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TheStreet Open House

Why Success Is Killing the Craft Brew Industry

Stocks in this article: BREWBUDSAMTAP

PORTLAND, Ore. ( TheStreet) -- What big brewers, wine and spirits couldn't do to craft beer, the movement's founding brewers and their would-be protectors will do themselves.

Craft beer as America knows it is about to die, and success is going to kill it.

Its beers and brewers should be fine, but a fermenting fight over beer taxes is going to kill the term "craft beer" forever. Good riddance.

On Tuesday, just as craft brewers and beer bloggers met in Washington, D.C., for the Craft Brewers' Conference, two of the beer industry's most influential interest groups came to an impasse over beer taxes, the definition of "small brewers" and the future of the industry in general. As reported by political news site The Hill, Washington-based beer industry lobbying group The Beer Institute vowed to "actively oppose" the Small Brewer Reinvestment and Expanding Workforce Act, or Small BREW Act, put forth by Colorado-based craft beer industry group The Brewers Association.

That particular bit of legislation would cut the federal excise tax on beer from $7 a barrel to $3.50, affecting the first 60,000 barrels made per year by a small brewer. After that, small brewers must pay $18 per barrel, which would be lowered to $16 under the bill. More importantly, it would expand the tax code definition for a "small brewer" from one that produces 2 million barrels or less to one that produces 6 million or less.

The Beer Institute has two big problems with this. First off, it creates competition for the lobbying group's own Brewer's Employment and Excise Relief Act, also known as the BEER Act, which is expected to be introduced later this year. That legislation would reduce excise taxes on beer made by brewers large and small, with past versions of the bill recommended cutting the tax from $18 per barrel to $9 for large brewers while cutting the tax for small brewers from $7 per barrel to $3.50.

Secondly -- and this is where it gets awkward -- The Beer Institute says the Brewers Association's legislation is "a giveaway to a handful of brewers that each are worth more than a billion dollars." Based on the latest numbers from Beer Marketer's Insights, there were only three brewers who fell between the government's current 2 million barrel cutoff for craft brewers and the Brewers Association's 6 million mark: Boston Beer (SAM) (2.7 million last year), North American Breweries (2.725 million of Magic Hat, Pyramid, Portland Brewing and Genesee) and D.G. Yuengling & Son (2.79 million). All are members of both groups, but Boston Beer is the only one the Brewers' Association publicly acknowledges as "craft."

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