CRAFT IN CONGRESS
Beer Institute-Backed “Fair Beer Act” Introduced
Congress is departing a pair of bills affecting beer company finances.
The bipartisan Fair Brewers Excise and Economic Relief Act (Fair BEER Act) – backed by the Beer Institute – was introduced last month into the House of Representatives. Co-sponsored by Rep. Ron Kind (D-Wis.), it differs from previous bills by creating a new scaled tax structure that would lower the per barrel tax rate for all brewers and importers of all sizes.
Prior iterations of the bill had included bigger breaks for small brewers, but wasn’t as “passable” in the eyes of the Beer Institute, said Chris Thorne, the vice president of communications for the BI. The latest reform bill would also keep the U.S. policy in line with the World Trade Organization, a key talking point the BI plans to deploy when it discusses the bill with members of Congress.
In a phone call with Brewbound, BI president Jim McGreevy explained that a “graduated federal excise tax structure” benefits small craft brewers, as well as large domestic and international beer companies, by slashing excise taxes at various levels of production, bringing down or eliminating the excise tax rate for production levels under 2 million.
Under the current federal tax structure, a reduced rate of $7 per barrel is paid on the first 60,000 barrels of beer that are sold by brewers making less than 2 million barrels annually. Additional barrels, up to 2 million, are taxed at $18 per barrel. That’s the same rate at which domestic brewers making more than 2 million barrels annually, as well as all beer importers, currently pay for every barrel produced.
But the introduction of the Fair Beer Act bill hasn’t come without opposition, however. Before the BI could send out press release touting the benefits of the new bill, the Brewers Association issued its own statement, challenging the motives while simultaneously explaining the advantages of the competing Small BREW Act, which it supports.
“While the Brewers Association supports lowering excise taxes for small brewers, the BEER Act is not the way to do it,” BA CEO Bob Pease said in a press statement. “There are several problematic issues with this legislation including cost to the country, job creation and fairness. The BEER Act gives further tax advantages to multinational brewing companies that not only already pay lower rates than purely domestic brewers, but also have cut thousands of U.S. jobs in the past six years and export and shelter their U.S. profits.”
The BA’s Small BREW Act is intended to give preference to smaller producers while also attempting to redefine the federal definition of a small brewer, raising the production ceiling to 6 million barrels.
The two bills are actually quite similar. In its current form, the Small BREW Act would also cut the tax rate on a brewery’s first 60,000 barrels in half, from $7 to $3.50, and would also cut the excise tax rate from $18 per barrel to $16 for production between 60,001 and 2 million barrels. Once a brewery surpasses that 2 million barrel threshold, however, the federal excise tax would not change from the current $18 per barrel rate. The new rates, if signed into law, would be applicable to brewers with annual production of 6 million barrels or less, which the BA currently uses as part of its own definition of a “craft brewer.”
But McGreevy believes a bill aimed at including all brewers and beer import-ers, and one that is WTO-compliant, is
a better approach.
“I think the Fair BEER Act, as it covers all brewers and beer importers, takes away a potential challenge that could come from other governments, and other brewers around the world, who could challenge a law that doesn’t include everyone,” said McGreevy. “We want to make sure that the potential challenge doesn’t exist if beer excise tax reform gets passed in Congress.”
This isn’t the first time that either group has tried to reform the tax code. Versions of the BEER Act have been introduced into Congress since 1990, when the excise tax rate for larger brewers doubled from $9 to $18. At the time, the government maintained a reduced federal excise tax rate (which had gone into effect in 1976) of $7 on the first 60,000 barrels for brewers making less than 2 million annually.
Both the BA and the BI have been able to agree on one thing: Both groups feel that a unified voice in Washington D.C. would improve the chances of passing any bill. But they still have been unable to come to terms on a single proposal, McGreevy said.
“The BA board and the BI board had some discussion over the summer about finding a way to get to one bill,” said McGreevy. “It didn’t happen at the time. I think there are plenty of places where the BA and BI can work together on regulatory issues. This isn’t one of them right now but its doesn’t mean that it couldn’t be one in the future.”
Last time around, the Small Brew Act received support from 182 House members and 47 senators. The BEER Act, which is vastly different than this year’s version, had 114 supporters in the House and only 12 in the Senate.
Jones Soda Founder Peter van Stolk Launches ‘The Juice Box’
Before he was selling soda, Peter van Stolk was slinging freshly-squeezed juices out of his truck in Edmonton. Nearly 30 years later, the Jones Soda founder’s latest venture is bringing him back to his juicing roots.
In 2010, three years after his abrupt departure from Jones, van Stolk became CEO of SPUD, a Vancouver-based organic produce delivery business. Today SPUD employs over 350 people, bringing organic and local groceries to consumers in Vancouver, Edmonton, Victoria, Calgary, Los Angeles, and San Francisco.
In 2014 SPUD served as the platform for van Stolk’s entry into the cold-pressed juice beverage market. Last July the company launched its own private label juice brand The Juice Box, delivering 100 percent organic cold-pressed juices throughout Vancouver, West Vancouver, North Vancouver, and Richmond, with plans to enter a fifth city in 2015. The brand carries 19 juices and nut milk varieties.
SPUD’s private label juice brand didn’t remain all that private for long. The Juice Box has since been made available at two of the largest retail grocers in the Vancouver area, Save-On-Foods and Marketplace IGA, as well as many of the city’s independent coffee shops. According to van Stolk, it’s slated to enter Whole Foods later this year.
“It’s got such an offering that people want to sell it everywhere,” he says. “It feels good selling a product that doesn’t have Blue Bubble Gum attached to its name,” he adds, with a laugh.
In addition to now selling a health-conscious beverage, another major difference from his time at Jones is that van Stolk’s now dealing with a product with a 4-5 day shelf life, and he intends to keep his juices raw. With no plans to pasteurize The Juice Box’s products in any way, including high pressure processing, the SPUD CEO says he’s in a unique position to handle the challenges of a limited shelf life.
“The typical beverage model is you have one facility and you ship your product from there across North America. Under that model, I’d have no choice but to HPP,” he explains. “But the wonderful thing is I’m a retailer, and my retail operations have their own warehouses in each location where they’ve got tons of fresh produce. So we have no plans to go HPP. The plan is to put more juicers in more of our facilities.”
Sans Glaceau, Big Geyser Reloads
As New York’s Big Geyser readies itself for a transition that will see Smartwater come off its trucks by March, the distribution powerhouse is set to add Core Natural, a new water brand headed by FUZE and Bodyarmor founder Lance Collins, to its portfolio.
It will be the Northeast debut for Core Natural, which infuses trace minerals into reverse-osmosis water, creating an electrolyte-enhanced beverage that is promoted as having a “perfect pH” of 7.4. Packaged in uniquely molded 20 and 30 oz. bottles that are tapered at the middle and topped with a large blue cap, Core Natural is currently distributed in Southern California (via Haralambos), Colorado and Texas, as well as in a handful of retailers in Virginia and Arizona.
Last month, Big Geyser announced its intention to cut the cord on Glaceau brands, informing suppliers that it would drop Vitaminwater and Smartwater from its portfolio by March 1. For Big Geyser, the largest independent beverage distributor in New York, the move was seen as a response to a sustained decline in sales and market share of Vitaminwater amid booming growth for Sparkling Ice and Monster Energy, which the company added to its trucks two years ago.
Smartwater, on the other hand, is growing at a torrid pace (according to IRI, a Chicago-based market research company, sales of the brand in measured channels are up nearly 17 percent over a 52 week period ending on Dec. 28). Big Geyser was expected to lean heavily on Essentia, the fast-growing alkaline water brand, to fill in some of the gaps left by Smartwater. Nevertheless, it’s clear that by dropping the Glaceau brand, Big Geyser would take a hit.
The addition of Core Natural now gives the distributor a two-horse stable of premium water brands to tackle metro New York.
MillerCoors CEO Long to Retire
MillerCoors has announced that its 56-year-old CEO, Tom Long, plans to retire this summer. His last day with the country’s second-largest beer company will be June 30.
“I am leaving a company and a team, both of which are stronger than they have ever been,” Long said in a press statement. “MillerCoors is in position to capitalize on the changing forces within the U.S. beer industry more decisively than ever and my team has the passion, conviction, creativity and business plan to win in the long term in this industry.”
“We intend to have someone in place by June 30, but if we don’t, we will lean on the rest of senior leadership team,” he told Brewbound.
Long – who previously served as the chief marketing officer for Miller Brewing Company in 2005 — was named CEO of Miller in 2006 and was instrumental in helping to create the MillerCoors joint venture in 2008, said Marino. That year, London-based SABMiller and Montreal-based Molson Coors agreed to combine their U.S. divisions — Miller Brewing and Coors Brewing. Long was named as the chief commercial officer of the new joint venture and would later be named CEO of the division in 2011.
Long’s decision to step down was personal, Marino said, and the CEO plans to “return to the South where both he and his wife have friends and family.”
MillerCoors has now lost three key executives in the last eight months.
Jake Leinenkugel, the longtime president of the MillerCoors-owned Jacob Leinenkugel Brewing, part of the company’s Tenth & Blake craft division,stepped down last September. His brother, Dick Leinenkugel, was immediately named as the successor.
Three months earlier, Tom Cardella, the president and CEO of Tenth & Blake, announced his retirement. MillerCoors tapped former Coors Distributing Company president Scott Whitley as Cardella’s replacement.
TTB: Understating Alcohol Content Biggest Labeling Issue
If the Alcohol and Tobacco Tax and Trade Bureau’s (TTB) latest compliance survey is any gauge, about 22 percent of all malt-based beverages have an inaccurate alcohol content posted on their labels.
As part of its annual random survey to discern how accurately manufacturers label their products, the TTB found the most common noncompliance issue among malt beverage producers involved understating the ABV of their products.
The TTB sampled 155 different malt beverages and cited 46 products for 61 identifiable issues. Chief among the reasons for noncompliance were labels that undersold the product’s alcohol content, with 18 citations. 16 labels actually overstated how much alcohol content was in the product, the second most common offense.
The survey was part of the agency’s Alcohol Beverage Sampling Program, which was first established in 2008 to identify common compliance issues in how beer, wine and spirits are regulated.
“The most common compliance issues we identified involved alcohol content that did not match the label and was outside regulatory tolerances, or that placed the product in a different tax class than indicated by the label,” wrote the agency.
So why were nearly a quarter of the products mislabeled? It could have something to do with the rapid growth of smaller, under-resourced craft breweries that are less-equipped to properly test their products, said Brewers Association director Paul Gatza.
“I think it has a lot to do with batch-to-batch variability among malt-beverage producers,” he said. “It is hard to imagine that they’d be as consistent as a brewer that has been there for 10 or 15 years.”
Jason Wilson, CEO of Alabama’s Back Forty Beer Co. reiterated that, saying cost can play a factor in the labeling process.
“For some, it is simply a cost factor. The lab equipment used to determine ABV is pretty unique, and brewers have proven methods to calculate ABV within an acceptable variance using the data that we already have on hand. It’s hard to justify the expense when you’re juggling financial priorities all over the building,” he told Brewbound.
According to Gatza, products checking in 0.3 percentage points above or below the stated alcohol content are still considered compliant and within the TTBs accepted tolerance range.
The survey also found 27 additional infractions unrelated to alcohol content labeling: 10 malt beverage products cited for having non-mandatory information on the label that differed from its Certificate of Label Approval (COLA); four products cited for omitting mandatory information; four that contained errors in listed government warnings; two for listing mandatory information that differed from the COLA and two without COLAs at all. Five other labels were cited for minor infractions.
Comparatively, last year, there were 92 noncompliance issues identified, but the number of malt beverages sampled was considerably larger, at 239.