Is Your Favorite Brew Really a “Craft” Beer?

The number of craft breweries in the United States has skyrocketed in recent years. Most recently, the monks of St. Joseph Abbey, located in a small Massachusetts town, made headlines by introducing the first and only certified Trappist ale in the country. It sold out in a matter of days.

Here in New Jersey, laws took effect in 2012 that reduce the red tape for New Jersey breweries and help them compete with businesses in other states. Under the regulations, brewpubs can increase annual production from 3,000 barrels to 10,000. Microbreweries can also sell beer as part of a brewery tour as well as sell a limited amount for customers to take home.

While small brewers continue to open and thrive, the industry is also becoming big business. Under federal tax law, “small brewers’’ qualify for a reduced excise tax of $7 on beer sales. By comparison, brewers producing more than two million barrels pay an $18 tax on every barrel.

Given the potential tax breaks, larger breweries are also seeking to take advantage. By way of example, Boston Beer Co. is one of several beer manufacturers lobbying to expand the definition of “small brewer” to include those who produce six million barrels. The maker of Samuel Adams considers itself a “craft brewer” with its seasonal beers and limited edition releases. However, it generated more than $600 million in sales in 2012.

Nonetheless, the manufacturer was previously successful in lobbying the Brewers Association to change its definition of “craft” to include manufacturers who produce up to 6 million barrels annually, arguing that its operations pale in comparison to international giants like Anheuser-Busch InBev and MillerCoors. However, many argue that the tax benefits should be limited to those brewers that need the break to gain a foothold in the industry, rather than an established business.

Other beer companies have designed their operations to take advantage of the current law. Anheuser-Busch InBev owns several small breweries, including Blue Point. In addition, Jacob Leinenkugel Brewing Company, famous for its summer shandy, is owned by MillerCoors, although you will find no mention of the affiliation on the brewery’s website. Through the use of holding companies and the use of small sounding names on their websites, the large corporations are able to shield the true owner’s name.

Whether the practice is squeezing out the “little guy” is up for debate, but it may make you think twice about where your money is going next time you order a pint.

If you have any questions about this post or would like to discuss the regulations impacting the craft brewing industry, please contact me or the Scarinci Hollenbeck attorney with whom you work.