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Why the End of 'Craft' Beer Is Just a Tax Break Away

Right now, there are only three breweries producing more than 2 million barrels a year and fewer than 6 million -- Boston Beer (2.7 million in 2012), North American Breweries (2.725 million) and Yuengling (2.79 million). The Brewers Association doesn't like Yuengling because its more-than-a-century-old recipe calls for maize and it doesn't like North American Breweries because it's owned by a Costa Rican conglomerate. It loves Boston Beer, however, because its sales keep the numbers up and its founder, Jim Koch, is sincere in his belief that the continued innovation of Samuel Adams styles keeps his beer "craft." Tough to argue that point, but Boston Beer is more than just Sam and its numbers get a big boost from both Angry Orchard cider and Twisted Tea malt beverages.

Though the Beer Institute clarifies that Gary Fish of Deschutes did not attend any meetings with lawmakers on the BEER Act, and F.X. Matt head Nick Matt made clear his position was in broad opposition to beer tax increases, and not specifically in support of the BEER Act, even those small gestures hold big significance. The brewers that crossed the threshold by supporting or refusing to outright dismiss the BEER Act -- and make no mistake, a line was crossed -- aren't exactly lightweights themselves. When the Brewers Association ranked its Top 50 craft beers by volume, Deschutes, Bell's, Matt and Brooklyn ranked No. 5, 7, 8 and 11, respectively. Among all American brewers -- including A-B InBev, MolsonCoors, Pabst and some of the castoffs mentioned above -- they rank No. 12, 14, 15 and 18. Their production is still less than a quarter of Boston Beer's, but they're among the Brewers Association's heavier hitters and are brands that group proudly considered "craft."

More importantly, they helped the Brewers association increase its revenues 23% last year, to $13.4 million. That's nearly double the $6.8 million the group amassed in 2008 and has given the organization a war chest of $1.3 million in cash on hand and $5.6 million in its reserves, according to Beer Marketer's Insights. That's not a huge stockpile in D.C. terms, but it's a huge increase in lobbying power for such a small organization.

The problem is that it's not clear who the Brewers Association is spending that money for. Even its strongest allies are having a hard time fitting the definition of "small" brewers lately. Chico, Calif.-based Sierra Nevada got its start in the late 1970s and has grown to produce roughly 900,000 barrels of beer. Its founder and chief executive, Ken Grossman, told us last year about the company's plan to expand to a facility in Asheville, N.C., supervised by his son. That would push Sierra over 1 million barrels of production and make Sierra a legacy brewer along the lines of Yuengling, Coors and even Anheuser-Busch.

New Belgium Brewing co-founder and Chief Executive Kim Jordan told us just last month about her brewery's own expansion plans in Asheville and what they'd mean to the company she helped start in 1991. Currently brewing about 750,000 barrels a year, New Belgium's production would also easily exceed 1 million barrels once the facility is completed in 2015.

Lyons, Colo.-based Oskar Blues is already brewing in Asheville and California-based breweries Lagunitas and Green Flash announced plans to open brewing facilities in Chicago and Virginia Beach, respectively. Boston Beer shares have traded publicly for years.

So what happens now? Does the Brewers Association excommunicate the whole lot of them and throw them into the "crafty" pile with Goose Island, Widmer, Red Hook, Magic Hat, Pyramid, Mendocino and all the other breweries it's tried to strip of the "craft" label for esoteric reasons? Or do brewers push drinkers a step closer to ditching the "craft" label altogether and calling it all "beer?"

When those choosing the latter include Oliver and brewers such as Ken and Rob Widmer and Larry Bell -- who've been in the industry for 30 years apiece -- the end of "craft" may be a tax break away.

-- Written by Jason Notte in Portland, Ore.

>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

>To submit a news tip, send an email to: tips@thestreet.com.

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