August 8, 2008
A political storm is brewing among small craft beer makers who are being pounded by state tax increases, a sagging economy, and a bid by beer giant Anheuser-Busch Company to change California law on doling out promotional merchandise.
Anheuser-Busch ” maker of Budweiser, Bud Light and Michelob beers ” is supporting Assembly Bill 1245 that would change California law by allowing beer companies to handout souvenirs valued up to $5 instead of the current 25-cent limit, according to the bill’s author Rep. Alberto Torrico.
The bill, which sailed through the Assembly and is now navigating the Senate, may not seem consequential to the average beer buff, but microbrewers across the state are foaming over the potential changes.
“I think AB 1245 is a special interest bill that is supported by one brewery only, and every other brewery in the U.S. is not interested,” said Glynn Phillips, owner of Sacramento-based Rubicon Brewing Company. “It makes it very difficult for small players like me to compete.”
But it’s not just the increase in promotional swag that has Phillips concerned. It’s the finite amount of shelf space and beer taps that may give large companies and distributors an edge over smaller competitors, said Phillips, whose craft beers are distributed in several North Lake Tahoe and Truckee restaurants.
“This could be an enticement to retailers to put more Bud on tap,” Phillips said. “Anheuser-Busch already owns 30 percent of the market share in California, and this would further change the level of the playing field against other breweries.”
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Truckee’s FiftyFifty Brewing Co. won’t need to compete for draft space as its taps are reserved for the restaurant’s lineup of frothy brews, but owner Andy Barr said doling out free souvenirs is not something he can afford.
“Although we do have logo’d merchandise for sale, we and other local breweries don’t have the budgets to be giving much of anything for free,” Barr said.
So while beer giants lure retailers with promotional trinkets, Barr said his focus will continue to be on producing high-end, tasty brews.
“Regardless of this bill, or any other that may come along, our strategy is to compete by making the best, highest quality beer we can,” Barr said.
However, producing quality beers is increasingly becoming an expensive task as the cost for barley, wheat and hops skyrockets, much like all other food products, Barr said.
“Raw materials and shipping costs have gone up a tremendous amount over the last few years, and are especially difficult to deal with as a new and relatively small brewery,” he said. “Our beer prices have gone up a little because we had to, but we have absorbed the better part of the increases internally.”
The problem isn’t confined to soaring food and trade costs. A nationwide shortage of hops ” a plant used to flavor beer, mainly pale ales ” has taken a toll on supply and demand, Phillips said.
“We’ve seen 100-fold increase in terms of hop costs,” Phillips said. “It’s absolutely affecting the price of beer.”
The shortage may force craft brewers to find clever alternatives for their recipes, but it’s also generating a greater camaraderie among small breweries who trade hops supplies for different strands of the plant, Barr said.
“We have done creative purchasing and hop trading with other breweries to continue to keep our recipes true to style,” Barr said. “However, we are planning on making a lot of beer in the upcoming months and years, and I expect that we will have to be even more creative in the future to get enough of the raw ingredients we need to make great beer.”