I received an interesting press release this morning from the Beer Institute, a national trade association for the American brewing industry, representing both large and small brewers, as well as importers and industry suppliers. According to the release the US added 948 new brewing permits in 2013, bringing the total number of “active ‘permitted breweries’ overseen by the Alcohol Tobacco Tax and Trade Bureau (TTB)” to a record smashing 3699.
This is a staggering number of breweries and extraordinary growth for any industry in one year. But I questioned the numbers. In January the Brewers Association released preliminary figures for 2013 putting the total number of breweries at 2722, an increase of nearly 400 over the previous year. That’s a difference of more than 1000 breweries from the Beer Institute report. That’s not something that can be put down to statistical error.
I also questioned the Beer Institute numbers because they list 73 active permitted breweries in Minnesota. This is true if you include contract-brewed brands and all of the Granite City locations where beer is fermented onsite, but not actually brewed. The number is considerably less if those are excluded.
I contacted the Beer Institute to find out what was going on and got a quick response from Megan Kirkpatrick. They get information straight from the Federal Tax and Trade Bureau (TTB) about issued brewing permits. “This is a list we receive from the TTB that includes any brewing location that has received a permit to brew beer.” she explained. This includes breweries-in-planning that are permitted, but haven’t yet started producing. It also includes brewing companies that have multiple breweries, such as Boston Beer Company, Lagunitas, and Sierra Nevada, as well as the mega-brewers. She was unclear as to whether the number includes beer companies whose product is contract brewed by others.
However you slice that number, it’s big. And most of the growth has occurred in just the last couple of years. Kirkpatrick pointed out that the start of the growth curve corresponds with the passage of the Small Brewer Tax Credit passed by congress in 1977. According to the Beer Institute press release, “under the existing tax structure, small brewers (defined by U.S. Tax Code as those that produce up to 2 million 31-gallon barrels per year, or the equivalent of 110 million six-packs) receive a substantial break on federal excise tax, paying only $7 per barrel on the first 60,000 barrels. The regular tax rate is $18 per barrel, which is paid by all brewers of more than 2 million barrels, all beer importers regardless of size, and on every barrel produced by small brewers beyond 60,000. More than 90 percent of permitted breweries today produce less than 60,000 barrels annually.”
The release goes on to say that “beer puts more than two million Americans to work, from farmers to factory workers, and brewers to bartenders. The combined economic impact of brewers, beer distributors, retailers, suppliers and other inducted industries was calculated to be $246.5 billion in 2012. The industry paid $49 billion in federal, state and local taxes that same year.” That’s a rather large economic impact.
While this news is exciting, I still get a slight nauseous feeling every time I hear about a new brewery opening. I know the question has been asked a billion times, “Is this a bubble? Will it burst?” I guess only time will tell, but to me this current rate of growth seems crazy. What’s that term they use in the stock market? “Irrational exuberance.”
You can read the full Beer Institute report here.
