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Posted at 9:30 AM ET, 01/10/2011

Beer: For craft brewers, size matters

By Greg Kitsock
sam adams_opt.jpg Sam Adams: Still crafty after all these years.

When is a beer a “craft” beer?

Most consumers would let their taste buds decide.

But the Boulder, Colo.-based Brewers Association (BA), which represents America’s small independent brewers, has a more precise definition.

It involves size. Until recently, to be considered “craft,” a beer had to come from a brewer with an annual output of no more than 2 million barrels. That’s the cutoff point, in federal law, on whether a brewery is eligible for a tax break ($7 per barrel on its first 60,000 barrels as opposed to the normal fee of $18).

As of Dec. 20, the BA altered its definition to raise the ceiling on craft brewers to 6 million barrels.

Only one craft brewer was in danger of bumping its head against the old limit. Boston Beer Co., maker of the Samuel Adams family of brands, shipped about 2 million barrels of beer in 2009, according to its annual report. That figure includes a small amount of a flavored malt beverage called Twisted Tea, which is not considered “craft.” Boston Beer doesn’t release a volume breakdown by brand, but company chairman Jim Koch asserted that Boston Beer didn’t breach the limit.

Total craft beer barrelage for 2009 was 9,115,635, according to the BA. That makes Boston Beer the proverbial 800-pound gorilla, accounting for around 20 percent of the total.

Figures for 2010 weren’t available as of press time. But if Boston Beer exceeded the limit and its barrelage were purged from craft beer statistics, the BA would have been in the embarrassing position of explaining what happened to all that liquid. After all, hasn’t the organization been crowing that craft is the lone rapidly growing segment in an otherwise moribund beer industry?

“The new definition gives us some breathing room and celebrates, rather than penalizes, our most successful members,” commented Julia Herz, the BA’s craft beer program director.

“It also aligns with our government affairs efforts,” she added. Last year, the BA backed H.R. 4278/S. 3339, a bill that would have extended the small brewers’ tax differential to companies making up to 6 million barrels a year.

The revised definition affords craft brewers quite a bit of head space. The second largest craft brewer, Sierra Nevada Brewing Co. in Chico, Calif., rolled out between 780,000 and 790,000 barrels in 2010, according to Bill Manley, the brewery’s communications director. The brewery, adds Manley, has a “theoretical” capacity of slightly more than one million barrels, after which company president Ken Grossman will have to make some hard decisions about expansion.

Even Koch, who was projecting nearly 12 percent growth for his company in 2010, has a hard time envisioning himself reaching the 6 million-barrel plateau. But he noted that back in 1985, when he started peddling beer, his initial business plan set a goal of 5,000 barrels. “It’s a vote of confidence in the health and future prospects of craft beer,” he said of the new limit.

And where does D.G. Yuengling & Son fit into this equation? The Pottsville, Pa. brewer passed the 2 million-barrel threshold in 2009 and was reporting double-digit growth in 2010. Although its beers are more flavorful than mass-market suds, the brewery uses some corn grits in its recipes (as opposed to all barley malt). This violates another tenet of the craft brewer definition: “A brewer who has either an all malt flagship ... or has at least 50% of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor.”

There are no plans to change that part of the definition, Herz insists.

By Greg Kitsock  | January 10, 2011; 9:30 AM ET
Categories:  Beer  | Tags:  Greg Kitsock  
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So, basically they changed the rules for behemoth "craft" beer manufacturer Sam Adams. Now they need an "ultra-craft" designation for the *real* craft brewers.

Posted by: MStreet1 | January 10, 2011 10:25 AM | Report abuse

Is this really a big deal at all? I'm not surprised they raised the limit--Koch's been lobbying for it since at least last Spring. I also don't see that it matters much.

Calling for an ultra-craft designation just sounds like an attempt to legislate which brewers are "too big to be cool anymore." I though that thinking went out with hardcore punk.

Do you choose a beer because it doesn't have a lot of rice and other crap in it? Do you prefer to support independent breweries? Then the craft designation is still helpful to you, even with the new limit.

If you only want to support craft brewers who fit under the old rule, that's pretty simple--avoid Sam Adams. Nobody else comes close to hitting even the old ceiling, nor will they any time soon.

Posted by: bikeboy389 | January 10, 2011 11:27 AM | Report abuse

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