The Beer World's Unlikely Alliance

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In the new film Beer Wars, the nation's multitude of small craft brewers are painted as a collective David facing off against the Goliath of Coors, Anheuser-Busch, and Miller. But while Dogfish Head and Budweiser aren't about to stop competing for market share, when it comes to policy, the two sides of the beer world are surprisingly cozy.

Earlier this year the Beer Institute, which represents a range of brewers but is dominated by the industry's largest players, teamed up with the Brewers Association, which represents craft breweries, to form a unified front on a range of federal tax issues.

"The Brewers Association feels it is of utmost importance during these critical times that the beer industry present a united and coordinated effort on the federal level," wrote Charlie Papazian, president of the Brewers Association, in a recent letter to members. "This is why we have teamed with the Beer Institute to help us represent our constituencies."

When it comes to alcohol regulation and other policy issues, the beer world is realizing that Washington doesn't differentiate between Coors and Clipper City.

In February the two groups coordinated the introduction of the Brewers Excise and Economic Relief Act (that's right, the BEER Act), which would return federal excise taxes on beer to pre-1991 levels, from $18 to $9. Interestingly, the Beer Institute supports an additional measure in the bill--which has 6 co-sponsors for the Senate version and 190 for the House version--to reduce taxes even further for small brewers.

For now, at least, it seems the big brewers see the craft sector as an overall boon to the industry--too small to threaten the big guys' market share, but high-profile enough to elevate beer's status among higher-income consumers.

"The small brewers are a great addition to the industry," said Jeff Becker, president of the Beer Institute.

But it's not just a matter of a rising tide lifting all boats; when it comes to alcohol regulation and other policy issues, the beer world is realizing that Washington doesn't differentiate between Coors and Clipper City. The biggest issue bringing small and large together is a proposal to fund health care reform with an increase in the federal excise tax on beer. Currently different alcoholic beverages are taxed at different rates; under the new plan, beverages would be taxed at $16 per proof-gallon (a proof-gallon is equivalent to a spirit that is 50 percent alcohol, or 100 proof; an 80-proof Bourbon, for example, would equal .8 proof-gallons per gallon). That means more than tripling the current per-gallon excise tax on beer, according to the Beer Institute.

Brewers from across the spectrum, but particularly lower-margin, higher-price craft beers, have been hit hard by the drop in consumer spending and a dramatic up tick in material costs. Not surprisingly, the prospect of higher taxes was Topic A at last month's SAVOR Craft Beer Festival, here in Washington. To hear brewers talk about it, the excise plan would zero out profits at even the most successful outfits and drive all but the most aggressive out of business (small brewers argue they would be hit especially hard because their beers tend to have much higher alcohol contents than those produced by the major breweries).

That prospect has driven an unprecedented, and unexpected, level of cooperation between large and small breweries. Through the Beer Institute and the Brewers Association, they have lobbied Congressmen, coordinated brewer visits to Washington, and penned joint letters to the Hill; the Brewers Association even held a reception for congressmen and staffers last week.

"The Beer Institute is telling their story, and we are telling ours, and the hope is that Congress will listen," said Papazian.

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Clay Risen is an editor at The New York Times, and is the author of A Nation on Fire: America in the Wake of the King Assassination. He has written for The New Republic, Smithsonian, and The New York Times Sunday Magazine.

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