Every other week, Peter Estaniel of BetterBeerBlog and I team up for a back and forth session we call Hopinions. We alternate who picks the topic and sends off the first email and each person gets the state their positions twice. Typically this series is hosted on our respective sites, but as I’m on paternity leave, I feel the need to double dip right now. This week it was my turn to pick the topic and I wanted to talk about the new definition of a craft brewer as defined by the Brewer’s Association. I anticipate a lot of discussion following this one, so please comment, share the link and participate in the conversation yourself.
From Mario of Brewed For Thought:
Never have a group of men argued so hard to prove how small they are.
Back in May of 2009, we discussed this topic of the changing definition of a craft brewer. Now, the Brewer’s Association has done exactly that and changed the high water mark from 2 million barrels to 6 million barrels.
This is great news for the Boston Beer Company. They will remain a part of the club of the little guys fighting the man. The Brewer’s Association says this is good for other brewer’s that are setting their sights on the 2 million barrel level as well.
Sadly, I’m too jaded to drink this kool-aid.
Loss of The Boston Beer Company’s production in craft brewing industry statistics would inaccurately reflect on the craft brewing industry’s market share.
I realize that numbers are important, but as a brewer moves beyond the level of a small brewer, it’s only reasonable that you stop counting their production. But fudging numbers isn’t the only thing going on.
Excise taxes are a big issue for craft brewers.There’s are a few bills on the table for the House of Representatives and the Senate. If these bills were to pass, a brewer with 2 million barrel production would save $3.50/bbl for the first 60,000 barrels and $2/bbl for the rest. That’s a total of $4.09 million, and $2 million for each additional million barrels the brewer produces.How much would it be worth to an organization to have keep a member with deep pockets, possibly with money for lobbying in the nation’s capitol?
In addition to Boston Beer, the current growth trajectory of other sizable BA member breweries places them on a course approaching the 2 million barrel threshold in the coming years.
I also have a problem with this statement. Sierra Nevada was listed as the #2 craft brewer in 2009. While production numbers can be difficult to pin down, from everything I’ve found, Sierra Nevada is in the neighborhood of 700,000 barrels. I find it hard to believe other craft brewers will be pushing into the 2 million barrel territory and beyond.
By the way, just a way for people to understand the 60,000 barrel threshold for the increase in excise taxes (currently $7/bbl and $18/bbl), there are no more than 4 or 5 breweries in the Bay Area which have exceeded that level of production. At 60,000 barrels, a brewery has established themselves.
So Peter, why should we be happy about the new definition of a craft brewer? Should we support the idea that a company with almost a half billion dollars in sales is one of the little guys?
From Peter of BetterBeerBlog:
I had to reread your email a couple of times to make sense of it all. All these numbers confuse me. It would seem that the easiest way to confuse a person is to point to a huge set of numbers indicating certain things and leaving it to them to sort through it all. I’m not accusing you of this more than I am saying this is what happens to me. How ironic that it was me who first proposed this topic nearly a year ago.
The most obvious question to cross my mind is, “What’s in it for the craft brewing industry?” It’s not unusual for corporations or governments to resort to accounting trickery to make numbers appear much better than what they are. Large retail corporations, for example, will count a backlog of product that is shipped in February as part of January’s sales figures. The state of California even shifted a payday of its employees into the following fiscal year to save money.
Even though the previous examples relate mainly to the bottom lines of business and government, the question remains, “What was in it for them?” In the corporation example, those companies would hopefully meet their revenue numbers. The company shows a profit, people stay employed. In the case of the California State government, a delay of payment helps the government close the gap on a $26B deficit, people stay employed.
So what is the bottom line for the craft brewing industry? Keep Boston Beer Company’s numbers in the “craft brewer” portion of the spectrum and people in the Brewers Association stay employed? Do we loose a well-funded ally to help lobby on our behalf in the nation’s capitol as you have suggested? Or is there some sort of secret federal funding the craft brewing industry receives if they continue to show year-over-year growth.
The other question that crosses my mind is what would happen if you remove the Boston Beer Company numbers from the overall craft beer statistical picture? While I’m sure the metrics will go down across the board, wouldn’t they be more truly indicative of the pulse of the craft beer industry? If Sierra Nevada is the #2 craft brewery by volume and they’re only approximately 1/3 to 1/2 the output of Boston Beer Company, then it would stand to reason that the Boston Beer Company is inflating the overall statistics of the craft beer industry. To what purpose would that serve the craft beer industry?
Boston Beer Company is like that kid from a poor neighborhood who made it. They worked hard and pulled themselves out of the “ghetto”. Like you, I question why we’re pulling them back in.
Even though Boston Beer Company has outgrown its peers by volume, market share and revenue, I don’t see the point of amending the ceiling of what defines a craft brewer. Instead of looking at numbers in a spreadsheet to determine what a craft brewery is, we should be looking at their actions, their core philosophies and their beers to make that determination.
From Mario of Brewed For Thought:
You ask “What’s in it for the craft brewing industry?” I asked some brewers about their thoughts on the news and one chose to share this comment with me anonymously:
It is obvious who the organization is being run by and for.
Tony Magee of Lagunitras Brewing was willing to expand on that when asked the same question.
This is a big issue for me… It is a complicated story and begins with Jim Koch of Boston Beer not wanting to pay taxes in the way that a 2MM barrel brewery is supposed to. The same way that he has known all along that he would have to and the way that I expect to one day.
It is fucking bullshit and I am happy to be the one that say it. I have written to the Brewers Association and they hammered my comment down quickly on their forum.
It is as unpatriotic as having offshore bank accounts to avoid paying taxes while making money in the very economy that you refuse to actively support.
The story of how it came to be is buried in the BA board of director’s own greed and self-promotion. Wanna know about it? Just ask….
Back to your question. What’s in it for the craft brewing industry? The answer is simple: money. What may have been lost in all the numbers of my original email is just how much money in on the table if these tax cuts are passed.
A brewery the size of Lost Coast Brewery in Eureka has an approximate production of 60,000 barrels. For craft brewers smaller than that, it means their tax bill could be cut in half. For craft brewer’s larger than that, it’s a minimum of $210,000. How nice must that be for a brewery in need of a new night time brewery, or sales staff in new territories.
With the help of Sam Adams, the Brewer’s Association can push to have the excise taxes reduced. Do the member brewers have the ability to turn down the cash even if they agree with Tony? All it costs is a check to the Boston Beer Company for $4 million made out by American tax payers.
From Peter of BetterBeerBlog:
Sounds like this is a case of the golden rule which basically states, “He who has the gold, makes the rules”. If everything Tony and your anonymous brewer says is true, and at this point I don’t doubt it, then it’s a pretty sad story.
It’s frustrating. On one hand, no one likes to pay taxes. I can’t name a single person who looks at their pay stub and thinks, “Y’know, I think I could pay more“. On the other, everyone needs to pony up and pay what they owe. The hard reality is that the state and country is cash strapped. We, as a people, complain about services and programs being cut yet when it comes time to foot the bill for said services and programs, everyone is suddenly up in arms. In many instances, rightfully so as there is a lot of wasteful spending on behalf of government. Unfortunately, we have only ourselves to blame for this predicament as we clamor for tax cuts after tax cuts while accounting loopholes all but ensure corporations and the very wealthy are able to skirt paying what’s due. What’s more American that capitalism?
I said earlier that Boston Beer Company’s status as a “craft brewer” should be determined by what they do and what they brew instead of how much they brew. Despite all their well crafted commercials and support of the homebrew community, Boston Beer Company is starting to act less and less like a craft brewery and more like the macro they’re slowly becoming.
This is one of the few times I find myself at a loss for words. I find myself curious to see what other people and brewers think about this topic and I encourage them to leave thoughts in the comments section. In the meantime, I’d like to leave us with this parable:
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