Brewers, Importers Score Tax Break
After nearly a decade of lobbying for lower federal excise taxes, brewers and importers of all sizes will finally enjoy two years of reduced payments after President Donald Trump officially signed the Tax Cuts and Jobs Act into law last December.
Included in the rewrite of the federal tax code was the Craft Beverage Modernization and Tax Reform Act (CBMTRA), which reduces the federal excise tax from $7 to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually.
At the new rate, a small beer company making 60,000 barrels annually will save $210,000.
In a press statement, Brewers Association president and CEO Bob Pease called the passage of the bill “a monumental day for small and independent brewers.”
“The BA has played a central role within the beverage alcohol coalition, advocating for this historic change in public policy,” he wrote. “The BA, as an organization advocating on behalf of small brewers, has a commitment to its members to influence change when and where it can, without taking a Beyonposition on larger legislation.”
Larger companies will also benefit. Under CBMTRA, the federal excise tax was reduced to $16 per barrel on the first 6 million barrels for all other brewers and beer importers. An $18 per barrel excise tax for brewers producing more than 6 million barrels was maintained, however.
Beer Institute CEO Jim McGreevy, in a message to the organization’s members, hailed the bill as “the first substantial federal excise tax reduction for the beer industry in decades.”
“I think the passage of this bill shows that in order to do big things in the industry, everybody has to work together,” McGreevy said.
According to the BA, the bill represents more than $142 million in annual savings for brewers. The BA added that the legislation could lead to the creation of an additional 9,000 beer industry jobs in the first 12 to 18 months after implementation.
The Beer Institute believes the excise tax relief will create an additional $320 million in annual economic growth within the beer industry.
Boston Beer Strikes Deal with Red Sox
In December, the Boston Red Sox and Boston Beer Company reached a multi-year agreement to make Samuel Adams “the official beer of the Boston Red Sox.”
Financial terms of the eight-year deal, which will last through the 2025 season, were not disclosed, but Boston Beer plans to “shift” advertising dollars away from more traditional channels to foot the bill.
As part of the deal, the Samuel Adams brand will be featured prominently throughout historic Fenway Park, including taking over the right field sponsor sign that had featured Anheuser-Busch’s Budweiser brand for nine years.
“Visitors to this historic ballpark will enjoy the freshest Sam Adams beer, while watching an incredible team, playing under our sign over in right field,”Boston Beer founder Jim Koch said via a press release. “It’s my personal impossible dream come true.”
The Red Sox team beer sponsorship was previously held by Rhode Island’s Narragansett from 1944 to 1975 before Budweiser assumed the sponsorship in 1976.
Beginning this year, the Samuel Adams brand will be featured with a right field rooftop deck called “Sam Deck” and a “Sammy’s on Third” bar beneath the third-base stands. Fans will also be able to purchase additional Samuel Adams offerings, including the company’s new Sam ’76 session lager, inside the stadium.
In addition to featured opportunities within Fenway Park, the Samuel Adams brand will be visible during spring training at JetBlue Park in Fort Myers, Florida. The contract gives Boston Beer the ability to use the Red Sox name and logo in its marketing, the Boston Globe reported.
Pabst Brewing Slashes 18 Percent of Workforce
For the second time in as many years, Pabst Brewing Company has undergone a major round of layoffs. The company announced in January that it would eliminate a total of 70 positions from the company.
The cuts – which impacted employees across all areas of the organization, including sales, marketing, operations and administration – were made to help the company reduce its cost basis by 15 percent.
In doing so, 50 employees were let go and another 20 open positions were not filled.
The company also cut its operating budget, focusing its efforts on fewer internal projects – such as reducing complexity in the supply chain and overhauling its social media strategy – while simultaneously shifting investment toward areas of the company with greater opportunities for growth, including the New Holland Brewing and Tsingtao brands.
“After careful review, we believe it is in our best interest to take a series of strategic actions now, in order to reduce complexity, cut costs, simplify priorities, and reallocate resources, so that Pabst is well positioned for success as we go into 2018,” Pabst CEO Simon Thorpe said.
The decision to cut its workforce by 18 percent came less than nine months after Pabst let a number key executives go, among them, chief sales officer Bruce Muenter, and chief growth officer Rich Pascucci. Six other employees were also laid off last April, and former CMO Dan McHugh was replaced last September.
Those moves came several months after Pabst terminated dozens of workers who had been hired to help manage the breakout success of Small Town Brewery’s Not Your Father’s Root Beer, which grew to $100 million in off-premise sales just six months after Pabst began nationally distributing the brand.
After the initial round of layoffs in 2016, Pabst hoped that it could retain approximately 70 employees as it worked to return the Small Town business to growth, Thorpe said.
But sales continued to lag – off-premise dollar sales of the flagship root beer offering declined 60 percent in 2017, to $33 million, according to retail data provider IRI Worldwide – forcing Pabst to once again downsize the organization.
At its peak in mid-2016, Pabst employed 440 people. As of press time, the company employs 310.
Smuttynose Heads to Auction
New Hampshire’s Smuttynose Brewing, citing overleveraging of investments and missed growth projections amidst increased competition from fellow craft brewers, is scheduled to be sold at a bank auction on March 9. Overcome by the brewing boom it helped to foster, sales had dropped for the past two years at the well-established, 24-year-old regional brewery.
“The company’s financial models were based on 20 years of consistent growth but the explosion of microbreweries has led to changing dynamics in the marketplace,” Smuttynose owner Peter Egelston said via a press release. “This dramatic shift occurred just as Smuttynose committed to a major infrastructure investment with the construction of the new production facility. As the turmoil in the marketplace stabilizes, Smuttynose, a trusted brand with strong consumer loyalty, can regain its footing with a major infusion of capital.”
Mortgage owner Provident Bank picked the James R. St. Jean Auctioneers to run the auction. It will include the Smuttynose brand, Hampton-based production facility on Towle Farm and nearby Hayseed Restaurant, according to the auctioneer’s website.
“With the arrival of a new owner, we anticipate a smooth transition as we are committed to continuity,” Egelston said in the release. Egelston didn’t return a message from Brewbound, and he declined to comment through a spokesperson.
Smuttynose, which employs 68 workers and generates more than $10 million in annual revenue, will continue to operate in the days leading up to the auction.
Jay St. Jean, operations manager of James R. St. Jean Auctioneers, told Brewbound that potential bidders must be ready to pay “$10 million or north.”
Green Flash Retrenches, Downsizes
Facing increased competition from more than 6,000 U.S. craft breweries, Green Flash Brewing announced in January that it would pull distribution from 32 states in a move that also included a 15 percent reduction of its workforce.
Green Flash co-founder Mike Hinkley said the 15-year-old San Diego-headquartered craft brewery had initially built a 50-state footprint with aspirations of being a “heritage” brand, but as thousands of startup breweries opened their doors, and chipped into Green Flash sales, the company was forced to alter its strategy.
“We were doing pretty well close to the breweries, and in some strategic markets we had some strongholds, but we had a lot of territory that was in pretty steady decline,” he said. “Rather than to continue to fight that battle, we took the resources from out there and brought ’em all into a smaller territory – as much as we could, anyway.”
As it retrenches, Green Flash, which also owns Alpine Beer Company, will cede about 18 percent of its wholesale business, Hinkley said.
To supply the remaining 18 states, Green Flash will source production from its two breweries – located in San Diego and Virginia Beach – and distribute to nearby markets. The San Diego facility will ship beer to Arizona, California, Colorado, Hawaii, Nebraska, Nevada, Texas, and Utah, while the Virginia Beach brewery will ship products to Connecticut, Delaware, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee and Virginia.
However, rationalizing 18 percent of the company’s distribution also required the company to cut its operating expenses, Hinkley said. Those cuts amounted to 33 workers across production, operations, sales, marketing and administration. However, the cuts won’t impact Green Flash’s retail business or Alpine Beer Company, he added.