The craft beer industry grew more than most of us could have imagined in 2009. Now with the recession behind us (for the most part), the near future could bring great prosperity to craft beer makers. Surprisingly, the government of all things could provide the biggest boost.
[5/13 Update: The links to the bills are now correct. Thanks, Tammie!]
Brewers Association President, Charlie Papazian, reported this week that Senators, John Kerry and Mike Crapo, introduced a new bill supporting small brewers. If you are feeling Déjà vu all of a sudden, it is probably because a similar bill was introduced in the House of Representatives (HR 4278) in December. That bill now has 66 cosponsors which comprises 15% of the House of Representatives. You can track the progress of the Senate bill here and the House bill here.
And then there is HR 5034 which could reportedly threaten direct-to-consumer wine shipments and, in the process, threaten your online beer purchases as well. But we’ll leave that one for another post . . .
Back to the two bills mentioned above, they are effectively the same. Although the bills are both very short and propose changes to a minute section of the Internal Revenue Code, we can still use Papazian’s help in translating what these bills actually do (in plain English):
* To reduce the excise tax on the first 60,000 barrels of beer produced from $7 to $3.50 per barrel.
* To redefine small brewers as producing 6 million barrels of beer annually from current 2 million barrel definition. Senator Kerry notes, “The small brewer tax rate was established in 1976 and has never been updated. Since then the annual production of America’s largest brewery increased from about 45 million to 107 million barrels.
* To reduce the tax from $18 to $16 per barrel of production exceeding 60,000 barrels up to 2 million barrels. A small brewer will pay the same $18 per barrel excise tax rate that the largest brewer pays at over 100 million barrels.
The increase in the small brewer cap from two million barrels to six million barrels might as well be called the “Sam Adams Clause.” As I’ve discussed previously, Boston Beer Co. is close to two million barrels annually and in danger of losing its “craft” status. With Boston Beer Co. reporting big numbers in Q1, there is a strong possibility that the brewery surpasses the mark this year.
The Brewers Association has been aiming for 10% craft market share for sometime. You can bet that they will keep BBC “craft” no matter what it takes. It seems unlikely that expanding the definition to six million barrels would qualify any other breweries as craft (but I’ve been wrong many times before).
Back off another tangent, the Brewers Association website outlines the benefits of the legislation:
# The estimated cost of the provision is about $44 million per year and less than $500 million over 10 years.
# A Harvard study of the Economic Impact of H.R. 4278 indicates that:
* The bill would generate more than 2,700 new jobs over the first year to 18 months, followed by an average of 375 new jobs per year over the following 4 years.
* Each new job would cost less than $4,000 in foregone government revenue in 2010.
Though this will help hundreds of small craft brewers and brewpubs, there is one thing to note. Of the 63 small brewing companies producing more than 60,000 barrels listed on the Brewers Association website, approximately half of those are craft brewers while the other half encompass some “craft misfits” (breweries like Goose Island that are technically not “craft” definition-wise) and a bunch of big brewer-owned subsidiaries and pseudo-craft breweries. You may not be in support of some of these other breweries, but we will take the bad with the good here, no?
Nevertheless, if legislation passes, it would be an absolute coup for craft breweries. The Brewers Association page informs on how to contact your local representatives to support the bill.