The recently-passed tax bill has some benefits for smaller brewers.
Times have been tough for many craft brewers as of late: Overall beer sales declined last year, and though craft beer is still growing, that growth has slowed significantly. Even within the craft sector, most of the recent success has come from the smallest breweries, and many midsize breweries have been paying the price. Meanwhile, plenty of “no longer officially” craft brewers (thanks to selling out to or taking investment from big breweries like Anheuser-Busch) have been trying to elbow smaller brewers out of the marketplace with tactics like selling more beer at lower prices. Overall, experts seem to agree that, right now, the beer market is the most competitive it’s been in at least a decade—since the period from about 1998 to 2008 when the first craft beer revolution crashed out and the industry turned stagnant.
But one recent piece of good news may potentially give some craft brewers the boost they’ve been looking for. Included in the Trump administration’s recent tax bill was the Craft Beverage Modernization and Tax Reform Act which had bipartisan support and the backing of both small brewers and larger brewers alike. The legislation cut the federal excise tax on all beer but is especially helpful on the first 60,000 barrels of brewers who produce less than 2 million barrels total, slashing those taxes in half from $7 per barrel to $3.50 per barrel—a potential for a total savings of up to $210,000 annually.
MarketWatch recently reached out to some of the brewers most affected by the new law to find out what they planned to do with the savings, and the responses were generally the same: reinvest the money back into the company, specifically with an eye towards expansion. “This will allow us to get over the hump of the high demand in our state, and we probably wouldn’t necessarily be able to do it without that tax break,” David Manson, co-founder of Michigan’s Blackrocks Brewery, explained. He said his company is already looking for ways to utilize those savings to get his beer on more store shelves. “This will allow us to put up a fighting chance to hold our own.”
Of course, if everyone gets the same tax break and uses it in similar ways, you might assume that the results would be a wash. But the main battle for shelf space isn’t between different craft brewers; it’s between craft breweries and big beer brands who, granted, are also getting a tax break, but who were plenty flush with capital to begin with. “This legislation will allow small and indie breweries to compete on a more level playing field,” Bob Pease, president and CEO of the Brewers Association told MarketWatch. When margins are already razor thin to begin with, every $3.50 per barrel counts.