Brewers Association enacts Sam Adams provision as brewery nears threshold

Jim-Koch

Boston Beer Co. file photo / SamuelAdams.com

(Boston, MA) – A comprehensive look at today’s landmark decision by the Brewers Association


Though it may not be a big deal to consumers, the Brewers Association saved itself some headaches with a recent decision to modify its bylaws. The association announced today that it has increased the production ceiling in which a brewery may produce beer and still qualify as a “craft brewery.” The number, set to two million barrels annually for the past three decades, has been increased to six million barrels.

The only brewery that is currently impacted by the change is Boston Beer Co. (Samuel Adams). The next closest craft brewery is Sierra Nevada Brewing and, at fewer than 800,000 barrels, it would likely not have been impacted by the limit for at least another ten years. Even with the number tripling, the Brewers Association may need to re-visit the rule again by 2025 should current Boston Beer growth trends continue through the next decade and beyond.

With the drastic change of the numbers, some conspiracy theorists are calling into question Boston Beer Chairman, Jim Koch’s, relationship with the BA as a member of the Board of Directors. Most are taking the Brewers Association’s reasonings at face value though: a) why punish growth and success? and b) excluding BBC from future craft beer industry reports would inaccurately reflect the growth (or, in that case, decline) of craft brewers. With an increasing number of media outlets covering craft beer like The Washington Post, The New York Times, The Huffington Post and CNBC, the latter point is becoming increasingly important.

Until now, the production limit imposed by the Brewers Association has been virtually synchronous with the small brewers tax regulations set back in 1976. The main difference that impacts Boston Beer is that the Brewers Association excludes “malternatives” like Twisted Tea from its production figures. This is how it is possible that Boston Beer exceeded two million barrels produced last year, disqualifying it from small brewer tax breaks, while enabling it to remain a “craft brewery.” The malternative exclusion brought the BA’s figure below two million in 2009.

Boston Beer reported a few weeks ago that production increased 12% in 2010, meaning that, even with the exclusion, there is a possibility that the BA number could eclipse two million barrels. An inquiry made to the brewery of Twisted Tea figures went unreturned. In order to cross the BA threshold, the brewery’s malternative line (which also includes HardCore Cider) would have had to increase in the vicinity of 40%. This is conceivable considering that the brewery is setting year-over-year Twisted Tea growth goals at 30% but unlikely given it would be a drastic increase from prior years’ growth.

Legislation is currently sweeping through Congress that would increase the amount of beer that a brewery can make up to six million barrels and still allow it to get tax breaks as a “small brewery.” Rather than wait for Congress to vote on the legislation, the BA opted to change the bylaws ahead of time. Though it is still receiving new supporters, the House version of the bill (HR 4278), was introduced way back in December of 2009. The Senate version (S 3339) was introduced just this past May.

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20 thoughts on “Brewers Association enacts Sam Adams provision as brewery nears threshold

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  2. Right at the end there, where a revision of a common sense law will save the biggest (craft) fish in the pond a lot of money, that’s the part where Sam Adams loses me.

    That spot is where they stopped being a small business focused on the handmade aspect of their product as an essential, beautiful element and became a true publicly traded corporation, concerned first and foremost with minimizing costs and maximizing profits. The notion that somewhere in their past, they used to brew beer because they were artisans – folks that sculpted meaningful tastes in the midst of a sea of watered-down, lowest common denominator “products” – has been boiled down into an a line-note aspect of increasing their bottom line.

    That they bother at all brewing a malternative illustrates their primary focus on being a money-making enterprise striving for maximum market accessibility.

    I understand Sam Adams has had a meaningful impact on an industry that has given me a lot, including a great job for some time, and I appreciate that. But when it comes to changing bylaws, and in no small way trying to influence national policy, in order to better accommodate their single most successful member, that amounts to the Rockefellers sitting in a meeting and influencing decisions that could make them the only members that qualify for a new tax break. And that is flat-out ridiculous.

    Sam Adams can stop increasing production tomorrow. The company has the ability to make exactly two million barrels of beer in 2011. If they want to qualify for a tax break that supports small (see: less than 2 million barrels seems a VERY reasonable definition of small) breweries, they should make the executive decision to STAY SMALL. It’s not punishment at all! If they want to be a mega-corporation and compete more directly with Yuengling, Pabst, and the other BMC ilk, they can certainly go and do that. But why should they qualify for benefits intended for small brewers when they clearly aren’t small any more?

    The more I think about it, the more I cannot believe the BA is okay with this.

  3. This only further delegitimizes the Brewers Association.

    From Mr. Koch’s perspective: Having your cake and eating it too

  4. Definition of craft = “an art, trade, or occupation requiring special skill, esp. manual skill: the craft of a mason.”

    I fail to see how they’re not a craft brewery despite the fact their beer is boring and apparently over-purchased.

  5. Your point about Sam Adams not being small anymore are valid. The angle you ignored though is the one in which the Brewers Association shares with the world that craft market share declined 20%. From an us (craft) vs. them (macro) angle, it also behooves the BA to keep a brewery like Sam Adams on our side so to speak. The more folks to lobby for craft the better…

  6. So the issue is with size, not whether or not the beverages are truly “crafted”, correct?

    I have no idea of Mr. Adam’s technique when it comes to brewing nor would I ever buy his beer so I plead ignorance to a degree.

    Shouldn’t the nomenclature describe the method to which the product is created and not the quantity?

    If you make 10,000 t-shirts by hand they were still “crafted” by hand, were they not?
    If those same shirts were machine made I believe that would contradict what most of us believe to be created in a “craft” sense.

  7. By their own definition, the Brewer’s Association exists for this purpose:
    To promote and protect small and independent American brewers, their craft beers and the community of brewing enthusiasts.

    How are they protecting actual small breweries in this instance? Sam Adams is NOT small. At 2 million barrels production, they would make over 1 BILLION bottles of beer in a year. I have never seen a billion of anything. Sam Adams is also NOT an independent brewery, it’s a publicly traded corporation. Visit their “Investor Relations Center” here http://goo.gl/tnRHX so you can make sound investment decisions and get up-to-date stock information.

    This is the time when the Brewer’s Association should have stuck to their purpose and graduated Boston Beer to some other status, like member of the craft hall of fame or something. The definition just doesn’t fit them any more. And when people see a chart that says “Oh my god, craft production is way down in 2011!” there should be an asterisk next to the title directing attention to the fact that the largest craft brewery has exceeded craft production guidelines and accounts for the skewed numbers. Just like adjusting for inflation to give a more accurate side-by-side picture of what things cost now vs 100 years ago, the numbers could be adjusted to account for the change (for instance, % growth based numbers instead of overall volume based numbers). Guess what? In 2012 the year-to-year imbalance is GONE. Good god, is statistics really the reason for slanting a judgment call of this magnitude?

    I agree with your point: the more folks to lobby for craft the better. But when we’re talking about a publicly traded, contract-produced, malternative sidejob brewery who cracks the top of the craft production scale, I fail to see how changing the rules in order to continue to hold them in the same esteem with small artisinal producers benefits craft beer in any way. If anything, it looks like the whole movement is wishwash and has no motivation behind it beyond profitability. And I know of hundreds of breweries that operate with much more on their minds than that.

    The tax breaks were put in place to encourage small business growth, not unlike other small business government initiatives. Boston Beer used those breaks to get their start. Now they are the definition of fiscal success in craft beer. They reached the point that the tax break no longer applies. The end. If the BA wants to keep Sam Adams in their fancy graphs that benefit mankind, they should urge them to find satisfaction – somehow – at a mere two million barrel annual production. But that’s not how American corporations are run, is it?

    Craft beer may be my favorite thing in life. Up to this point, it has (with minor exception) been focused on the magic in the glass, getting to know the people behind it, and reveling in its myriad variants and constant boundary-pushing. It connects people in a real way. It goes beyond monetary value and has deeper value. And I hate above all else the manipulation of this thing that has meant so much to me in the name of capitalist greed.

  8. It’s a passion-filled debate with valid points on both sides. One that Jim Koch & his shareholders opened long ago when deciding to take the company public. The brewery has taken on additional financial and legal obligations as a result that force it, in some ways, to hit certain revenue and profit targets. The way I personally look at Twisted Tea is that it fits a certain market that I don’t have to partake in, results in profits appeasing shareholders and provides the company the extra funding to take on special projects like Stony Brook Red that won’t result in similar profits. If Pale Ales aren’t someone’s thing, they can look at those the same way for any brewery; all of them need some staples to fund the risky, “innovative” projects whatever those may be.

    As for size, I agree that 2 million barrels does not seem “small” though it truly is when speaking relatively to the behemoths.

    Just playing devil’s advocate…

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  10. 2 million barrels = industrial sized brewery (sure it’s not as big as “the big 3″, but it is completely trying to aspire to be that yet with the “face” of a craft brewery.

    Sam Adams makes some great beers, but I have not considered them a “craft” brewery for quite sometime…. or even a “Boston” brewery for that matter considering their largest brewing facilities aren’t even in Boston.

    Either way, it really makes no difference to me. If they can fenagle their way into getting tax breaks, good for them! More power to you, Samheuser!

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  12. After a recent tour of the St. Arnold brewery in Houston, I was made aware of this scandal obviously perpetuated by politics ($$) and perhaps some unforgiving pictures of craft brewers association suits slamming back cans of clone-beer (yes, we have that brewery in Houston, also!!) Add to that the debacle of the Boston Beer Company sponsoring the Opie and Anthony radio grunt and their nasty recording a pagan couple having sex in a confessional in a Catholic church and the subsequent lack of apology or remorse by Boston Beer. At that point, I no longer considered their beer worth sipping even if free! You all would be better beer-snobs if you did the same!

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