Opinion

Beer Is Dead / Long Live Beer

If you’re reading news headlines, it might appear that the state of the beer industry is shifting at breakneck speed. Analysts will claim the industry is rapidly losing ground to wine and spirits, then turn around and cite the thriving craft segment in which new microbreweries are popping up at an unprecedented pace. So is beer booming or dying?

From an overall consumer perspective, beer is doing great. A visit to a grocery or liquor store makes this abundantly clear — there is more selection and variety available to beer drinkers than ever before. That variety is being fueled by tremendous growth in the number of small breweries.

In 2017 alone, about 1,000 new breweries were created. According to the Brewers Association, there are now more than 6,300 breweries in the United States — more than 98 percent of them brew fewer than 6 million barrels each year, qualifying them for craft status.

Despite this growth, there has been concern from some beer aficionados about brewery consolidation as some of the larger breweries have purchased stakes in smaller rivals — or in some cases, purchased these companies outright. These transactions have occurred primarily because larger breweries have recognized the tremendous growth in the craft industry and tried to get in on the action. That makes sense given the market trend: craft beer consumption grew by about five percent last year while large breweries saw their overall sales and market share fall slightly.

This is hardly cause for worry. Consumer preferences are changing, and businesses are responding. What should be concerning is the threat of bad laws and regulations that increasingly hurt the industry and limit consumer options.

For instance, the new tariffs on aluminum and steel pose a serious threat to American brewers. For years now, brewers have been using more aluminum cans and fewer glass bottles. Now that tariffs are increasing aluminum prices, canned beer is becoming more expensive. Small breweries that have invested in canning lines simply cannot afford to shift to lower-cost glass bottles. They are forced to pay higher costs while trying to compete with imported beers that use aluminum cans that are free of tariffs.

On top of that, higher steel prices mean more expensive kegs and brewing equipment. This could significantly raise the cost of building a new brewery or expanding an existing one — an impact that will be especially burdensome on newer, smaller brewers who often lack easy access to capital.

The harm from the new tariffs has been somewhat blunted by alcohol beverage excise tax relief that was provided in last year’s Tax Cuts and Jobs Act. But the craft beverage tax provisions in the new law are scheduled to expire at the end of next year, so it’s important for Congress to make them permanent and lock in these benefits for wine, beer and spirits producers.

At the state and local levels, bad government policies have made it more difficult and costlier for brewers to get their beer to consumers. These range from outdated “blue laws” that prevent Sunday sales of alcohol to onerous franchise termination laws that can force craft brewers into effectively interminable contracts with distributors. Reforming these laws — and many others like them — would help empower consumers instead of government bureaucrats and alcohol industry middlemen.

While the beer industry faces some threats from restrictive and costly government policies, it remains vibrant. It’s a growing $111 billion industry that supports hundreds of thousands of jobs.

As in any competitive marketplace, there will be bumps down the road. Some breweries will succeed, some will fail, and some will be bought out by competitors. Policymakers should do their best to create a level playing field that fosters a strong, competitive brewing industry and allow consumers to pick their beverages of choice.

 

Brandon Arnold is executive vice president of the National Taxpayers Union.

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