A brewing fight

EARLIER this year when a lawsuit accused Anheuser-Busch of selling watered-down beer, it caused only a minor buzz. America’s biggest breweries have long produced flavourless tipples. And anyway, those seeking a more robust brew have plenty of options. Today’s beer market increasingly resembles that of the pre-Prohibition era, when smaller, regional breweries dotted the map. Such is the demand for good-tasting beer that, on average, more than one new brewery opened every day last year.

Small and independent breweries have thrived during the recession and its aftermath, taking market share away from traditional brands like Budweiser and Miller Lite. According to Beer Marketer’s Insights, a trade publication, craft beer has grown over 13% by volume in each of the past three years. America’s two biggest brewers, Anheuser-Busch and MillerCoors, still account for around three-quarters of the domestic market, to craft’s 6.7%. But even they have noticed the change in consumer tastes. Whereas sales of their big brands have dropped off, gains have been made by offerings derisively called “crafty beer”, which look and taste like craft brews.

This has led to some debate over what constitutes a craft beer and an intra-industry squabble over taxes. The Brewers Association promotes the interests of “small, independent and traditional” brewers that produce up to 6m barrels of beer a year. The largest craft brewer under this definition is the Boston Beer Company, maker of Samuel Adams, which produced over 2m barrels last year. That number also happens to be the cut-off for favourable treatment by the government, which gives small brewers a break on the federal excise tax.

As the craft-beer industry grows, the Brewers Association thinks more of its members will join Boston Beer on the wrong side of the tax code. So it is pushing Congress to pass a bill that would raise the excise-tax bar to 6m barrels a year. In March hundreds of small-brewery owners took their case to Congress. But the Beer Institute, which represents big and small brewers alike, unsurprisingly favours a different bill that would cut the excise tax for the whole industry.

Opponents of slashing the excise tax, which has not been adjusted since 1991, note that inflation has already reduced its potency. Moreover, some see higher alcohol taxes as a way to increase revenues. But others are sympathetic to the Beer Institute’s claim that taxes have become the most expensive ingredient of beer. Hence, perhaps, the bitter taste of some brews.