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Why 2013 Could Be Last Call for Craft Beer

Stocks in this article: SAM BREW TAP BUD

PORTLAND, Ore. (TheStreet) -- If the term "craft beer" wasn't wheezing its way into irrelevance before 2013, it collapsed into oblivion at some point during this year.

Boosters at the Brewers Association craft beer industry group argue that craft beer added $34 billion to the U.S. economy this year. Meanwhile, the 2,480 craft breweries operating among the 2,540 U.S. breweries that existed as of June far outpaces the 2,011 breweries that existed in total during U.S. brewing's peak in 1887.

But that's not making a happy little community of beer artisans dedicated to experimenting with existing styles and improving their beers. Instead, it's exposed a swelling undercurrent of animosity that's eroding any intangible definition of the term "craft" and is replacing it with a production number and dollar amount. We saw the first evidence of this in January, when the Brewers Association felt it would be a good idea to lay down the law and determine which beers were "craft" and which were just "crafty."

It surprised no one by putting Anheuser-Busch InBev's  (BUD) recently bought Goose Island brand and MolsonCoors (TAP) and SABMiller joint venture MillerCoors' Blue Moon and Leinenkugel's on the list, but it managed to draw some ire by lumping pre-recession brewers including Pennsylvania-based D.L. Yuengling and Minnesota's August Schell into its grouping of bad guys. It also includes the Craft Brew Alliance and its Redhook and Widmer Brothers brands on its blacklist, which puts its figures for craft beer sales and production at odds with industry observers including Beer Marketers' Insights -- which includes Redhook, Widmer and those brewers' roughly 30 years of history in their publication's craft numbers.

Yet it is something that Boston Beer (SAM) founder and Samuel Adams Boston Lager creator Jim Koch said to Tom Cardella, head of MillerCoors' Tenth & Blake craft division, at a Beer Marketers' Insights conference in spring that gave a better idea of how brewers -- or at least larger craft brewers -- define "craft":

We craft brewers have created a category that is able to command a price premium based on our points of difference from the mass domestic brewers. And that has created a lot of profitability in the category and a lot of growth.

In that breath, Koch offered a wise, reasoned definition of craft beer that no one could provide until that point. He also, perhaps unwittingly, made it about numbers rather than quality. That argument hasn't killed "craft beer," but it left the term mortally wounded.

Nowhere did that become more clear than in the halls of Congress, where the emergence of legislation that would provide tax breaks for brewers fractured the craft ranks. Forget about the sequester and the government shutdown that left breweries' approvals for new beers in jeopardy for a brief span in September: It was a visit to Washington in May that shook things up a bit. Brooklyn Brewery joined Bend, Ore.-based Deschutes Brewing, Utica, N.Y.-based Saranac brewer Matt Brewing and Kalamazoo, Mich.-base Bell's Brewery in D.C. to ask Congress to support reducing the excise tax on the nation's brewers. Those brewers offered varying levels of support for the Brewers Excise and Economic Relief Act of 2013 (or BEER Act) that would reduce the federal excise tax on beer for all brewers and beer importers. The act, introduced by U.S. Reps. Tom Latham (R-Iowa) and Ron Kind (D-Wis.) with 33 original co-sponsors, would help reduce the overhead on Brooklyn and the others and would, ideally, make it easier for new breweries to break into the business. That, in turn, might actually soften craft beer prices a bit for consumers.

The BEER Act, though, is also supported by Anheuser-Busch InBev, MillerCoors, Heineken USA, Constellation Brands' (STZ) Corona distributor Crown Imports and Magic Hat and Pyramid brewer North American Breweries. That makes it a bit of a sore point for craft beer lobbying group The Brewers Association, of which Brooklyn, Bell's, Matt and Deschutes are full members. That group has been working on its own legislation -- the Small Brewer Reinvestment and Expanding Workforce Act (or Small BREW Act) with members of Congress including Sens. Ben Cardin (D-Md.) and Susan Collins (R-Maine).

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