2017 Stewardship Report Dear Valued Brewers Association Member:
Thank you for making 2017 a successful year for your association. Among the numerous programs and activities high- lighted in this report, the below milestones illustrate the BA’s organizational purpose: to promote and protect American craft brewers, their beers and the community of brewing enthusiasts.
INVESTING IN A HEALTHY SUPPLY CHAIN To further the development of a healthy and sus- PASSED! tainable raw materials supply chain, the Brewers — CBMTRA — Association Research and Service Grant program awarded $440,000 to 19 projects in 2017. Since the inception of the grant program in 2015, the BA has provided more than $1.2 million in funding for 60 projects—addressing public barley and hop variety development, hop disease and hop aroma—as well as supported affiliated national and state-level grower leadership. REDUCING THE FEDERAL EXCISE TAX: In October, the BA announced an agreement with PASSAGE OF THE CRAFT BEVERAGE the United States Department of Agriculture-Agricul- MODERNIZATION & TAX REFORM ACT tural Research Service to fund public hop breeding In December, the 115th United States Congress passed for developing and releasing disease-resistant aroma H.R.1, the Tax Cuts and Jobs Act. Included in this hop cultivars into the public domain, in support of legislation is the Craft Beverage Modernization & Tax hop growing efforts throughout the U.S. Research to Reform Act (CBMTRA), a two-year provision that lowers develop and release hop cultivars with no intellectual the federal excise tax for breweries, wineries and dis- property protection ensures that all growers have tilled spirits producers. access to high quality, disease-resistant cultivars need This reduction in federal excise tax represents to sustain production at levels required by brewers. more than $80 million in annual savings for America’s small brewers. SUPPORTING BREWING EXCELLENCE The effort to bring meaningful federal excise tax To equip our members for excellence in brewing, the relief to small brewers has been a primary political BA Technical Committee and staff expanded the BA’s objective for the Brewers Association (BA) for almost educational resources through the introduction of 10 years. The BA played a leading role within the bev- new hands-on instruction workshops, quality analysis erage alcohol coalition (Brewers Association, Beer videos, best practices publications, online webinars, Institute, Distilled Spirits Council of the United States, and an expanded in-the-field ambassador program. American Craft Spirits Association, Wine Institute and These resources address safety, sustainability, supply WineAmerica) to advocate for this historic change in chain, quality, draft beer quality and engineering public policy, and will now focus its efforts on making topics, relay industry guidelines and metrics, and help this two-year provision permanent. bridge the gap in technical acumen.
2 | Brewers Association 2017 stewardship report Take Craft Back In October, the BA launched its first consumer aware- ness campaign, “Take Craft Back,” as a humorous rallying cry to bring attention to a serious issue: how Big Beer is seeking to permanently alter the craft land- scape by presenting acquired brands as if they were truly, authentically independent. Along with the BA’s many other promotional activities, Take Craft Back sought to raise awareness of beers from America’s small and independent craft brewers. The campaign created millions of impressions and campaign video views among beer lovers, seeing greater reach than any promotional campaign in BA history. Addition- ally, nearly 12,000 beer lovers directly pledged their support via TakeCraftBack.com.
PROMOTING INDEPENDENCE LOOKING FORWARD The craft brewing community has entered a time of Independent Craft Brewer Seal increased competitiveness. Quality is now a baseline. The independent craft brewer seal was We know it’s hard out there. Breweries will have to released on June 27 to differentiate beers work harder and smarter to differentiate their beers from small and independent craft brewers through quality, innovation, marketing and branding. and beers from global ale companies. All of us at the BA are here to support you, and to equip Many in the beer community have taken you with resources and tools you need for success. immediate steps to obtain the seal art and We look forward to serving you. incorporate it into their brewery marketing and brand efforts. Cheers, To date, more than half of all craft brewing com- panies, representing 75+ percent of craft brewer volume of beer, have taken steps to use the seal. Since the launch, sightings of the seal “in the wild” on Bob Pease bottles, cans, six-pack holders, growlers, tap handles, President & CEO brewery t-shirts, front doors and more are increasing. Brewers Association Reception from the beer community’s allied trade members along with wholesalers and retailers has also been positive and growing. And, the mark is catching beer lovers’ attention.
Craft Brewer An American craft brewer is small, independent and traditional. Small. Annual production of 6 million barrels of beer or less (approximately 3 percent of U.S. annual sales). Beer production is attributed to the rules of alternating proprietorships. Independent. Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer. Traditional. A brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Flavored malt beverages (FMBs) are not considered beer.
BrewersAssociation.org | 3 Industry Snapshot
It is anticipated that this number will continue to RECORD BREWERY COUNT rise in the coming years, with the U.S. Tax and Trade Bureau (TTB) showing 8,863 active brewers permits as of December 31, 2017. This will continue the trend of increased competition in U.S. brewing.
JOBS AND ECONOMIC IMPACT Brewery growth has driven tremendous job growth ,+ as well. The BA’s Economic Impact Report, a biennial analysis featuring economic data of craft brewing for BREWERIES all 50 states and the District of Columbia, showed More than 6,000 breweries operated in the that craft brewers contributed $67.8 billion to the U.S. United States in 2017, and 83% of 21+ adults economy in 2016, a 21.7 percent increase from 2014. now live within 10 miles of a brewery. Craft brewers were responsible for more than 456,373 full-time equivalent jobs, a 7.5 percent increase from 2014, with 128,768 of those jobs directly at breweries STEADY GROWTH and brewpubs. Although the craft market has become more compet- itive in recent years, craft brewers continued to grow and gain market share in 2017. The Brewers Association’s 2017 mid-year survey ECONOMIC IMPACT measured 5 percent production growth year-over- year for small and independent brewers. Full year IRI Group scan data numbers showed 4 percent growth , Jobs for BA-defined craft brewers, and given the contin- Craft beer full-time equivalent jobs— ued growth in non-measured sales, 5 percent overall a 7.5% increase from 2014. growth seems likely for the year. That would take craft brewer share of the U.S. beer market to roughly 13 percent by volume in 2017. . Billion Some of the growth in market share has been driven Craft brewers’ contribution to by the continued rise in the number of breweries. the U.S. economy in 2016, a Although final numbers are still being compiled, it is 21.7% increase from 2014. certain that more than 6,000 American breweries oper- ated in 2017, a record number for the United States.
4 | Brewers Association 2017 stewardship report Based on preliminary Bureau of Labor Statistics (BLS) figures, those numbers could rise sharply in 2017, with Number of Operating ~10,000 new jobs being created between June 2016 and June 2017 in BLS data (QCEW, 2018). U.S. Breweries
Finally, small brewery growth has been related to 8000 consumer demand for visiting breweries, a new expe- riential occasion that nearly two-thirds of brewery 7000 visitors say is a different occasion than a traditional 6000 on-premise visit (Nielsen). The annual BA-Nielsen survey found that the average craft drinker now makes 5000 six brewery visits a year, 3.5 near their home and 2.5 while traveling, fueling beer tourism. 4000
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U.S. Beer Volume Share 1000
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Want more statistics on the U.S. beer scene? Visit BrewersAssociation.org Import Craft Other Domestic
BrewersAssociation.org | 5 Ensuring a Healthy Supply Chain Craft brewers produce approximately 13 percent of beer sold in the U.S. but consume well over a third of the hops and malt used by U.S. brewers. To meet the Brewers Association’s primary strategic objective—brewer access to an adequate supply of high quality ingredients—the BA puts member dues to work in support of public breeding programs, research and development, and strategic partnerships.
PUBLIC HOP BREEDING PROGRAM In 2017, the Brewers Association executed a trust agreement with the United States Department of Agriculture-Agricultural Research Service (USDA-ARS) Research & to fund a public hop breeding program. Program Service Grants goals focus on development and commercializa- tion of competitive public aroma hop varieties with improved disease resistance and yield. The program will be located in the Pacific Northwest in order to leverage existing industry structure, but is intended $432,658 to produce varieties that can potentially travel to 2017 any U.S. hop-producing region. The execution of this grants trust agreement follows 18 months of developing a comprehensive program document that establishes goals and outlines the processes for achieving those goals. BA investment in this program represents a $1.2 million+ long-term commitment to hop industry stewardship, since 2015 exceeding $400,000 in future years. funding total grants
as flavor, increased extract and a lower total enzyme package. Finally, the expansion of malting barley production into new growing regions has resulted in increased geographic spread of production for risk management, as well as access to local ingredients by craft brewers. Since the inception of the grant program in 2015, the BA has provided more than $1.2 million in support of 60 projects—addressing public barley and hop variety development, hop disease and hop aroma—as well as supported affiliated national and state-level grower organizations.
HOP USAGE SURVEY Each year since 2007, the BA has RESEARCH & SERVICE GRANTS provided aggregate craft brewer In 2017, the Brewers Association invested over $432,000 hop usage data to hop growers in support of 17 research projects focused on hop at the annual Hop Growers Asso- (six projects) and malting barley (11 projects) crops. ciation meeting. Over time, this Researchers continue to focus on disease resistance crucial communication has allowed and yield improvements to maintain crop competi- growers to make important plant- tiveness and grower interest. They are also working ing decisions with confidence in on quality improvements that help craft brewers such the market.
6 | Brewers Association 2017 stewardship report • Hop Research Council: The Brewers Association joins brewers, dealers, and state hop growing com- missions to pool resources in support of research that benefits the hop crop. HRC is becoming increas- ingly active in federal lobbying in support of public hop crop funding and ag policy. • Hop Growers of America: HGA is focused on the profitability of U.S. hop growers, and promulgates hop crop quality guidelines that benefit brewers, beer drinkers and all beer industry stakeholders. • Glass Recycling Coalition: GRC brings together a diverse membership of companies and organizations INDUSTRY PARTNERS to make glass recycling work: glass manufacturers, In support of the Brewers Association board of direc- haulers, processors, materials recovery facilities, tors’ strategic objective to “promote access to raw capital markets, end markets and brands that use materials and markets,” Brewers Association techni- glass to showcase their products. cal staff provides direct support of several hop and malting barley industry groups through dues-paying membership and/or staff involvement and leadership in the following organizations: • National Barley Improvement Committee: NBIC lobbying activities focus on ensuring favorable public funding and agriculture policy related to barley. • National Barley Growers Association: NBGA member growers, maltsters and brewers work to maintain the profitability and competitiveness of the U.S. barley industry. • Brewing and Malting Barley Research Institute: BMBRI member brewers and maltsters provide financial support and direction for breeding and research in Canada, which supplies roughly 20 percent of malting barley consumed by U.S. brewers. • Craft Maltsters Guild: 2017 represented the third year of Brewers Association staff involvement in the board of directors of this group, whose mission is to promote and sustain the tradition of craft malting in North America.
BrewersAssociation.org | 7 Protecting and Promoting Breweries: Federal Government Affairs 2017 was a banner year for the Brewers Association’s political efforts. The year culminated with the passage of a two-year provision of the Craft Beverage Modernization & Tax Reform Act (CBMTRA), a legislative victory that the BA has been working toward for the last decade.
BIG WIN: CRAFT BEVERAGE MODERNIZATION & TAX REFORM ACT Fed. Excise Tax CBMTRA Reduced To: CBMTRA, the BA’s top legislative priority, was included as a two-year provision in the Tax Reform and Jobs Act. The modified legislation recalibrates the excise tax for small and independent brewers on the first 60,000 barrels to $3.50/per barrel and reduces the upper tax $3.50 $16 rate to $16 per barrel on beer production above 60,001 PER BBL PER BBL barrels up to 2 million barrels. In addition, it would ON FIRST ON PRODUCTION lower the federal excise tax rates for all breweries that 60,000 BBLs 60,001 BBLs produce more than 2 million Estimated barrels of beer a year from $18 CBMTRA per barrel to $16 per barrel beers without facing a tax liability. CBMTRA went into Savings: on the first 6 million barrels. effect on January 1, 2018, and is slated to sunset on American craft breweries will December 31, 2019. collectively save upwards of The BA worked closely with a strong coalition of $80 million per year. The legis- other associations from alcohol, agricultural and man- lation also allows the transfer of ufacturing trades to grow support for the bill. More beer between bonded facilities than half of the United States Congress are sponsors 80 without tax liability, something of CBMTRA (H.R. 747/S.236), which currently has 303 MILLION that will benefit small unaffili- House co-sponsors and 54 Senate co-sponsors. The DOLLARS ated brewers and give them the Brewers Association will work in 2018 with our cham- flexibility to collaborate on new pions in Congress to make these tax cuts permanent.
8 | Brewers Association 2017 stewardship report CAN SHEET ALUMINUM MUSIC LICENSING Throughout 2017, aluminum and steel were under a The Brewers Association joined other members of Section 232 investigation (referring to the relevant the Music, Innovation, Consumers (MIC) Coalition in section of the Trade Expansion Act of 1962) to deter- support of the Transparency in Music Licensing and mine whether imports of the materials had a national Ownership Act (H.R. 3350) introduced by Rep. Jim security impact on the United States. The Brewers Sensenbrenner (R-Wis.). The legislation’s goal is to Association joined a coalition of can manufacturers, create a licensing system that is open and accessible to non-alcoholic beverage producers and large global those who own and license music. The proposed leg- multinational brewers to advocate against tariffs on islation would create a public database that provides can sheet aluminum, which is used exclusively to make all stakeholders in the music marketplace with access beverage containers. The coalition worked together to authoritative and fully searchable records of music to educate members of Congress, the White House, ownership and licensing information, free of charge the Department of Commerce and the Department to users and updated in a timely manner. The legisla- of Defense about can sheet aluminum and the ingre- tion has 15 co-sponsors and has been referred to the dients used to produce it and to advocate against House Committee on Judiciary. including them in the investigation and imposing tariffs on aluminum and steel products. ADVOCACY Despite legislators in both the House and Senate The Brewers Association and its members continued sending letters advocating against tariffs on can sheet to grow relationships with legislators in the House and and primary aluminum, Department of Commerce Senate, and breweries hosted legislators from across Secretary Wilbur Ross recommended across the board the country at their breweries. tariffs on all forms of aluminum and steel. The BA held two Washington, D.C. hill climbs in In early 2018, as a result of the report, the president conjunction with the Craft Brewers Conference and announced that the White House would impose tariffs with SAVOR. Participants from all 50 states and D.C. of 10% on all imported aluminum products and 25% were represented. Brewery owners, guild executive on all imported steel products and that no countries directors and employees met with senators and repre- would be exempted. As of the printing of this report, sentatives and attended 470 meetings in total. the details of the tariffs have not been finalized. The Brewers Association strongly opposes tariffs on HOUSE AND SENATE imported aluminum can sheet and the materials used SMALL BREWERS CAUCUSES to make it, and cautions against any action that would There were 37 members of the Senate Bipartisan Small result in increased prices for small and independent Brewers Caucus and 226 members of the House brewers. We will continue to work with the coalition Small Brewers Caucus as of December 2017. The and our supporters in Congress to try and mitigate House Small Brewers Caucus is one of the largest the impact that these tariffs will have on small and special interest caucus groups in Congress. independent craft brewers. The Brewers Association helped the House and Senate Small Brewers Caucuses arrange meetings HOPS to educate Hill staff about small and independent The BA worked with representatives Peter DeFazio brewers. Topics included Beer Laws 101 and an edu- (D-Ore.) and Patrick McHenry (R-N.C.) to gather sig- cational hops sensory event with hops grown on Rep. natures for a letter to the FDA encouraging them to Dan Newhouse’s (R-Wash.) Yakima farm. give the hops industry a variance exemption from a The Brewers Association also held the 2nd annual ruling that categorizes hops as “produce that is often Hill Staff Homebrew Competition. All Capitol Hill consumed raw” and the regulations that come with employees and staffers from the House and Senate that designation. Without a process for exemption, were invited to participate individually and as teams. the U.S. industry will face cumbersome and unneeded This year’s winner was a member of the United States labeling and documentation rules, raising costs for Capitol Police. The awards ceremony was held at the not only hops producers but breweries as well. This Brewers Association’s annual Holiday Tasting, where rule was slated to go into effect January 26, 2018. BA the American Homebrewers Association also served staff will continue to monitor this situation and work beer brewed for the competition. with our congressional champions and the FDA to find a solution.
BrewersAssociation.org | 9 Protecting and Promoting Business: State Government Affairs
Florida Brewers Guild meeting in Tampa
SUPPORTING STATE GUILDS Since its formation in 2005, the Brewers Association has long made supporting state brewers guilds/asso- ciations a priority. With crucial issues such as franchise BIG law, self-distribution and the regulation of on-site retail sales almost wholly in the domain of state authority, the WINS BA provides valuable resources to state guilds to assist in their efforts to ensure small brewers have equitable saw both Mississippi and open access to markets, distribution and sales. In and Georgia brewers achieve 2017, the BA supported state guilds on these issues as the ability to sell directly to well as issues related to excise taxes, raising produc- tion caps for small brewers, beer transfers, satellite consumers from the brewery retail locations, trade practice and comprehensive premises for both on- and alcohol law reviews. off-premise consumption Executive Director Grant Program The BA continued the Guilds Executive Director Cooperative Funding Grant Program in 2017, with 13 total grants approved. The grant program addresses the need for guilds to hire paid staff, particularly in the executive director role. Filling this leadership position has proven an indispensable step for state guilds seeking to elevate organizational efficacy and advance small brewer inter- Protect Craft, Support Your Local Brewery Pavilion at the ests on both the state and national levels. Great American Beer Festival
10 | Brewers Association 2017 stewardship report 32 states represented at New Glarus Brewing Co. for Guilds Summit 2017 Tennessee Craft Brewers Guild meeting in Nashville
HOW TO GET INVOLVED The BA provides programs and resources to assist its members and the greater beer and brewing communities in taking an active role in educating and champi- oning the interests of small and independent brewers.
Spread the Word Support Your Local Brewery (SYLB) is a communication network that informs brewery members, homebrewers and beer enthusiasts (more than 81,000 nationwide) about issues that impact small brewers and organizes grassroots activities to defend the interests of small Brewers Guilds Collaboration Blending Day at Crooked Stave Brewery brewers. The network is designed for quick mobiliza- tion when issues arise, with SYLB members contacting educate them about the small brewing industry, and their elected officials to support small brewer positions. share information about their individual businesses In 2017, seven action alerts were issued in six states and their impact on the local community. (Delaware, North Carolina, Montana, Texas, Wisconsin and Utah). Invite The BA encourages all members to invite their elected Climb the Hill officials (federal, state and local) to their businesses for Each year BA members and guild representatives a visit. There’s no better opportunity to educate them travel to Washington, D.C. to meet with their con- on the issues and the industry, and meeting employ- gressional representatives and staff on federal issues, ees who are their constituents is something every politician will find valuable. For helpful resources, visit BrewersAssociation.org.
Join Joining your state guild/association is one of the most effective means of involvement, as the majority of legis- lation and regulation governing the beer and brewing industry is at the state level. The BA supports state organizations in many ways—visit the Guilds pages of Utah Brewers Guild in Washington, D.C. our website for more information.
BrewersAssociation.org | 11 Supporting Business Health: Technical & Quality Resources Building upon existing resources and launching new initiatives, the Brewers Association continued to expand the collection of technical resources available to members. Below are highlights from the BA’s technical and quality efforts in 2017.
Free Online Brewery Safety Training Courses completed: