Duty exempt cider maker, Hobbyist).

Appendix 1 – Methodology, recruitment and screening

Additional information from methodology

‘Hard’ quotas were not set for the project, instead the database and recruitment were managed intelligently to ensure that cider makers across the spectrum were included in the research.

Geographical location was not a sampling criteria, but a wide geographical coverage was ensured as part of the process of recruitment, and care was taken to ensure that key cider production regions (such as the South-West of England) were well represented within the sample.

A sample frame of 339 UK cider makers was compiled using both publicly available information (The directories of cider makers at Real cider and UK cider) and information from NACM affiliated cider organisations.

Four affiliate bodies and a known expert on the UK cider industry helped support this research by providing access to their members and providing their own insight in relation to the research questions. Through the expert we were able to ensure that cider makers that were not affiliated or ‘off grid’ could be included within the research. These bodies were:

i. the Three Counties Cider and Perry Association, with members in Herefordshire, Worcestershire and Gloucestershire

ii. South West of England Cidermakers’ Association, whose members are predominantly in the South-West of England

iii. Welsh Perry and Cider society

iv. the Northern Ireland Cider Association

Six cider makers were removed from the sample as they were known to be very large (national or international cider makers) and would fall out of scope of the work. This left a sample of 333 cider makers. In total 84 participants were contacted and screened via telephone during recruitment. The outcomes of these screening calls are shown below.

Table 1: Outcomes of screening calls (n=84)

Outcome	Number of participants
Screened and in scope of the work – went on to be interviewed	37
In scope but not interviewed e.g. sufficient cider makers with similar characteristics had already been booked or interviewed	14
Refused	8
Not producing commercially (e.g. personal consumption only)	2
No longer produced cider	23
Total Screened	84

25 of 84 either did not sell or were no longer in business, representing 30% of those screened. This suggests that available online databases containing details around cider makers are subject to noticeable changes over time, and we were unable to estimate how many ‘new’ cider makers may have entered the market and whose details were not included in online databases.

The key sampling criteria for interviews was the size of the cider maker (determined both by volume of cider produced on an annual basis and number of employees). No cider makers with more than 10 employees were interviewed; though the original aim was to try and interview some organisations with more than 10 employees, one finding from this research was that this group wasn’t very large this was confirmed by NACM. Even cider makers with very few employees can reach very high scales of production.

Most interviewing resource was spent conducting research with exempt cider makers (the cider makers that were producing less than 70hl and would be directly affected by changes to the duty exemption). SME manufacturers were also included in the sample with more of a focus on exploring how production processes and equipment differed for organisations producing above 70hl and understanding drivers and barriers for growth. Some of these organisations would themselves be able to discuss their own experiences of growing from being artisan size, and the factors that had encouraged that transition. The distribution of completed interviews by approach and size or exemption status is provided in the table below.

Table 2: Interviews achieved by group and interview approach

Organisation exemption status and size	Face to face	Telephone	Total
Exempt (<70hl, <10 employees)	6	17	23
Non-exempt (>70hl, <10 employees)	4	10	14
NACM affiliated cider bodies	-	3	3
Total	10	30	40

We attempted to screen and interview SMEs with over 10 employees, but it wasn’t possible to achieve any interviews with these cider makers. NACM suggested difficulties in this area as there are significantly fewer of the medium and larger SME, and that employee band could be misleading in correlation with production volumes – that small SME in terms of number of employees could still be producing very large volumes of cider.

The research was conducted in compliance with ISO 20252; the international standard for quality in market research.