Craft Beer Industry Siphons Profits of ‘Big Beer’

Across the country, states are struggling with how to categorize — and regulate — small brewers.

May 28, 2014

TALLAHASSEE, Fla. – What do growlers, taps, Busch Gardens and the Florida legislature have in common? Beer, says a recent report in Pew Charitable Trusts’ Stateline publication.

Laws regulating the brewing and distribution by small or “craft” brewers in the Sunshine State have become a flashpoint for efforts to change liquor laws in other states. Larger beer interests and wholesale distributors are looking to legislatures for regulations that would make the smaller brewers follow the same state-by-state rules as they do. Those rules govern everything from the size of containers used for the beer to how much can be distributed, if any, outside the wholesaler system.

So-called craft beers — generally produced by small, regional breweries — have grown exponentially in the past five years and are cutting into the sales of legacy big brewers.

According to Beer Marketer’s Insights, a trade industry publication, the craft beer industry produces 16 million barrels annually, approximately 7.8% of the total beer volume in the United States. The craft beer industry is growing 13% to 14% each year, with a commensurate drop in production by large brewers like Anheuser-Busch and Coors, from 177.6 million barrels in 2008 down to 162.7 million in 2013.

The fight in the Florida legislature crystalized all the arguments nationwide. The issue divided small beer makers from large ones and energized the wholesale industry. The Florida fracas started out with a minor issue over the size of “bring your own” containers and ended up in a major dispute about how beer is distributed throughout the state. The distribution issue is also dogging other states, as well as a plethora of other craft beer issues. Some examples:

Hawaii: A bill creating a new license class for small brewers, which doubles the number of barrels from 30,000 to 60,000 a year and permits them to use growlers on their premises, is on Democratic Gov. Neil Abercrombie’s desk.

Maryland: Democratic Gov. Martin O’Malley signed a bill allowing microbreweries to sell bottled beer for consumption off the premises in non-refillable containers.

Wisconsin: A bill allowing craft brewers to sell to customers in growlers exceeding 24 ounces failed to get out of committee.

Michigan: Republican Gov. Rick Snyder signed a package of bills that doubles the amount of beer that microbrewers can produce and sell directly, from 30,000 barrels per year to 60,000. Also, microbreweries that produce less than 1,000 barrels of beer per year are now able to distribute their product directly to retailers under certain conditions.

Nationally, the Brewers Association is calling on Congress to pass legislation that would lower excise taxes on small brewers with an annual production of 6 million barrels or less. At the same time, the Beer Institute, which represents both large and small brewers, is backing a bill that would lower federal excise taxes for all brewers and importers. The federal beer excise tax, at $18 a barrel, has not changed since 1991.

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