Brewers Association

BA Fires Back at Carlos Brito

Anheuser-Busch InBev CEO Carlos Brito stirred up a hornets’ nest by saying that “consumers are a bit tired of choice.” Bob Pease, the president of the Brewers Association, was quick to respond.

Pease pointed out that the 2016 Great American Beer Festival attracted a sellout crowd of 60,000, who sampled more than 3,800 from 780 breweries; and that the ability to choose from that many alternatives is “a central value of our democracy and a core tenet of ‘being American’.”

The BA head also asserted that Brito’s comment smacked of self-aggrandizement. He said that A-B InBev entered the craft beer market by acquiring a portfolio of craft breweries, and is about to use its economic power to push its brands onto store shelves and tap handles—and push out truly independent brands. Pease observed, “That’s reducing choice all right—but not based on beer lover demand.”

Peace also suggested that consumers will rebel against A-B InBev’s attempt to limit their choices. A recent Nielsen survey found 58 percent of American craft beer drinkers want even more flavors to choose from, and about 65 percent said they drink more craft beer specifically because craft offers more variety.

The Friday Mash (“Be Prepared” Edition)

On this date in 1907, Sir Robert Baden-Powell set up the Brownsea Island Scout camp on the south coast of England. That nine-day event—we assume that no beer was served to campers—was the foundation of the Scouting movement.

And now…The Mash!

We begin in Scotland, where the Innis & Gunn brewery has released a “Vintage” beer that is meant to be aged. One bottle has been put inside a time capsule, which is not to be opened until 2116.

Old Style beer will return to its La Crosse, Wisconsin, birthplace. The brewery will make an Oktoberfest-style version of the 114-year-old brand for the city’s annual Oktoberfest U.S.A.

After winning his third Tour de France, Britain’s Chris Froome celebrated in style. In the Tour’s final stage, he handed out bottles of beer to his teammates.

According to the libertarian magazine Reason, state beer laws continued “a slow creep in the right direction.” However, many bad laws remain on the books.

The Smithsonian has posted a want ad for a beer historian/scholar. This three-year position, funded by the Brewers Association, will pay $64,650 plus benefits.

Some breweries try too hard to be original, and wind up giving their beers awful names. Thrillist.com calls out some of the worst offenders.

Finally, Jim Vorel of Atlanta magazine criticizes Terrapin Brewing Company for selling a majority interest to MillerCoors—and then keeping mum about the transaction on social media.

Big Wins for Small Brewers

As expected, the U.S. Justice Department has approved the merger between Anheuser-Busch InBev and SAB Miller. However, MarketWatch.com’s Jason Notte reports that the Brewers Association, which represents craft brewers, won major concessions from the government:

  • A-B, which sells 10 percent of beer through company-owned distributors, can’t acquire any more distributors.
  • A-B  can’t require independent distributors to drop competing brands, and can’t offer incentives that would reward distributors for giving A-B brands preferential.
  • Any future craft brewery acquisitions by A-B must first receive Justice Department approval.

Notte attributes the craft brewers’ win to the Brewers Association’s paying more attention to government relations. The BA has hired a full-time lobbyist in Washington; and, earlier this year, it flew craft brewery executives to the capital to ask members of Congress for tax relief.

According to Notte, state capitals will become the next battleground, now that states–even thouse as small as North Dakota–have enough craft brewers to form a trade association. Some of the issues these associations will raise include bars selling tap handles to the highest bidders, supermarkets putting distributors in charge of choosing their inventory, and limits on the number of liquor licenses.

More About That Big Beer Merger

Bob Pease of the Brewers Association has sobering news for craft beer lovers. In a New York Times op-ed earlier this month, Pease warned that the coming merger between Anheuser-Busch InBev and SABMiller will have an impact on your local beer selection that you hadn’t expected.

The problem is rooted in the three-tier system of liquor regulation, which forces craft breweries to sell their beer through distributors. In some states, the law allows big breweries to own distributors. Making matters worse, the distribution industry has undergone consolidation, and many areas of the country are served by a handful of distributors.

A-B, which controls 45 percent of the U.S. beer industry, has been particularly aggressive, buying five independent distributors—a move that has led to a Justice Department investigation. The brewery also compensates its distributors using a formula that in effect penalizes them for handling craft brands rather than A-B brands. That, too, is being investigated.

Pease hopes that the when the Justice Department gives final approval to the InBev-SAB merger, it will take steps to keep the beer market competitive. He points out that in 2013, it prohibited A-B InBev from interfering with independent distributors that sold Mexico’s Modelo beer. Pease urges Justice to give craft brand distributors similar protection, require A-B to reduce its stake in distributors, and bar compensation systems that favor A-B’s own brands.

Beer…By the Numbers

  • Most expensive beer at a major league ballpark: $8.75 (Boston Red Sox, Chicago Cubs, Philadelphia Phillies).
  • Cheapest beer at a major league ballpark: $4 (Arizona Diamondbacks, Cleveland Indians).
  • Average cost of a beer at a major league ballpark: $5.96 (down 13 cents from last year)
  • Per-household legal marijuana sales in Spokane County, Washington, in 2015: $225.64.
  • Per-household beer sales in Spokane County in 2015: $232.70.
  • San Diego’s brewery count at the end of 2015: 114.
  • Its brewery count at the beginning of 2015: 97.
  • Dollar value of the U.S. beer market: $105.9 billion.
  • Craft beer’s share of the U.S. beer market: $22.3 billion (21.1 percent).
  • Extra large breweries’ (over 6 million barrels per year) share of U.S. brewery population: 0.4 percent.
  • Extra large breweries’ share of U.S. beer production: 84.3 percent.
  • Small breweries’ (under 7,500 barrels per year) share of the U.S. brewery population: 92.8 percent.
  • Small breweries’ share of U.S. beer production: 1.6 percent.
  • Styles in the Brewers Association’s 2016 Beer Style Guidelines: 162.
  • Net change in styles from 2015: +7.
  • Judge Rejects BA’s Definition of “Craft Beer”

    Last week, U.S. District Judge Gonzalo Curiel rejected, at least for the time being, the Brewers Association’s definition of craft beer: production under 6 million barrels a year, less than 25-percent controlled by a big brewer, and using “only traditional or innovative brewing ingredients.”

    G. Clay Whittaker of The Daily Beast argues that Judge Curiel has in effect given every brewer in America the green light to describe its beer as “craft.” (Which is ironic considering that Anheuser-Busch InBev, during Super Bowl 49, ran an ad making fun of the entire segment.)

    Judge Curiel gave the plaintiff, Evan Parent, the opportunity to amend his complaint, which might eventually lead to a legal definition of what craft beer is. Then again, the phrase “craft beer” could go the way of “the Champagne of bottled beers,” an advertising slogan that expresses a meaningless opinion about the product.

    Brewers Association on A-B InBev and SABMiller

    Yesterday, it was reported that Anheuser-Busch InBev is working to acquire SABMiller. Paul Gatza, the head of the Brewers Association, issued a statement about the proposed deal.

    If acquisition goes through, Gatza believes the federal government would order the combined business to divest itself of Miller brands in the United States. The brands, which are profitable, could be bought by MolsonCoors, or possibly Constellation Brands, Heineken, or Carlsberg. The acquisition would also have an effect on the ten-year joint venture between Miller and Coors, which runs until 2018. It’s unclear what will happen to the Leinenkugel family of beers, currently owned by Miller.

    Gatza believes the takeover would have little impact on what American craft breweries will produce, or their acceptance by the nation’s beer drinkers. He also believes beer distribution won’t change much. He’s less sure of what effect the takeover will have on the wave of mergers and acquisitions in the craft brewing industry, or whether consumers will view craft beer as less of a reflection of the brewers’ “personal passion.” About this he says, “Time will tell all.”

    On Capitol Hill, Dueling Beer Tax Bills

    Large and small breweries are lining up behind competing bills that would provide tax relief to the industry.

    The Small BREW Act would cut excise taxes for small brewers, which it defines as those making less than six million barrels a year. (The current definition tops out at two million, and thus excludes Boston Brewing Company and D.G. Yuengling & Son.) The Brewers Association, which represents smaller breweries, supports this bill.

    On the other hand, the Fair BEER Act would halve the excise tax for the smallest brewers—those making less than 60,000 barrels a year—but give only modest relief to brewers in the 60,000-to-two-million-barel range. It would also apply to importing producers such as Corona and Heineken. The legislation is backed by the Beer Institute, whose membership includes the industry giants.

    With millions of dollars in tax breaks at stake, both sides are lining up heavyweight lobbying firms to make their case to lawmakers.

    Exiles on Beer Street

    Last year, the Brewers Association liberalized its criteria for what qualifies as a “craft brewery,” and welcomed Boston Beer Company, D.G. Yuengling & Son, Straub Brewing, August Schell Brewing, and Minhas Craft Brewery into the fold.

    However, five well-known breweries—which aren’t called Anheuser-Busch, Miller, or Coors—still fail to qualify:

  • Craft Brew Alliance. Reason: It’s 32.2-percent owned by Anehuser-Busch InBev (the BA’s ceiling is 25 percent).
  • Pyramid Brewery/Magic Hat Brewing. “Imported adjunct beer sales exceed domestic production.”
  • 10 Barrel Brewing. Owned by A-B InBev
  • Mendocino Brewing. Owned by UB Group in Bangalore, India.
  • Goose Island Brewery. Owned by A-B InBev.
  • The Friday Mash (Grand Ole Opry Edition)

    On this day in 1925, “Grand Ole Opry” radio show aired for the first time on WSM, a Nashville radio station. The Opry’s home, Ryman Auditorium, attracts hundreds of thousands of visitors from around the world.

    And now….The Mash!

    We begin in Kalamazoo, where Bell’s Brewery is selling glassware designed for Oberon. It’s called the American Wheat-Witbier Glass, and is made by Austrian glassware maker Spiegelau.

    Mike Nichols is best remembered as a film director, but more than half a century ago, he and Elaine May created and voiced animated commercials for now-defunct Jax beer.

    The Brewers Association has put together an infographic with statistics on the size of each state’s craft beer industry: number of breweries, production, and economic impact.

    As it turned out, Pabst Blue Ribbon wasn’t sold to the Russians after all. The group that acquired it didn’t involve Oasis Beverages, itself the biggest independent brewer in Russia and Ukraine.

    British lawmakers took the first step toward scrapping a centuries-old rule that requires “tenanted” pubs to buy their beer from the brewery that owns them.

    An app called Next Glass has been called ”the Pandora for beer”. Using a mass spectrometer, the Next Glass lab staff use a mass spectrometer to analyze beers sent to the lab by Beer Census.

    Finally, Jay Brooks’s blog linked a 1929 Mickey Mouse cartoon, ”The Galloping Gaucho,” in which Mickey enjoys a beer. Presumably he was outside the U.S., where Prohibition reigned. However, temperance groups couldn’t have been thrilled about a cartoon character drinking alcohol.

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