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Last month, President Barack Obama signed a highly publicized Executive Order demanding a government-wide review of existing laws to remove regulations that stifle job creation and hamper America’s economy. Meanwhile, the Obama administration is considering a new alcohol labeling requirement that would devastate America’s small brewers, hampering their ability to grow and hire new employees—and even to continue operating.
Big producers of alcoholic beverages are supporting a proposal before the federal Tax and Trade Bureau (TTB) that would require manufacturers of alcoholic beverages to list the nutritional content of their products, such as calories, alcohol content, and carbohydrates.
Supporters of the proposal claim that it will help provide consumers with more information to make better choices, but the result will be an increase in production costs could force some brewers of craft beers to close their doors while depriving others of the funds they need to grow their business—and hire more workers. This will mean fewer varieties of beer, more expensive products, and fewer jobs throughout the entire nation, as every state is home to small breweries.
Larger breweries will have little problem absorbing the cost of the new rule. In addition to the economies of scale they enjoy from large-scale production, major brewers only produce a few limited beer lines. Having fewer products limits the cost of providing content analysis and labeling.
Craft brewers on the other hand, produce a wider variety of beers, and far fewer barrels of each one, so they will struggle with the cost of testing and labeling the nutritional contents of their many beers. In its 2008 comments on the TTB labeling requirement proposal, the Brewers Association, which represents more than 1,400 U.S. small brewers, estimated that the annual cost of compliance with the proposed labeling requirement could be as high as $18,000 for brewers producing less than 1,000 barrels a year and more than $350,000 for brewers making more than 100,000 barrels a year.
Consumer choice will suffer, as the makers of many popular beers will be affected. A small brewery, according to the Brewers Association, is one that produces fewer than 2 million barrels a year. To put this in perspective, Boston Beer Co., maker of Samuel Adams, produces about 1.8 million barrels a year. The next highest producer, Sierra Nevada of California, produces just over 700,000 barrels a year. Other well-known craft brewers produce substantially fewer barrels, including Louisiana’s Abita Brewing Co. in and Delaware’s Dogfish Head Brewery, both of which produce less than 100,000 barrels a year.
Craft brewers compete with the well-established large beer companies by putting their money and staff time into high-quality ingredients and boots-on-the ground marketing. The added costs from the labeling requirement will reduce the number and variety of beers that small brewers can bring to the market, according to the Brewers Association.
The added costs may also force small brewers to reduce costs elsewhere, such as by decreasing their output, firing staff, or exiting certain markets entirely. For some small brewers living on the thinnest profit margins, the new requirements may sound the death knell for their business. Consumers will lose out by having fewer options. State and local economies will also lose when jobs and businesses disappear because of the increased regulatory costs.
Over the last two decades, the United States has seen an explosion in the craft beer movement. Thousands of new small breweries have opened, creating thousands of new jobs and a vast multitude of beers to suit every particular taste, including those who desire a healthier beer, environmentally friendly beer, or for those who are allergic to certain ingredients. All of this has been in response to consumer demand. By the same token, if consumers want to know the calorie and carbohydrate content of their beers they will demand it and savvy brewers will respond.
As small brewers thrive, they provide states with tax revenue and jobs. Regulations that drive up the cost of production could bring that to a halt. If President Obama truly wants to reduce the burden of government and create an environment where small businesses can grow, he ought to urge the TTB to get out of the way and let consumers decide whether or not they want nutritional labeling on their beer.