Bierfesten has been off beer for the last few weeks due to a severe injury that occurred while coming home from work recently. Thankfully I survived the scare of my life, I had the fun of a having to duck under a train on the Sydney rail network when I had slipped between a train and the tracks. I survived with a few bruises and scratches and a broken ankle. This has helped me dry up for a few weeks and do some reading, and of course now content for the latest TRENDS POST.
There have been a few actions taken recently that are definitely hotting up the Craft Beer space in the US, which is the most lively in the world.
1. Who are the Main Players in Beer in America?
Like many Craft Beer Blog Guys I have my own opinion on what constitutes Craft Beer in America and what doesn’t. The Brewers Association is the lobby group who helps many small brewers, but has very strict guidelines that includes or excludes. I always though read their press releases with a grain of salt. I of course want to support a sustainable growth industry in Craft Beer for years to come, not over-inflate marketing hoopla and think our industry is better than wine, spirits or any other alcohol beverage industry.
In an article by Jason Notte “Why Success Is Killing the Craft Brew Industry” he is able to explain some of the reasons for the fighting on TAX that the Beer Institute and separate organisation Brewer Association in Denver are fighting over. I had previously never heard of Beer Institute, but here are what both represent.
Beer Institute –Aims of the institute are; “The Beer Institute works with federal and state lawmakers to develop legislation that represents the interests of the beer industry and the country as a whole.” – “The Beer Institute represents the $246.5 billion beer industry. An industry that includes more than 2,800 breweries and 2 million jobs.”
Brewers Association – Aims of the BA are; “The Brewers Association is an organization of brewers, for brewers and by brewers. More than 1,700 US brewery members and 36,000 members of the American Homebrewers Association are joined by members of the allied trade, beer wholesalers, individuals, other associate members and the Brewers Association staff to make up the Brewers Association.”
So why would 2 beer organisations be battling over bills through congress ? well it comes down to Politics, to provide a brief breakdown I have provided a table with the breakdown.
Like any major organisation each group has to attain funding from Beer Industry associated. The brewers association came out earlier in the year with the “Craft v Crafty” argument that stated that not all Craft beers are created equally. It was seen as a petty and unarticulated argument that put many Craft Beer people offside. Including myself as I enjoy large company Craft endeavours as much as Local Craft brewpub beer.
The diagram above should display some o the major differences. The Brewers Association aim was a few fold with their “Small Brewers Act“.
- “Small BREW Act would create a new rate structure that reflects the evolution of the craft brewing industry. The rate for the smallest brewers and brewpubs would be $3.50 on the first 60,000 barrels. For production between 60,001 and 2 million barrels the rate would be $16.00 per barrel”
The Beer Institute is an organisation that tries to represent all Breweries and Employees in America and provides broader output of brewery release. This from Joel McClain who is President of the Beer Institute that takes a more holistic view of the brewing industry.
“Whether it is a major brewery that supports thousands of good-paying jobs or a microbrewer that is expanding, brewers help our economy by drawing on a widerrange of supporting industries – farming, manufacturing, distributing and service workers who help deliver beer to the consumer. Today, there are more than 1.8 million Americans at work because of beer. An economic analysis shows that brewing and importing accounts for $223.8 billion in economic output, with employees earning nearly $71.2 billion in wages and benefits, and generating more than $44 billion in tax revenues.“
2. TAXES –
There is no doubt America is in need of MONEY, with employment at all time lows, and the nation that has had to make huge budget cuts that have meant closing National Parks and is opposed to taxes for the wealthy unlike other allied countries like (Sweden, Canada, Australia). So now the allied beer groups are lobbying for Tax Breaks for small businesses. This is an area that as the industry grows larger and more profits are being made, it will impact the smaller brewers more so than the larger more profitable ones.
The State of Texas this week had a Craft Brewery day in State Legislature. This from Shanken News.
” The Texas Senate voted 31-0 this week to approve two bills that will allow craft brewers and brewpubs in the state new opportunities to sell their beer. The legislation lets brewpubs sell a limited amount of beer through distributors and allows craft breweries to sell their products to consumers on location. The bills were initially promoted by the Texas Craft Brewers Guild and still have to be approved by the Texas House and governor. “.
We can see there are pro- Craft Beer states in the US, that assist with Growth of Brewers such as Colorado, Oregon, and California that encourage small start up brewers along with a population that supports the small brewery idea. But are some small brewers starting to get too large? Is there a point now where we have to re-term the word “Craft Brewer” as we can look at a hand full of brewers and ask how large is too large now for multifaceted growth.
We are having Craft Brewers who are setting up East Coast operations to allow for increasing market share on the East Coast. These brewers are using high capital growth projects to expand their operations, and of course getting local support with their new breweries, due to providing jobs in areas for construction and in hospitality. I think its a great thing I really do, but how should multi-site breweries with less 6 Million Barrels annually get tax benefits of small brewers??
Comparative Analysis with France Tax HIKE
A country that should be on par with hits Northern Neighbours is suffering from inability to view the whole picture. A Country with amazing excesses of wine barrels could create a unique and interesting array of beers for the global market to bring the country away from just wine, but unfortunately across France it is very difficult to attain Craft Beer unless you head all the way North to Belgium or Netherlands.
Thanks to Johanna Kolerski-Bezerra (EuroMonitors)
3. Equity Firms Getting into Craft Beer
I came across a Wall Street Journal excerpt explaining the private Equity are buying into Craft Beer, as I’m not a subscriber I googled it and came across Lisa Browns article “Brew Hub to Build 5 Breweries for Craft Beer Production” and I think this is definitely one of the key areas of growth we’re going to see. So what does this have to do with trends, well its pretty simple mathematically really.
“Brew Hub, founded in 2012 by a group that includes former Anheuser-Busch InBev executives, is based in Chesterfield. It announced Tuesday that it would start construction in the coming weeks on a brewery in Lakeland, Fla., the first of five planned breweries. The Lakeland facility will have an initial brewing capacity of 75,000 barrels. The other sites have not yet been selected, but company executives said they were looking in the Northeast, Mid-Atlantic, Midwest, Texas and West Coast for locations.“
What this concept is not so much Banks building Craft Brewery groups, but its banks investing into well constructed business plans for growth business concepts. This idea is going to work on several fronts.
- Large Brewery Experience in Anheiser Busch
- 5 Breweries in various markets will enable fresher beer and local acceptance
- Setup in Beer Market of St Louis that used to be home to ABInbev so it will attain goodwill from a strong beer city
- $100 Million Dollars over 5 years to complete the business into a sustainable business operation
Without doubt we can see that 2 Beer Organisations are at war with each other as they are both lobbying for the same cause but need to differentiate themselves from the other. One a Washington Lobby organisation that aims to support all brewers great and small, and the Brewers Association that is run by small and large “Craft Brewers”. They have both put forward ideas the other doesn’t want to acknowledge. It appears to an outsider like Bierfesten like its a ‘school yard shuffling’ of who is in the cool kids group and is not.
Earlier in the year the Brewers Association put out a list of who is Craft and Who is NOT, and I disagreed with the statement as it was like spitting out the window of a car at high speed. You soon learn not to. I drink Hoegaarden Grand Cru, I drink Leffe, and I’m happy to drink beers from Large breweries if they are well made. Because they are not in the “list” of BA does not mean I don’t buy them.
Taxes are going to be an area that everyone is going to have to adjust to, as the US although has many craft brewers, but we can’t sit here changing rules for some of our “favorites” who are technically not small anymore. If they have money for expansion then there should be adequate taxes paid by the brewery for state and federal resources. This is an area that will definitely be discussed more this year due to bills and legislature.
End of the day Small Craft Beer is ‘Big Business’ and there is lobbying like any other industry.