The Street: "Why Success Is Killing the Craft Brew Industry"

Discussion in 'Beer News' started by Kuemmelbrau, Mar 29, 2013.

  1. herrburgess

    herrburgess Nov 4, 2009 South Carolina
    Beer Trader

    Wow, that's an incredibly interesting piece. So much for all the "cooperation and camaraderie" among the craft scene...but signs of this "rift" have been appearing more and more frequently recently. Maybe the 'boom' will go 'bust' by means of a legislative whimper.
     
  2. Frankinstiener

    Frankinstiener Jul 28, 2009 Illinois
    Beer Trader

    "Does your legacy brewery that survived prohibition have an original recipe containing maize, which the Brewers Association considers an adjunct filler? Sorry, D.G. Yuengling & Son, but you're out. Does your brewery have a deal with Anheuser-Busch InBev (BUD) that keeps your 30-year-old pioneering craft brewery independent while giving it access to a big brewer's distribution system? Sorry, Craft Brew Alliance (BREW) members Widmer Brothers and Redhook, but you're out, too."

    "Does your brewery make malt beverages such as Twisted Tea, have breweries in three states and make nearly $600 million in revenue? Then that means Boston Beer is not only in, but the Brewers Association will change its own definition of a "craft brewer" to accommodate you. "

    Some great points.If you are going to mess with the rules of being "craft" to keep some in and others out than the term "craft" becomes useless. Craft Vs. Crafty was an absolute joke. I'll go with the term "good beer" from now on.
     
  3. DStoked

    DStoked Sep 28, 2011 Ohio
    Beer Trader

    There are assholes everywhere. Fact of life.
     
  4. FriarTuckInLuck

    FriarTuckInLuck Dec 15, 2011 Arizona

    Its not infighting at all. The Beer Institute grants board membership to executives of InBev and the others, and stumps for legislation to relive these giant multinationals of tax obligations to the US. The Brewers Association sees the incredible growth of homegrown breweries such as Lagunitas, Oscar Blues, and New Belgium as reason to support MORE growth for OUR US BREWERIES. I don't think anyone on this board would argue that Boston Beer Co. wouldn't gateway into "craft" beer better than the BMC boys. They unfortunately don't enjoy a fraction of the output of the conglomerates, and are bashed on this site weekly for being too "big". Giving a break to the pioneers of the craft brewing industry so we can stop shipping money offshore and get some better beer in our goddamned ballparks should be a no-brainer.
     
  5. RobertColianni

    RobertColianni Nov 4, 2008 Pennsylvania

    Who cares? New breweries are opening every day on the micro scale. Many of which won't feel the taxation for 60,000+ barrels and those that are over that gross output probably don't mind expansion. The only thing that would kill or put brewers on the chopping block would be if they were new, jumped into high output before they allowed the customer base to build and some Scott Walkeresque law came out requiring anybody over 60,000 barrels to hire a middle man for distribution services. The name of the game will be "unless you're sure that you can keep a recipe true, stay artisan." I win.
     
    Hokenfloken, Premo88 and ktblue22 like this.
  6. RblWthACoz

    RblWthACoz Aug 19, 2006 Pennsylvania

    When life hands you assholes, get some lips and make hotdogs.
     
  7. jesskidden

    jesskidden Aug 10, 2005 New Jersey
    Subscriber

    Lots of craft breweries in the membership of the Beer Institute (the successor group to the old "big Brewers" organization, the United States Brewers Association), besides Board member Steve Hindy's Brooklyn Brewery, their ranks include top 20 craft companies like Boston Beer Co., Boulder, Bell's, Boulevard, Deschutes, Dogfish Head, Full Sail, Matt, Harpoon, Sierra Nevada, St. Louis, Stone, etc. And, of course, the BI (and USBA) existed long before AB and M-C became subsidiaries of large, international brewing conglomerates.

    And, of course, AB and MC pays top dollar dues rates for each of their 20+ breweries and subsidiaries (Goose Island, Leinenkugel, etc) to The Brewers Association.

    I'd say that qualifies as infighting. Of course, the brewing industry groups have a long history of infighting, mergers, and splits.
     
    herrburgess likes this.
  8. leedorham

    leedorham Apr 27, 2006 Washington

    This will definitely kill the craft beer industry. I predict we will have less than 10 breweries in North America by this time next year.
     
    jcb7472, crushedvol, cavedave and 9 others like this.
  9. beertunes

    beertunes Sep 24, 2007 Washington
    Beer Trader

    3 of them will be in Bellingham, and the other 7 will be in Bend.
     
  10. coreyfmcdonald

    coreyfmcdonald Nov 13, 2008 Georgia
    Beer Trader

    Eh, I get it. BA raises their definition of max barrels for a craft brewer and wants to change laws using this figure for tax purposes. Six million barrels of beer is seriously a large company; not many people want to go out of their way to help billion dollar companies. It's getting to the point where saying "us versus them" is a bit more difficult. Craft beer has become more of a spectrum. There are the local brewers who are small and want to stay small. There are the regional brewers who are expanding to new markets. There are the breweries who distribute nationally.
     
  11. kemoarps

    kemoarps Apr 30, 2008 Washington
    Beer Trader

    A: so why would that apply to BBC and not, say, Widmer or Redhook (I agree with the principle of what you're saying just not sure it really reinforces your point as strongly as you intended)

    B: I think the reason they get 'bashed weekly' is less for their size and more for the fact that much of what they do output (while an excellent intro for many) just isn't that tasty

    C: Absolutely agree with the last sentiment expressed there, but still refer back to A

    EDIT: not really intending to just dump on BBC if it came across that way, just the thoughts I had as I read through the responses
     
  12. dennis3951

    dennis3951 Mar 6, 2008 New Jersey
    Subscriber Beer Trader

  13. Evan

    Evan Mar 9, 2012 Maryland
    Beer Trader

    I discussed this for some time with one of the brewery owners who was going to be involved in these talks. My understanding is that there is a significant tax break once you surpass 6 million barrels. This allows the largest breweries (BMC) to pay a much lower avg tax/barrel than any of the little guys. The Brewer's Association's argument is that those tax breaks are creating a competitive advantage for breweries that are already huge and that the tax break should service more than the very few it currently does. Their logic is that lowering the limit sets a more reasonable threshold for current craft breweries because 6 million barrels is an s-load of beer. They also argue that tax breaks provided to BMC sized brew operations are going towards companies that use a significant amount of automation. They contend applying these tax benefits to the smaller breweries will allow expansion and in turn jobs for American humans. Again, this is just what I took from the discussion. I was drinking.
     
    Mandark and GotWad629 like this.
  14. sandiego67

    sandiego67 Feb 25, 2008 California

    I don't know which of you is correct but the NY Times says the exact opposite:

    http://www.nytimes.com/2013/03/29/b...brewers-ask-congress-for-a-tax-cut.html?_r=1&

    "Commercial beer makers pay a federal tax on every barrel of beer they produce. It is a progressive tax: small breweries, producing fewer than two million barrels a year, pay $7 on their first 60,000 barrels. For every 31-gallon barrel above 60,000, they pay $18. Only about 100 craft breweries in the United States produce more than 15,000 barrels a year. About 95 percent of craft breweries and brew pubs produce less than that. Bigger brewers, like Anheuser-Busch InBev, which produced 98.5 million barrels in 2011, pay $18 for every barrel."
     
  15. Evan

    Evan Mar 9, 2012 Maryland
    Beer Trader

    Again, I am essentially repeating what I took from the conversation. Maybe the tax break comes in another form. There wouldn't be much point of different designations for breweries less than or greater than 6 million barrels otherwise.
     
  16. cbeer88

    cbeer88 Sep 5, 2007 Massachusetts

    That reads like a bit of a hit piece on Boston Beer Co more so than the death of the craft beer industry.
     
  17. Kuemmelbrau

    Kuemmelbrau Aug 2, 2008 Louisiana

    My subject title post was a play on the articles title. I have no actual belief that this will seriously impair the craft beer movement. I think it only one speed bump of many on the road to craft persona (in the Jungian sense) I am interested in how the breweries who are members of both entities recon their loyalties.
     
  18. Frankinstiener

    Frankinstiener Jul 28, 2009 Illinois
    Beer Trader

    "Its beers and brewers should be fine, but a fermenting fight over beer taxes is going to kill the term "craft beer" forever. Good riddance. " -taken directly from the article. I don't think many of the comentors are actually reading the article.
     
  19. CharlatanSin

    CharlatanSin May 28, 2009 Connecticut
    Beer Trader

    As a beer geek and a political science grad student, my two worlds are FINALLY colliding! Maybe somebody can make use of my very particular set of skills...
     
    franklinn and kemoarps like this.
  20. jRocco2021

    jRocco2021 Mar 13, 2010 Wisconsin
    Beer Trader

    Bravo at least I know I'm not the only person who can read on this site. There is still hope, not a lot but it's there.
     
    UncleJimbo likes this.
  21. cyclonece09

    cyclonece09 Aug 5, 2008 Maryland

    I am sorry, but why not just make the whole beer tax thing progressive like our income tax rates? Billionaires still pay the lowest tax rate on their first little bit of money each year, why not brewers. I am sure the lawyers in Washington can come up with some other tax to stick it to BMC to make up for lost revenue.
     
  22. FriarTuckInLuck

    FriarTuckInLuck Dec 15, 2011 Arizona

    Widmer and Redhook honestly never entered my mind, lol. I'm no big fan of BBC to the point of not drinking many of their newer offerings because I can't stand passing up amazing beer for ? I just want some common sense reforms to tax laws, not cash giveaways to companies headed oversees. An American beer boom means American jobs on American soil. I realize that BMC were all independently owned at one time, but their focus as a company(global growth, stagnant thinking, SELLING OUT) is and should be wildly divergent from the current trajectory of the "beer movement".
     
    craigo19 and kemoarps like this.
  23. Premo88

    Premo88 Jun 6, 2010 Texas

    That's sort of my reaction ... a big "are you kidding me?" when it comes to the death of craft beer.

    The djinni is out of the bottle and not going back. This particular pissing match over taxes won't kill craft beer. In fact, I don't even see how it will hurt it. Should BMC get a better tax deal, while the craft breweries also get a better tax deal, are BAs going to stop buying Heady Topper?
     
  24. smokinyodas

    smokinyodas Oct 21, 2012 Florida

    My eyes started rolling over near the end of that article after long talks about taxes. Then like a light from heaven I remembered to put more craft beer in the fridge. ;)
     
    Premo88 likes this.
  25. Premo88

    Premo88 Jun 6, 2010 Texas

    The term "craft beer" is already dead to me. How the hell can Sam Adams be considered "craft" when it's as big as it is? Same for (I hate to say it) Sierra Nevada? And Arrogant Bastard is on tap everywhere here in Texas. That doesn't sound "craft" to me.

    If the term "craft beer" dies for everybody, do I still get to drink Karbach's Sympathy for the Lager? That's the only question that matters ...
     
  26. jRocco2021

    jRocco2021 Mar 13, 2010 Wisconsin
    Beer Trader

    My comment was about BA's ability to read. The hope I was talking about was for reading comprehension.
    I see what your saying though but size to me isn't a determining factor for quality to me all craft is are higher quality brews if the quality is the same what difference does output make.
     
  27. otispdriftwood

    otispdriftwood Dec 9, 2011 Colorado
    Beer Trader

    Sucess seems to always screw a good thing up, doesn't it?
     
  28. Premo88

    Premo88 Jun 6, 2010 Texas

    I read it from a point of view that ruined any chance I'd have of finding the distinction; i.e., the headline was more or less "Craft beer is dying!" Not "The term 'craft beer' is dying!"

    meaning, I can't read :)

    I'm glad y'all hunted out the point, though, because as I finished the article, I wondered what the hell *was* the point. So one lobby group loves Samuel Adams to the point of shaping law to help it, one lobby group doesn't. Who cares? Will I be able to buy a 6-pack of Noble Pils this summer? THAT matters to me.

    You know, I've never liked the term "craft beer," not from the first time I've heard it. It comes off to me like the words "progress" and "forward-thinking" ... words that can mean whatever the hell you want them to mean.
     
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  29. jRocco2021

    jRocco2021 Mar 13, 2010 Wisconsin
    Beer Trader

    Is it the success or the money that screws good things up? my vote is for money (unless the success your referring to is purely monetary)
     
  30. jRocco2021

    jRocco2021 Mar 13, 2010 Wisconsin
    Beer Trader

    Right on I posted that from my phone had to keep it short lol
     
    Premo88 likes this.
  31. Premo88

    Premo88 Jun 6, 2010 Texas

    hahahaha ... well, you and Frankinsteiner get credit for pointing out a key distinction. and as a professional headline writer, I know all too well the dangers of topping a story about "A" with a headline that screams "B".

    so let the term "craft beer" live or die, and hopefully we all keep doing what we're doing, because it's things like BeerAdvocate.com that prove good beer brewed and distributed locally, regionally, nationally and multi-nationally is here to stay.
     
  32. Lantern

    Lantern Feb 27, 2011

    The more of that shit I read, the more I wanted to hang myself.
     
  33. mintjellie

    mintjellie Oct 2, 2005 Ontario (Canada)

    I don't think Schell felt very supported by the Brewers Association.
     
  34. dhannes

    dhannes Feb 14, 2010 Wisconsin

    I think what will ultimately doom a number of companies is rapid expansion (and marketing costs) into new markets that already have been offerings, while neglecting their current markets.
     
  35. jesskidden

    jesskidden Aug 10, 2005 New Jersey
    Subscriber

    The Federal Excise Tax (as noted in the quote above from the NYT) does not have a "tax break" for large brewers, there is a break for small brewers on their first 60,000 bbl.

    The official US TTB definition of "small brewer" is under 2m bbl. Six million is simply the Brewers Association new limit, increased a few years back to allow Boston Beer Co. to stay "craft". The 6m figure currently has NO legal standing.
    The current "reduced rate" dates from the late 1970's when there was no "microbrewery" movement or any brewpubs (although obviously Anchor Brewing Co. was in business). The reduced rate for "small" (under 2m bbl/yr) was created to help those struggling and disappearing local breweries of that era, and gave them a $2 break off the then standard $9/bbl. At the time, the new legislation was eventually supported by both brewers' groups of the era, the US Brewers Assoc. (the "big brewers") and the Brewers Association of America (the BAA, "small brewers").

    When the change for a reduced rate was first proposed (1976) there were about 50 US brewing companies left and under 40 of them qualified for the reduced tax rate. More to the point, there were 12 that didn't. Twelve brewers over 2 million barrels a year -compared to only 5 today - AB, MC, Pabst, Yuengling and BBC. (NAB sells over 2m bbl., but much of that is Labatt imported from Canada).

    The largest breweries under 2 million in '76 were Pearl (1.3m bbl), Rainier and Lone Star (both under 1m bbl.) Coincidentally, all would be purchased by larger companies by the end of the decade (S&P, Heileman, and Olympia, respectively) - a sign that the "beer wars" era of buyouts and mergers was still in high gear.

    So, the 2 million figure was a sort of "natural" dividing line at the time, between "large" and "small". All the breweries above 2 million were national or had a very large regional distribution and only Genesee and Coors were "single brewery" companies.
     
  36. otispdriftwood

    otispdriftwood Dec 9, 2011 Colorado
    Beer Trader

    Yes. Success = Money.
     
    jRocco2021 likes this.
  37. rlcoffey

    rlcoffey Apr 20, 2004 Kentucky

    For the same reason that twice monthly filers of beer excise taxes pay 25 payments per year and not 24.

    It would make a hell of a lot of sense to make it progressive and give the big brewers the tax break on the first 60k or 2MM or 6MM or whatever barrels too. It would also make a lot of sense to eliminate the 3rd September payment period, which only amounts to about 4-5 days.

    But, Congress doesnt easily give up tax receipts. Especially not when it doesnt mean many votes. And the 3 September periods is even dumber as it doesnt add extra revenue, it merely shifts a few days worth to the previous fiscal year. But to fix it would take money out of the current fiscal year, so that cant happen.
     
  38. frazbri

    frazbri Oct 29, 2003 Ohio

    GREATLY EXAGGERATED AND/OR MISLEADING HEADLINE!

    Gotta love the internet.
     
  39. brewsader

    brewsader Dec 7, 2012 New York
    Beer Trader

    i stopped reading after the words "good riddance."
     
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