A political storm is brewing among small craft beer makers who are being pounded by a sagging economy, state tax increases and a bid by beer giant Anheuser-Busch Co. to change California law on doling out promotional merchandise.
But while producing quality microbrews grows more costly, beercrafters also are finding ways to get creative and work together.
At Truckee’s FiftyFifty Brewing Co., owner Any Barr is wrestling with rising prices of barley, wheat and hops.
“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,” Barr said. “Our beer prices have gone up a little because we had to, but we have absorbed the better part of the increases internally.”
A nationwide shortage of hops ” a plant used to flavor pale ales ” has taken a toll, said Glynn Phillips, owner of Sacramento-based Rubicon Brewing Company.
“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, and it’s also generating a greater camaraderie among small brewers who trade hops supplies, 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.”
California’s Office of Administrative Law recently adopted a 1,600 percent tax increase on flavored alcoholic beverages to curb underage drinking, according to the State Board of Equalization.
“I believe that the ultimate effect of this regulatory change will be positive,” said board Chairwoman Judy Chu. “It will make it harder for young people to access alcopops, and that can only be helpful in reducing underage drinking.
The new regulation goes into effect in October and taxes flavored malt beverages as distilled spirits, at a rate of $3.30 per gallon; beer is taxed at 20 cents per gallon.
But the regulations fails to define flavored malt beverages, causing some artisan beer products to be thrown in the mix with alcoholic drinks such Mike’s Hard Lemonade, Barr said.
“The beer drinker is going to miss out on certain craft beers because of the way it’s written,” Barr said.
Many breweries and alcoholic beverage purveyors are challenging the law saying the decision to raise taxes is not the responsibility of the Board of Equalization, but is that of the California legislature.
Trinkets vs. quality
Small brewers also are foaming over a bill they say would entice retailers to put more big-name beer on tap.
Anheuser-Busch ” maker of Budweiser, Bud Light and Michelob beers ” is supporting Assembly Bill 1245, which would allow beer companies to hand out souvenirs valued up to $5 instead of the current 25-cent limit, according to the bill’s author Rep. Alberto Torrico.
The bill sailed through the Assembly and is navigating the Senate.
“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,” Phillips. “It makes it very difficult for small players like me to compete.”
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.
“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,” Phillips said.
FiftyFifty won’t need to compete for draft space, as its taps are reserved for the restaurant’s lineup of frothy brews, but owner Barr said he can’t afford to dole out free souvenirs elsewhere.
“We do have logoed merchandise for sale, (but) 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.
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