National Conference to Address New Market Realities in ‘Cross Industry Dialogue’
As millennial consumption continues to drive marketplace innovation and all sectors of the alcohol beverage industry are projected to rise, wine, beer, cider and spirits segments may be finding increasing reasons to work together for their proverbial common good.
A case in point is legislation recently introduced by Senator Ron Wyden (D-OR) that would amend the current federal excise tax structure for all beverage alcohol.
The bill, S. 1562, is called “The Craft Beverage Reform and Modernization Act of 2015.” Key components of the legislation include consolidating a number of provisions in existing beer, cider and distilled spirits bills into one proposal and incorporating a change in the tax credit structure for all wineries, large and small. The bill also excludes aging periods for beer, wine, and distilled spirits from the production period, which could have beneficial effects on capitalization rules, particularly for distilleries.
Michael Kaiser, the Director of Public Affairs at WineAmerica, explains that under the bill’s provisions, all American wineries would receive a $1 per gallon tax credit on the first 30,000 gallons of wine produced and that small producers – defined as those making less than 2 million gallons of wine per year – are eligible for another 90 cent per gallon tax credit on wine up to 100,000 gallons.
Kaiser notes that certain aspects of the bill point to strength in numbers from a legislative standpoint.
“There were four different excise tax proposals out there, two for beer, one for spirits and one for cider,” Kaiser says. “Consolidating all of the bills together allows for a united front from those commodities on the legislation, and increases the chance for passage. The Brewers Association and the Beer Institute both supporting this legislation is quite impressive.”
According to the Beer Institute, a national trade organization representing beer brewers, importers and suppliers, the legislation provides much needed, comprehensive reform. The Institute reports that the Wyden proposal, and its counterpart in the House of Representatives (H.R. 2903):
Reduces the federal excise tax to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually.
Reduces the federal excise tax to $16 per barrel on the first six million barrels for all other brewers and all beer importers.
Keeps the excise tax at the current $18 per barrel rate for barrelage over 6 million.
“This legislation is yet another critical step forward in addressing beer excise tax reform in a way that benefits everyone,” states Jim McGreevy, president and CEO of the Beer Institute. “It’s a great day when the entire brewing industry can support a solution to address an issue that has plagued us for too long. I’m excited to work jointly with the Brewer’s Association to reform the regressive federal tax on beer.”
Andrew Faulkner is Editor of Distiller Magazine, a publication of the American Distilling Institute. He reports that craft distilling is currently experiencing a 50 percent annual growth rate. Faulkner agrees that alcohol beverage groups could benefit by cooperation, noting that they are experiencing the same type of exponential changes in the marketplace, and have been for some time.
“It’s important to see that if you take the curve of growth in family wineries since Prohibition, craft brewing since the 1960’s and craft distilling since the 1980’s … the curves are all identical,” Faulkner declares. “It’s the same trajectory upwards.”
That upward trajectory is perhaps most notable with the recent explosion in the American cider category. David Cordtz, a former winemaker turned Cider Master, says the cider market has jumped between 80 and 100 percent per year since 2012 and credits millennial consumption for much of that growth.
“Retail sales went from $150 million in 2011 to $1.1 billion in 2014,” Cordtz confirms. “Studies have been done … showing that volume in the cider category is driven by millennials; 50 percent men and 50 percent women.”
Cordtz, the founder and CEO of Sonoma Cider, also sits on the Board of the U.S. Association of Cider Makers. He opines that in such a dynamic and shifting marketplace, all alcohol beverage producers have lessons to learn from one another.
“I’ve always been amazed at how uninterested wine people are about cider,” Cordtz says wryly. “It is apple wine. From a flavor and stylistic perspective, it’s as good as some very fine wine out there. The wine industry could benefit from looking out of the box a little bit.”
Cordtz would like to see more cooperation between beverage producers on multiple levels.
“Working together is an awesome idea,” he attests. “Right now we’re divided and everybody is funding their own little (legislative) effort. If you could bring it all together it could be pretty powerful, just from that standpoint alone.”
George Christie, President of the Wine Industry Network (WIN) and producer of the North Coast Wine Industry Expo, is in the process of launching a national beverage conference early next year to address many such issues. USBevX 2016, which is slated for February 16-18 in Washington, DC, is designed to bring together leaders and policy makers from the beer, wine, cider and spirits categories for a “cross industry dialogue.”
Christie says the motivation for the conference comes from an urgent need for beverage businesses to acknowledge how rapidly the competitive landscape is evolving into what he calls “the new normal.”
“While there are obvious differences between the products, primarily in production and taxation, they actually have a lot more in common than not, particularly with regard to the consumers they share,” Christie points out. “If you’re a winery, your competitive set is not just composed of other wineries anymore. If you want to remain successful, you better be paying attention to what else is going on in the beer, cider and craft spirits segments as well.”
According to Christie, the conference will be featuring topics and speakers to specifically address the changing business environment from a more holistic perspective that creates an ongoing conversation.
“Category leaders gathering on an annual basis to share learnings, best practices and to address common challenges just makes good business sense,” Christie says. “Our goal for USBevX 2016 is to help make that happen.”
For more USBevX2016 information and registration go to: www.usbevexpo.com