· Lower the excise tax on small brewers
· Re-define small brewer
The senators are updating the tax—it hasn’t been touched since inception in 1976. Additionally, they argue the microbrewery industry will be put on a more even footing with the mega-brewers. There are 1500+ microbrewers in the country which employ over 100,000 people. Tax cuts are always good, but especially so for this group. It’ll allow them to expand, create more jobs, and create increased demand for American grown input ingredients—barley, wheat, and hops. A breakout of the proposed excise taxes are itemized below in the table:
Marginal Output (bbls)
Current Tax per bbl
Proposed Tax per bbl
0 – 60K
60K – 2M
Note: Barrel = bbl
For breweries producing less than 60K bbls, it would save them close to $20M. Additionally for brewers producing up to 2M bbls, the marginal rate would save an additional $27M in tax.
What defines a small brewer? The current cutoff is 2M bbls per year. If a brewer produces in excess of this ceiling, they are considered “large.” Boston Beer Company (NYSE:SAM), producers of the Samuel Adams brand of beers, is the largest American owned brewery operating in the US now. Anheuser Busch, Miller, and Coors were all acquired by foreign companies. Boston Beer Company’s 2010 output was 2.2M bbls—a drop in the bucket for the big brewers. Yet according to the tax code, Boston Beer Company is now considered a large brewer even though they represent 0.9% of the total US beer market. If the bill goes through, it would raise the ceiling to 6M bbls per year as the cutoff for a small brewer, an important benefit to them. Most are privately owned, such as Sierra Nevada, Harpoon, and Yuengling. Boston Beer Company and the Craft Brewers Alliance (HOOK) are the only publicly traded small brewers.
The bill would have positive impacts for not only SAM and its shareholders, but for the rest of the microbrewing industry as well. Based on SAM’s 2010 output of 2.2M bbls, this tax proposal would net them approximately $4.1M in tax reductions on $464M of revenue. Since the passage of the bill is uncertain, I’m maintaining my fair value estimate of SAM at $83. See the existing analysis here.
SAM hails from Sen Kerry’s state of Massachusetts. Click here to read about the BEER Act, and S534 to track it through Congress.
Disclosure: Long SAM