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RBPMail 3.08, August 1997
Real Beer Page Mail (RBPMail) began as a modest update to craft-brew events on the WWW. It evolved into a news digest and sometimes editorial forum. We present its contents here much as they were emailed to subscribers. Often, links you will see are out of date, and businesses referred to may also be long gone.
In this issue:
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THIS ISSUE BROUGHT TO YOU BY BEERWEEK
For over seven months we've been co-publishing BEERWeek with
The Celebrator Beer News. This valuable industry news digest is
delivered every week with a compilation of digested breaking news,
new product releases, events, openings and closings along with many
novel reports and reporting found exclusively in BEERWeek. For the
next two months, we will present world-wide headline articles from
BEERWeek in RBPMail, sort of like an extended cable channel
preview weekend. If beer is your avocation or profession, this is the
resource for you. To clarify, RBPMail is the FREE news digest mailed
monthly; BEERWeek is supported entirely by your subscription
support and -- as the name implies -- never misses a Monday. Read
on or subscribe at:
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El Toro Brewing Company has filed a Class Action lawsuit against
Anheuser-Busch, claiming that El Toro and many other small
breweries were unfairly terminated from distribution agreements
through actions by A-B, actions which they allege violate the
Sherman Act and Clayton Act. The suit charges that "With the intent
to and with the effect of reducing interbrand competition in the craft
brew market and eliminating competition from craft brewers in the
overall market, Anheuser-Busch had exercised its market power to
significantly change a pattern of distribution which had originated in
a competitive market and which had persisted for several years."
The suit was filed in U.S. District Court for Northern California by
Corey, Luziach, Manos & Pliska, LL of Millbrae, CA. The lead attorney
is Dario de Ghetaldi. A similar suit was filed by St. Stan's Brewery,
Modesto, CA.
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CHINESE BREWERY GOES PUBLIC
China's Guangzhou Zhujiang Brewery Group Co. plans to issue 360
million yuan in convertible bonds, according to a company official.
The bonds will be convertible to stock. At this time, the brewery is
awaiting approval from the China Securities Regulatory Commission.
China has recently announced a four billion yuan quota for
convertible bonds. Beijing has stated that the size of each convertible
bond offer must be a minimum of 100 million yuan, and have term
limits of no less than three and no more than five years. Zhujiang
plans to use the proceeds to boost capacity and purchase other
domestic breweries.
Sofia, Bulgaria - The price of beer in Bulgaria will go up in September
- although it was not announced by how much - according to Petar
Paunkov of the Beer Producers' Union. The reason is the poor quality
- and low quantity - of Bulgarian barley and high energy charges.
Beer producers imported 20,000 tonnes of brewery barley this last
spring to cover a consumption gap. To secure next year's crop and
improve barley quality, beer producers plan to offer futures
contracts to cash-strapped barley producers.
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ARMY CUTS BEER RATION IN KOREA
The US Army's cut back in the beer ration to the 37,000 G.I.'s
stationed in Korea has been opposed by big brewers who say the
policy is costing them millions of dollars. The previous ration of 30
cases a month (24 bottles a day) was rescinded by military
authorities because of illegal sales to the Korean black market. The
new ration is 8 cases a month per person (6.4 bottles a day). The
beer sells duty free in the PX system for about $12 a case and can
bring as much as $48 on the black market. Brewers are opposing the
new policy because of lost sales (estimated to be at least 50%) and
because of fears that the reduced rations will be applied to other
military markets as well. The Beer Institute in Washington, D.C. has
lobbied the House of Representatives to amend the Pentagon's
budget bill to reinstate the larger beer rations. Total shipments of
beer to Korea were 1.3 million cases of Budweiser, Miller, Stroh's,
Coors and others. The military also covers the cost of delivery.
(Source: Eric Schmitt, The New York Times, July 5, 1997, pg. 1)
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JUDGES RULE IN FAVOR OF A-B RE: GIVEAWAYS
As reported in the July 14 BEERWeek (and July RBPMail), a California
State Judge Diane Dwayne had temporarily shut down an Anheuser-
Busch rewards program begun June 30, after the California
Department of Alcohol Beverage Control had filed a suit against A-B
on June 27. The July 21 edition of Ad Age reports that a state judge
issued a preliminary ruling on July 15 permitting A-B to resume the
program. The ruling was based on the view that, even though
Anheuser-Busch broke state codes banning giveaways tied to sales of
alcohol, state regulators had failed to enforce promotion laws
consistently in the past. Both sides now await a court order that will
clarify or modify the judge's position. Meanwhile, A-B may complete
the running of its current program into the fall.
A-B, ATLANTA BREWING CO. FORGE ALLIANCE
A-B's distribution network will widen Atlanta Brewing's sales, while
A-B will own part of the Southeast brewery. Atlanta Brewing
President Greg Kelly said he would be "proud if Atlanta Brewing Co.
were in the same league as Redhook or Widmer," two craft breweries
that in recent years marched down the aisle to exchange vows
similar to those reported at the A-B/Atlanta Brewing nuptials. For
the complete story, read the August/September edition of Southern
Draft Brew News, available in early August. Subscribe at:
http://www.southerndraft.com
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BREWWORKS NOW A WYNKOOP OPERATION
According to an article by Jane Prendergast in the Cincinnati
Enquirer, July 4 , BrewWorks at the Party Source, opened just eight
months ago, will be run by Wynkoop Brewing Company. BrewWorks
was billed as Covington, Kentucky's $11 million economic
development prize when it opened. Currently, signs on BrewWorks
brewpub/restaurant doors state that the facility is now operated by
Wynkoop, a Denver, CO, craft brewing company. The BrewWorks
name will stay, and employees have been told they will be able to
keep their jobs. The original Party Source store, on 12th Street in
Covington, and in Bellevue will continue to be run by owner Ken
Lewis. John Hickenlooper, president of Wynkoop, announced plans to
open seven new brewpubs this year, bringing the company's total to
13.
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********** WEB WATCH **********
We've been promising at the bottom of every issue of RBPMail to
provide an ever-expanding list of information and resources to make
your regular surf our way a satisfying experience every time. Little
by little we've been adding content that adds up to just about
anything you'll want to know about beer. This month, we're proud to
present some incredible homebrew resources we've been able to
support and bring you.
THE BREWERY
Surf. Bookmark. Inform spouse you will be gone for awhile.
http://www.brewery.org/
Glenn Tinseth's extensive page on the subject.
http://www.realbeer.com/hops/
The first beer page and an excellent resource.
http://www.realbeer.com/spencer/
1009 Recipes. Searchable. Yeeeeehaw.
http://brewery.org
Check out Mark Riley's online recipe calculator with a growing
database of recipes created using the program.
http://brewery.org
DAVE BROCKINGTON'S TASTING NOTES
http://brewery.org/brewery/taproom/DBindex.php
GAK'S TASTING NOTES
http://www.beerismylife.com
This is a GREAT place to learn everything you know to get started.
http://www.realbeer.com/jjpalmer/
The best brewer's magazine going according to several internet
surveys. Find back articles online and more.
http://www.brewingtechniques.com
BREW YOUR OWN
As the name suggest, this is a magazine all about homebrewing.
Archived articles and approachable design and content make this a
must-surf.
http://www.byo.com
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************* REAL BEER PICKS *********************
Summer is winding down, but the Portland Brew Bus is not. If you
are headed to Portland on a weekend, let these guys drive you to
their favorite craft-brew destinations. If you're headed to Portland
mid-week, you can still charter their service. Details and reservations
are available at:
http://www.brewbus.com
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HORSE BRASS POLISHES PORTLAND TOUR
While in Portland in body or spirit, head to the Horse Brass. Faithful
followers of RBPMail know our admiration and fondness for publican
Don Younger and his legendary Horse Brass Pub. For over 20 years
they've been satisfying craft-consumers and supporting local
brewers by providing a tap when they come to the market. The
website is full of historical information, gossip, all things British and
lovingly maintained as another room in the tavern by Joy Campbell,
fulfilling the mission of being "a bit of England, where good
companionship is the order of the day."
http://www.horsebrass.com
CABO, CABO, CABO CHAMELEON
The Cabo Group continues to evolve to deliver quality products in the
hottest markets in the beverage industry. The company was
formerly a distributor of Mexican beers in the United States.
Currently the company delivers niche beers, specialty beers, and
spirits both domestically and internationally. See their brands at:
http://www.cabogroup.com
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SHADOW MOUNTAIN DOES IT ALL
Shadow Mountain is a brewery, a brewing equipment manufacturer, a
computer company and more. They’ve got a great Java quote generator
with prices that look near impossible to beat (we priced a fully-equipped
15 barrel brewhouse with generous fermenting and conditioning capacity
at $125,000!). You can also check out their family of beers and order
merchandise at:
http://www.shadowmountain.com
BECOME A BEER BARON ON YOUR PC
We've got a strange combination of pleasure and guilt in turning you
on to our latest fascination: The Metersteiner Beer Manager game.
The guilt comes from knowing you'll be hard pressed to stop at the
free "four-year" version. It's a SimCity-type game you can download
right off of the Web that puts every armchair brewery operator right
in their place -- in front of the PC (sorry, no Mac or Unix product
available) and in the thick of brand war battle. The Beer Manager
game engine is based on many random elements; the competition is
fierce and the market is brutal! Share our little problem by going to:
http://www.beermanager.com
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BEAUMONT ON THE ROAD IN EUROPE
Want some great reading from a road trip unfolding? Spare no time
in heading to the opinionated, witty, occasionally acerbic and always
fair World of Beer with Stephen Beaumont. Read the back issues too.
If you have not signed up for his email newsletter, treat yourself to
the second url below.
http://worldofbeer.com
http://worldofbeer.com/update.php
BIG SAVINGS ON FUN BEER VACATIONS
Just for reading RBPMail you've qualified for some great savings on
events you'll probably want to attend anyway. If you respond before
September 1, 1997 you can receive a $25 discount on BEER CAMP or
a $200 discount on BREWS CRUISE '98. One writer called the former
event "the best place in the world to drink beer that weekend."
Mention Real Beer to earn your discount and start planning your
getaways now.
The next Oldenberg Beer Camp will be held September 12-14, 1997.
Cost is $349 per person based on double occupancy (but don't forget
about the $25 Real Beer discount). For additional information, point
your web browser to:
http://www.oldenberg.com
A brand new event happening in March 1998 combines the
excitement of Beer Camp with the sheer indulgence and pleasure of a
week-long Caribbean cruise. BREWS CRUISE '98 will cost $2099 per
person, double occupancy (again, remember the Real Beer discount).
For additional information, call Magellan Travel at 1-800-375-8549
for a reservation package, or point your browser to:
http://www.oldenberg.com
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Thanks to all who have been replying to our
Quickie Surveys. We draw one winner each month for the prize of
Michael Jackson's The Great Beers of Belgium distributed by Vanberg
& DeWulf (http://www.BelgianExperts.com).
RESULTS FROM LAST MONTH'S SURVEY:
We asked, "How many BRANDS of beer do you have in your
refrigerator at any one time?" and learned that nearly two thirds
stock 1-4 brands and fully another third stock more. We asked you
the question about styles this month to see if this diversity exists
within a family of beer styles or not.
Here are what your proud 'fridges look like:
1-4 Brands = 62% more = 33%
Can we come over and play?
Last's months Quickie Survey winner is geologist, Ed Nealson. You
rock, Ed! Enjoy the Michael Jackson book from
http://www.BelgianExperts.com
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*********** Brewed Fresh For You! **************
The Real Beer Page announces a diverse group of brew websites to
check out:
Bloomington Brewing http://www.bloomington.com
Bad Frog http://www.badfrog.com
International Brewpro http://www.brewpro.com
Cooper's Brewery http://www.conbev.com
Elk Grove http://www.elkgrovebrewing.com
Golden Gate http://www.goldengatepark.com
Hales Ales http://www.halesales.com
Lucky's Teeth http://labattblue.com/Lucky/
Molokai Brewing http://www.MolokaiBrewing.com
Newlands Services http://nsibrew.com
ProBrewer http://www.probrewer.com
Routh Street, TX http://routhstreetbrewery.com
Source Packaging http://www.sourcepackaging.com
Toronto Beer Fest http://realbeer.com/torfestbeer/
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LOUISIANA RELAXES DIRECT SHIPPING LEGISLATION
On July 9, Louisiana Governor M.J. Foster, Jr. signed a bill to legalize
the direct shipping of 60 bottles of wine a year to Louisiana
consumers. The passage of the bill was the result of negotiation on
the part of the Wine Institute with Louisiana wholesalers,
administrators and legislators in the hope it will become a model for
other states regarding direct shipping of wine. Florida, Georgia and
Kentucky all have laws prohibiting shipping by out-of-state
licensees, and it is a third degree felony. Fourteen other states have
been engaged in legislative activity re this subject. Louisiana is one
of fifteen states that have made it legal to ship limited amounts of
wine directly to adults. This impacts over one thousand commercial
wineries who can't reach their market by any other means. The
effect on the brewing industry is felt by beer of the month clubs,
which are prohibited in certain states from shipping beer directly to
the consumer, because they circumvent the traditional three tier
system.
OREGON LIQUOR COPS BAN INTRASTATE BOM DELIVERY
The Oregon Liquor Control Commission decided it is unlawful for
Oregon consumers to join Beer Across America, a national
microbrew-of-the-month club, according to a company press release
dated July 15. The current Oregon membership base of over 1,000
customers has been informed that they can no longer participate in
the program. Oregon residents can legally purchase wine from out-
of-state retailers for personal consumption and have it shipped to
their home or business. This latest enforcement by the OLCC pertains
only to beer. OLCC officials take exception to the fact that the order
information is processed at the company's Illinois headquarters,
although Beer Across America has proposed to assign the information
to a retailer in Oregon for shipping purposes. The OLCC insists that
order-taking for Oregon residents be based in Oregon. "In this age of
telecommunications and the Internet, the physical home of any
company's order-taking business should be irrelevant," the company
stated. "It certainly is to the consumer."
http://www.beeramerica.com
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NY TRIES TO REMOVE ONE PUB/ONE OWNER LAW
A New York Post article by Richard Wilner, reported that several
New York City brewpub owners are "caught in a post-prohibition era
law that limits them to just one establishment." State lawmakers
passed a bill earlier this month allowing ownership of up to five
brewpubs. The State Assembly, however, still holds the bill in
committee. It was unanimously approved by the Assembly economic
committee, and sent on the Assembly Ways and Means chair, who
indicates that he (Deny Farrell) has not yet reviewed the bill. End of
session is about two weeks away. Two NYC brewpub owners are
anxiously following the progress of the bill: Jon Bloostein, owner of
Heartland Brewery in Union Square and Joe Quattrocchi,
Commonwealth Brewery, Rockefeller Center. Bloostein has leased
space at 6th Avenue and 51st Street and will have to give it up if the
Assembly does not pass the bill this session, while Quattrocchi lost
$400,000 when he leased the historic Delmonico's site near Wall
Street and had to give it up when the old law was re-interpreted.
http://www.heartlandbrewery.com
PORTLAND BREWING TAPS INTO COLLEGE PUBLICATIONS
Portland Brewing Company, Portland, OR, has begun a newspaper ad
campaign targeting alternative and college publications, according to
the July 21 Ad Age. The $400,000 campaign is expected to appear in
college papers in California, Colorado, Oregon and Washington, and is
being handled by Portland's Moffatt/Rosenthal and Cass
Communications, Los Angeles. The campaign takes a position of
poking fun at microbrew snobbishness and mainstream beers,
according to a M/R staffer.
http://www.portlandbrew.com
SAM ADAMS AIDS SUPPORT PROMOTION
Boston Beer Company is featuring a promotional vehicle for on-
premise retailers. Consumers make a donation to a local AIDS charity
and fill out a special Heart of Gold card identifying them as
supporters. The cards can then be displayed around the bar to
encourage customer involvement and to show how much money has
been raised. For more information, contact Lucy Sholley, 617-368-
5000.
http://www.samadams.com
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********* BEERWEEK HEADLINES **********
The following are news headlines and features from the last month.
BEERWeek of July 7 - 14, 1997
* Army Cuts Korean Beer Ration -- Big Brewers Cry Foul!
* Yakima Brewing Celebrates 15th Anniversary
* A-B Invests One Billion Plus in Mexican Beer Market
* Anheuser-Busch Opposes "Real Beer Here"
* 1998 AOB International Events Announced
* Bass Is Really Really Really Out of Contention
* G-o-o-a-a-l-l-l pour le Bud - Mais, non!
* Guinness/Grand Met/LVMH Still Carrying Baggage
* 1997 California State Fair Commercial Beer Awards
* New CA Labeling Law for Malt Beverages
* Redhook Helps Avert Plane Crash
* Beer and Cigars at Camp Getaway
BEERWeek of July 14 - 21, 1997
* Sierra Nevada's Paul Camusi to Retire
* New President & COO for Pete's Wicked
* Wynkoop Takes Over Kentucky's BrewWorks at the Party Source
* A-B to Appeal to California Courts
* Louisiana Becoming Safe for Direct Shipment of Alcohol
* Old NYC Law Dampens Brewpub Expansion
* Miller Sales Up: Advertising Campaign or Discounting?
* Russian Brewery Brews Pilsner Urquell?
* GABF Gears Up for Big Event
* GABF Magic Bus Ride
* Chinese IPO's? (An hour latter your... )
* Bulgarian Beer Prices Rise
* Flooded Wisconsin Brewery's Friends Help Out
* Red River Beer Helps Midwest Flood Victims
* Gosser Helps Sponsors Art Biennale
* Molson Dry Gets Wet
* Lav-en-dar Cigars, Oh My!
* Weston Re-Opens
BEERWeek of July 21 - 28, 1997
* Oregon's OLCC Bans BOMs
* Wynkoop Repeating Itself - in a Good Way
* ASCAP & BMI Face the Music
* Opinion: "Estate Brewery" Trademark a Good Idea?
* New Stout from Dublin - My Goodness?
* Red Tail Draught Exceeds Expectations
* A-B Registers Shelf Offering
* Judy's Last Hurrah
* Backroads Meets Backroads at Anderson Valley
* Maps on Tap: New AHA Membership Perk
* Sapporo USA Relocates Offices
* Mexican Beers Awarded POPAI's
* Bud Graduates 40,000+ from Bud "School"
* Moss Bay Ales Now Officially Hale's Ales
BEERWeek of July 28 - August 4, 1997
* California Micros Sue Anheuser-Busch Over Distribution Deals
* Favorable A-B "Buy-the-Gear" Court Ruling in California
* Portland Brewing Ads Target College Papers
* Obscure Delaware Legislation Thwarts Homebrewers
* Montana Breweries Organize
* Sam Adams Rules Down Under: What's Next - - Koch-o-dile Dundee?
* Sam Adams "Hearts of Gold"
* New Brewery Bus Tours in Colorado
* Corsendonk Now on Tap
* Big Rock & Ducks Unlimited: Wise Quacks
* Cigar Party Kit from Murphy's
* Hale's Ales Expands MicroKeg Production
* Colorado Agency Takes on New Brewery Clients
* Beamish Now Available in San Francisco
* Westchester Brewing Voted Top Micro
* The Beers You Could Have Had at OBF
Each issue also includes:
* Openings * New Publications * New Releases * New Events and
Festivals Update * Beer Events in the Next Two Weeks * Beer Quote
of the Week
BEERWeek is the subscription-based newsletter delivered by email
each Monday for the industry professional or serious beer enthusiast
who needs it regularly. To subscribe, go to
http://www.beerweek.com and get it now.
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REDHOOK ENABLES PILOT TO LAND IN ONE PIECE
Three bottles of Redhook ESB softened the landing of a small plane in
Colorado. The landing gear on Ben Cahan's plane could not be lowered
as he and a friend returned from a fishing trip. After circling the
airport for about an hour, Cahan obeyed the suggestion of a
mechanic, who radioed him to "pour all available liquid into the
hydraulic system." They poured the contents of three Redhook ESBs,
the front wheel came down a little farther, and the back wheels
moved a little, too. Then they landed. A serious crash landing had
been averted. If the wheels had not come down far enough, the
propeller could have hit the ground first. (For story verification,
Nelson Jay, Redhook, 206-634-4208.)
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********** HEALTH WATCH **********
SLEEP-DEPRIVATION EQUALS DRIVING INTOXICATED
New research by a team of Australians reveals that it is more
dangerous to be sleepy behind the wheel than it is to be driving
under the influence of alcohol. "Moderate levels of fatigue produce
higher levels of impairment than the prescribed level of alcohol
intoxication," researchers said in a letter to the science journal
Nature. Researchers made their conclusions after observing 40
people in two experiments. "In one they were kept awake for 28
hours (from 8:00 until 12:00 the following day) and in the other they
were asked to consume 10 to 15 grams of alcohol at 30-minute
intervals from 8:00 until their mean blood alcohol concentration
reached 0.10 percent." In both experiments, a computer test of hand
eye coordination was used. Following their experiments, the research
team concluded that staying awake for 24 hours makes people react
as badly as those who have blood alcohol levels of 0.1 percent.
ALCOHOL MAY LOWER ULCER RISK
Researchers say alcohol may play a role in decreasing the risk of
duodenal ulcers. The disorder, which affects the gastrointestinal
tract, hits some 300,000 American each year, UPI reported July 22.
The Harvard University study on alcohol and its relation to duodenal
ulcers was conducted by Dr. Walid Aldoori who observed two groups
totaling 48,000 men: those who drank alcohol and those who did not.
He found the risk of ulcer decreased from 24% to 53% among
drinkers, depending on the level of consumption. "We observed a
small inverse relation between alcohol consumption and risk of
duodenal ulcer." Researches add that those who drank smaller
amounts of alcohol benefited the most from decreasing their risk of
duodenal ulcer. They commended light drinking of beer, wine or
spirits.
DRINKING FENDS OFF HAIR LOSS
New scientific research shows that those who drink to excess rarely
go bald, the Australian Associated Press reported July 27. "If you
force him to drink too much alcohol, it is very unlikely he will lose
his hair," said Hugh Rushton, fellow of the Institute of Trichologists.
Also siding with the findings is Glen Lyons of the Kingsley Clinic in
London. Lyons said a person who doesn't drink is inclined to have
more stress in his or her life, and stress can contribute to hair loss.
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FAMOUS PUBLICAN BIDS FAIRWELL
"This is a very special moment for me," Judy Ashworth told the
crowd gathered for Lyon's Brewery's June 21 Hoppiness Festival.
"Number one," she said into the microphone, "I'm alive." Surrounded
by family, friends, fans and the firemen of Dougherty Regional Fire
Station 1 who revived her following her April 26 heart attack
(BEERWeek, April 28, May 5), Judy gave her farewell speech at her
final festival as owner of Lyon's in Dublin, CA. Judy joked about her
near-death experience, "I looked down that tunnel, and all I saw was
a Bud Light, and I said, 'No way!'" she laughed, drawing applause
from the crowd. She finished with words heard by thousands of ears
over many years. "Thanks, you, guys," she concluded, stepping down
off the stage. "Enjoy the beer!" Judy's last party will be at the pub
August 9th. All are invited.
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ANNOUNCEMENTS:
DOUG EDDY TO LEAD SALES AND MARKETING
Real Beer, Inc. is pleased to announce a vital new member to the
Real Beer team with Doug Eddy. For the past several years Doug and
Christine Eddy have been delivering the beautiful full-color craft
brewer's calendars from Copper Kettle Concepts. You'll also recognize
their excellent work in our partnering on the Events Calendar at
http://www.realbeer.com/rbp/rbp.events.php. Doug saw our posting in
the classified/help wanted area on the Professional Brewer's Page,
wanted to make a change of environment and coasts but not of
industry, so we decided to tie the knot. Doug is tasked with heading
up our sales and marketing efforts and his first major event in this
role with us will be the Great American Beer Festival. Come by and
welcome Doug or email your sentiments to doug@www.realbeer.com
REAL BEER PARTNERS WITH BREWORLD
Real Beer, Inc. (http://www.realbeer.com) announces a joint
marketing and publishing agreement with BreWorld
(http://www.breworld.com) effective immediately. The agreement
allows both companies to market the other's advertising space to
their clientele, an important feature for companies looking to tap
consumers in remote markets. "This is a great boon for both of our
audiences because it means a more unified and expanded
presentation of information." said Pat Hagerman, President of Real
Beer, Inc. "We've been North American in much of our content areas
by logistics only, not by design. This relationship allows us to truly
deliver world-wide content and audience." Advertisers benefit from
regionalized audiences and users enjoy more richly focused editorial.
For one example of some of the integrated content, see the European
Events listing at:
http://realbeer.com/cgi-bin/events/rbp.events.cgi?cont=EUR
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Who Benefits from Beer Tax Breaks? - Guest Editorial
Peter Egelston, pioneer in the Northeast U.S. brewpub scene, wrote
this month's editorial in a posting on the ProBrewer’s message board,
a new webspace for professional brewer's to network with others within
the industry. Although the appeal in the message is brewer to brewer,
it has strong consumer implications and deserves increased awareness.
July 21, 1997 The Federal Excise Tax Rollback Scam
Over the last year or so, I have noticed a number of articles in both
the trade and mainstream press about a proposal in Washington to
roll back the Federal Excise Tax on beer, which was doubled in 1991,
to pre-1991 levels. The argument in favor of this rollback is based on
several presuppositions:
1. The first is the trendy political mantra "Taxes bad, tax cuts good."
2. Second is the belief that the reversal of a bad decision (or policy)
produces a good outcome.
3. Next is the assumption that a rollback of the FET will be good for
consumers.
4. And finally there is the assumption that a rollback of the FET will
be good for the brewing industry and, by extension, the American
economy.
I think this proposed rollback is a patently crappy idea; a scam
designed to line the pockets of some of the least deserving members
of the brewing community. It would be disastrous for small brewers,
and have little or no impact on the price consumers pay for beer.
Let's step back and take a closer look at the federal excise tax, and
how the 1991 increase in that tax filtered down to consumers. Prior
to 1991, brewers paid the FET at a rate of $9.00 per 31-gallon barrel.
Small brewers, defined as those with an annual production of less
than 200,000 barrels, were eligible to pay a reduced rate of $7.00
per barrel. The 1991 increase doubled the rate to $18.00, but the
reduced rate for small brewers remained at $7.00 per barrel. The
1991 excise tax increase added about 65˘ per case to the producer's
cost. Did the end user see a 65˘ per case price increase? Absolutely
not! By the time the tax increase passed down to the consumer that
65˘ had been marked up twice along that way - both at the
wholesale and retail levels - so that Joe Sixpack saw a price increase
more in the neighborhood of $1.20 a case.
Now, let's have some fun and imagine that the FET was rolled back to
its pre-1991 level. The editorials paint a rosy picture where beer
prices drop, 50,000 jobs are miraculously restored to the beer
industry (partially replacing the 60,000 that were "lost" in 1991),
and the shortfall in federal tax revenues will be made up by "balance
sheet improvements from the new jobs that would be created and
the improved economy." (cited from Frank McNeirney's column
entitled "Tax Cut Rumblings" in January, 1997, All About Beer)
Come on. Let's imagine what might really happen. First of all,
remember that the excise tax is paid by the producer; from the
standpoint of the producer, it is no different than the price of malt,
case cartons, or any other cost of goods sold. An increase in that tax
must either be absorbed by the producer (fat chance), or passed
along to the consumer, as was the case in 1991. A reduction, by the
same logic, will also be absorbed by the producer or passed along the
line in the form of lower prices.
Now, for the sake of argument, let's imagine a hypothetical national
brewing concern called Burns & Allen Brewing Co., whose annual
taxable production is, say, about ninety million barrels. A nine dollar
per barrel reduction in the FET will result in a windfall of
$810,000,000, going straight to B&A's bottom line. That's more than
three quarters of a billion dollars a year, folks, free money, courtesy
of Uncle Sam. Now, pretend for a moment that you are Mr. Doggie
Burns III, President of B & A Brewing. Are you really going to pass
$810,000,000 along to your wholesalers in the form of a 65˘ per case
price reduction? Try explaining THAT to your stockholders.
OK, now let's pretend that in a lapse of fiduciary sanity B&A Brewing
decides to pass that 65˘ to its distributors. Are the distributors now
going to reduce their price to retailers by 87˘ a case? Remember,
they marked up the tax increase five years ago, and it's only fair that
they take it back, right? And will the retailers now take that 87˘ and
pass $1.16 savings on to you and me? Forgive me if I sound
skeptical, but I can't imagine why Doggie Burns III (or any real
major American brewer) would voluntarily give away $810,000,000
of annual windfall profit, or why B&A's wholesalers would give away
the profit they make each year on that $810,000,000, or why
retailers would give up the profit they make on that original
$810,000,000.
The problem is, that $810,000,000 may be involuntarily surrendered
to the various states who are likely to raise their own excise tax rates
to offset the reduction in the FET. Of course, in that case it will be the
wholesalers and small brewers who are left holding the bag. B&A
Brewing will still get its $810,000,000 windfall; small brewers will
effectively lose their reduced excise tax rate, since increases in state
excise taxes will be applied equally across the board, regardless of
the size of individual breweries; and wholesalers, who in most states
are responsible for paying state excise taxes will be forced into the
unenviable position of absorbing the increased taxes, passing them
along to retailers (who will them pass them along to guess who), or
hoping that B&A Brewing and its brethren will pass their reduced
FET windfall along to them in the form of price reductions or rebates
to offset increases in state excise taxes.
Imagine that! Doggie Burns III of B&A Brewing gets his
$810,000,000 windfall (compliments of his pals on Capitol Hill), small
brewers see their taxes double and consumers get stuck with a price
increase to boot. Talk about adding insult to injury!
In conclusion, let me get back to four points the points I started
with:. "Taxes bad - tax cuts good." Suffice it to say that this simplistic
notion did not serve Senator Dole's presidential aspirations well. It is
nothing more than demagoguery; nobody buys it anyway.
2. Raising the FET was a bad decision. Any excise tax, in my opinion,
is a bad tax because it is effectively hidden from the consumer, who
will ultimately pay for it. Reducing that tax now will not necessarily
undo the damage done, however. Because it is a "hidden" tax, its
reduction is hidden, too.
3. Rolling back the FET to its pre-1991 level will have no positive
effect, and most likely some very negative ones. Whether consumers
ever see a penny of the reduced tax will depend solely on the
beneficence of Doggie Burns III and his ilk.
4. I feel my ire rise when I read all this sentimental crap about how
this tax giveaway will restore thousands of lost jobs and improve the
economy. It is clear that the push to reduce the federal excise tax on
beer is nothing more than a cynical attempt of the large domestic
brewers, through their well-funded trade association - the Beer
Institute - to get a huge windfall at the expense of taxpayers. Look
closely at members of Congress who have signed on to this bill. See
the strings attached to their limbs? The wholesalers, through the
NBWA, have thrown their lot in with the big brewers, but I expect
that this is the result of a lot of behind-the-scenes arm-twisting. Ask
your distributors privately how they feel about this (I did) and you
get a different point of view.
Part of me is confident that at this point even Congress is not stupid
enough to give billions of dollars of tax revenue back to a handful of
huge brewing companies, but stranger things have happened. I don't
relish the thought of seeing my small-brewer tax differential
disappear, and I certainly don't look forward to seeing the large
brewers armed with billions more dollars, some of which will no
doubt be earmarked for making life miserable for us small, annoying
craft brewers who have been nibbling away at their market share.
I have posted this because I would like to find out what anybody
else thinks about this? Well...?
Post your response to this editorial at:
http://www.probrewer.com/cgi-bin/probrewer/message.cgi?mode=message&id=81
The views expressed here are not necessarily those of the publishers,
but they come pretty darn close...
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