Good news for booze: tax cuts help small breweries compete in a tightening market

  • Granite Roots Brewing in Troy offers a rotating menu of beers with trail-themed names for an itinerant customer base. Staff photo by Abbe Hamilton

  • Granite Roots Brewing in Troy offers a rotating menu of beers with trail-themed names for an itinerant customer base. Staff photo by Abbe Hamilton—

  • Granite Roots Brewing in Troy offers a rotating menu of beers with trail-themed names for an itinerant customer base. Staff photo by Abbe Hamilton—

  • Granite Roots Brewing in Troy offers a rotating menu of beers with trail-themed names for an itinerant customer base. Staff photo by Abbe Hamilton—

  • Granite Roots Brewing in Troy offers a rotating menu of beers with trail-themed names for an itinerant customer base. Staff photo by Abbe Hamilton—

Monadnock Ledger-Transcript
Published: 1/14/2020 11:33:04 AM
Modified: 1/14/2020 11:32:16 AM

In December, Congress extended tax cuts for craft brewers through 2020. The gesture was a boon to the state’s breweries, which often operate on precarious margins. Rich Stadnik of Houndstooth Brewing and Pup’s Cider Company in Greenfield, and Anthony Levick of Granite Roots Brewing in Troy weighed in on what the tax cut means for their businesses, and some of the other ways they maintain an edge in the increasingly competitive world of craft brewing.

The tax cuts, which were originally approved in 2017 and extended for 2020 on Dec. 20, 2019  with the passage of the Further Consolidated Appropriations Act, halve tax rates from $7 to $3.50 per barrel produced – a barrel is defined as 31 gallons. For nanobreweries, breweries producing less than 2,000 barrels a year, this might only amount to $7,000 saved – but that’s enough to gain some breathing room and reinvest in the business a little, Stadnik said. “It’s very nice to actually get a tax to come down,” Levick said. “I hope they extend it forever.”

Granite Roots Brewing is a member of the NH Brewers Association, a nonprofit that promotes the state’s beer industry. “They help enormously, they lobby like crazy,” Levick said.

“At the end of the day, any savings are worthwhile to a small business owner and beneficial in stimulating our local economy,” NH Brewers Association Executive Director CJ White said. She said that in 2019 alone, the state’s craft beer industry represented $452 million in economic impact and added nearly 4,000 jobs to the state's creative economy. She described the cuts as “crucial to the success” of the state’s small brewers, enabling breweries across the state to add jobs, improve employee benefits, purchase new equipment and even expand operations.  The NH Brewers Association lobbied congress and mobilized their 70 member breweries to write letters to politicians about extending the tax cut this year, and plan to continue lobbying and mobilization efforts in order to pass the Craft Beverage Modernization and Tax Reform Act, legislation that would make the rates permanent. The bill had 73 Senate and 332 House co-sponsors by the end of 2019, including Sens. Maggie Hassan and Jeanne Shaheen. “Every single congressman has a brewery in their district,” Stadnik said. He said he’s optimistic the tax cuts will continue to perpetuate now that there’s a strong lobbyist presence in Washington DC. 

Stadnik and Levick cite multiple challenges to small area breweries. Every two weeks, Stadnik said he reads that four or five more breweries shut down nationwide. “It’s all about location,” he said, describing breweries as “basically restaurants that happen to have beer,” with the same amount of risk involved. 

Both brewers have had to contend with market saturation. Elm City Brewing Company in Keene was the only brewery in Cheshire County when Granite Roots Brewing started up in 2015, Levick said. Now, there are nine breweries in the county. There are about 8,000 breweries nationwide, Stadnik said, and that he believes New Hampshire crossed the 100 brewery threshold as of the start of the year, with nanobreweries comprising 70 to 80 percent of that.

“Competition is healthy,” Levick said, “It brings more people to Cheshire County  to try the beers.” However, it’s an encumbrance when he markets his beers wholesale, he said, as the proliferation of options make it harder to stand out to a potential bottle shop purchaser.

Another issue that breweries have to contend with is a flattening drinking population. The drinking population has been basically flat for the last three or four years, due to an increasing focus on health and moderation, Stadnik said. “The challenge is that beer does not have the same cachet, and sales have been declining.” Craft beer comprises about 13 percent of the nation’s beer market, Levick said, although he calls that figure “pretty dubious,” as some large breweries are sometimes included in the figure.

“We want more people to drink craft,” Levick said. The 25 to 35 year-old demographic comprises craft beer’s base, he said. Older beer drinkers are harder to convert if they’ve been loyal to a certain domestic beer for decades, although it’s not impossible. “That's our job, to get the craft beer out,” he said.

“If you're younger, you want something new all the time,” Stadnik said. A younger drinker isn’t necessarily loyal to a certain type of alcohol. He said that right now, hard seltzers are the hottest new product. “That will be offset with something else,” he said. Stadnik said he sees a brewery’s ability to constantly offer something new as a make-or-break quality for its survival. Both brewers say they try to keep up with industry trends. “A lot of people like sours now, young people particularly,” Levick said. This works well, considering Granite Roots Brewing started off by making gose-style sour beers with fruit from the family farm.  

Canned beers are gaining popularity among microbreweries. “Bottles break and slip,” Levick said, whereas customers and bottle shops alike appreciate the convenience of cans – the beer even keeps better in new aluminum cans rather than glass. Granite Roots Brewing periodically pays a man to can and label their beer with equipment he drives to the brewery in a trailer. Stadnik said that Houndstooth Brewing will be sticking with glass bottles for his operation. “I was debating whether I should can or not, once I saw the [news about raw material] tariffs, I said I'm not even gonna look at this,” he said.

“Every brewery is different,” Levick said, and must cater to their own situation and customers. “Most of our customers are out-of-state people coming by,” he said, using Route 12 as a shortcut between Vermont and their homes in Massachusetts, Connecticut, and Rhode Island. “Lower alcohol beers are becoming more popular,” he said, following a wave of popularity for high-alcohol, imperial ales. “Most of our customers drive in, they don't want to get sloshed on a nine percent beer,” he said. “So we sell them a four percent beer.” Granite Roots is also the closest brewery to Mount Monadnock, he said, which pulls in a substantial tourist crowd. Levick said they cater to the tourists by naming beers after the trails on the mountain.

Stadnik began selling beers at the Peterborough Farmers Market two years ago, and has since developed hundreds of recipes that trend towards the tastes of his Peterborough customers. “You learn what your consumers like to drink,” he said, although he’s keeping Peterborough’s favorite flavors a trade secret. Stadnik said he instituted his own bottle return policy because of his recycling-oriented customers. He’s not sure it saves him much money after he cleans and sterilizes the returned bottles, but connecting with customers is an important enough reason to continue, he said.

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