The Beer Industry's Bright Spot

From this recent Brewers Association press release:

Small and independent craft brewers* saw volume** increase 11 percent and retail sales dollars increase 12 percent over 2009, representing a growth of over 1 million barrels (31 gallons per U.S. barrel), equal to more than 14 million new craft cases.

The "craft brewer" designation has favorable federal excise tax implications.

Currently, a small brewer that produces less than 2 million barrels of beer per year is eligible to pay $7.00 per barrel on the first 60,000 barrels produced each year.

So remaining below the 2 million annual barrels of beer threshold has been required to gain the favorable federal tax benefits but that may be about to change.

It turns out the threshold was recently increased from 2 million to 6 million barrels by the Brewers Association. Some Senators are attempting to put that new definition in a new bill called the Brewer's Employment and Excise Relief (BEER) Act while also lowering the excise tax rates.*** 

The bill would drop the $ 7.00 tax per barrel to $ 3.50 up to 60,000 barrels. Above 60,000 barrels, it would also also drop the excise tax rate from $ 18.00 per barrel to $ 16.00 for those that meet the definition of a "craft brewer". The larger brewers pay $ 18.00 per barrel. As it stands now, above 60,000 barrels, the small brewers pay the same excise tax as the very largest brewers. 

So guess who is just about to go over 2 million barrel run rate in the next few years?

Boston Beer Company (SAM), the maker of Sam Adams and by far the most successful "craft brewer".

Over 200 million barrels of beer per year is produced in the United States.  So while Boston Beer has been extremely successful in "craft brewer" terms, it still has only a tiny fraction of the beer market.

Though still small, I find it hard to not admire what Boston Beer has accomplished.

Anheuser-Busch (BUD) has more than 50% of the U.S. beer market. MillerCoors (TAP) is the 2nd largest U.S. brewer with ~30%.

The entire craft brewing segment still acounts for less than 5% of volume.

One thing of note is how the beer brewing industry has evolved since prohibition:

Before prohibition, the number of breweries in the U.S. peaked at 1,751 breweries.

By 1980 that number had fallen to less than 100 breweries.

Where's it at now?

1,759 breweries. Quite a comeback.

CNBC article: The Beer Industry's Bright Spot

There's a good graphic on how the U.S. brewery count has changed over the long haul and more recently in the Brewers Association press release that's worth checking out.

The 10 Largest Craft Breweries in the U.S.:

1 Boston Beer 1.84 million barrels
2 Sierra Nevada Brewing 724,000 barrels
3 New Belgium Brewing 583,000 barrels
4 Spoetzl Brewery 409,000 barrels
5 Pyramid Breweries 192,000 barrels
6 Deschutes Brewery 187,000 barrels
7 Matt Brewing 172,000 barrels
8 Magic Hat Brewing 154,000 barrels
9 Boulevard Brewing 139,000 barrels
10 Harpoon Brewery 131,000 barrels

Some consolidation is already happening as Pyramid Breweries and Magic Hat Brewing were acquired by North American Breweries in August of last year.

Another 600+ new breweries are in the works so it certainly seems that the segment is thriving.


* From the Brewers Association press release: The definition of a craft brewer as stated by the Brewers Association: An American craft brewer is small, independent, and traditional. Small: Annual production of beer less than 6 million barrels. Beer production is attributed to a brewer according to the rules of alternating proprietorships. Flavored malt beverages are not considered beer for purposes of this definition. Independent: Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member who is not themselves a craft brewer. Traditional: A brewer who has either an all malt flagship (the beer which represents the greatest volume among that brewers brands) or has at least 50 percent of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor. 
** From the Brewers Association press release: Volume by craft brewers represent total taxable production. 
*** It turns out a bill, the Brewer's Employment and Excise Relief (BEER) Act, was introduced by Senator John Kerry of Massachusetts (Democrat) and Senator Mike Crapo of Idaho (Republican) that would also modify the definition of a small or "craft" brewer to 6 million barrels (while also providing other federal tax advantages). They were joined by eight Republicans and nine Democrats who signed on as co-sponsors.
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The Beer Industry's Bright Spot
The Beer Industry's Bright Spot
Reviewed by Pisstol Aer
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Rating : 4.5