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‘Small brewery’ redefined; Sam Adams will remain one

Submitted by on January 3, 2011 – 7:53 pmNo Comment

Small brewery redefinedThe Brewers Association has changed its definition of a “small brewery” from one that produces up to 2 million barrels (bbl) per year to an upper threshold of 6 million bbl per year. The most immediate effect of the new definition is that it will help the nation’s largest craft brewer maintain its status as it is poised to pass the old mark of 2 million bbl.

In a news release, the not-for-profit Boulder, Colorado-based association said it made the change for several reasons, one being a matter of relative size compared with the overall industry.

“Thirty-four years have passed since the original small brewers tax differential defined small brewers as producing less than 2 million barrels,” said Nick Matt, chair of the Brewers Association board of directors and chairman and CEO of F.X. Matt Brewing Company. “A lot has changed since 1976. The largest brewer in the U.S. has grown from 45 million barrels to 300 million barrels of global beer production.”

What does this mean for craft beer consumers? Seemingly little. It’s a change in definition for the BA’s bylaws and not unexpected. Whether a craft brewery produces 100 bbl a year or a million, it’s still the product that matters. As long as the brewer makes the effort to produce beer of high enough quality, its customer base will grow to the brewery’s capacity.

It’s interesting to note that the BA’s statement discussed the fact that some craft breweries are approaching the 2 million bbl a year mark, which would have stripped them from the ranks of “small” breweries under the old definition:

The industry’s largest craft brewer, The Boston Beer Company, brewer of Sam Adams brands, is poised to become the first craft brewer to surpass 2 million barrels of traditional beer within the next few years. Loss of The Boston Beer Company’s production in craft brewing industry statistics would inaccurately reflect on the craft brewing industry’s market share.

“Rather than removing members due to their success, the craft brewing industry should be celebrating our growth,” Matt said in the statement.

In the publicly traded Boston Beer Company’s (NYSE: SAM) 2009 annual report to stockholders, the company wrote that “For the first time, we surpassed the two million barrel mark, which includes Samuel Adams beers and our allied brands Twisted Tea, Longshot American Homebrew Contest beers, and Hardcore Cider.”

Combined, these “core products,” accounted for 2.02 million bbl in 2009. The company also reported production of 201,000 bbl of non-core products, defined as “products brewed or packaged at the Cincinnati and Pennsylvania Breweries under contract arrangements for third parties.”

The BA’s definition of “Craft Brewer” says that “Flavored malt beverages are not considered beer for purposes of this definition.”

An initial review of the 2009 stockholders report did not indicate that Boston Beer Company separated its flavored malt beverage production from its core products. But with a predicted 12 percent increase in shipments in 2010, it’s not inconceivable that Boston Beer will cross the 2 million bbl threshold in its beer products in 2011, if it did not already do so in 2010.

Boston Beer Company owner and founder Jim Koch is an at-large member of the BA board of directors.

You can read the entire Brewers Association press release here.

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