Hundreds of brewers flocked to Capitol Hill in Washington D.C. last month in an effort to update the federal beer excise tax. Although most of the brewers were in town for the Craft Brewers Conference, they didn’t waste an opportunity to voice their opinions to legislators. Bill Covaleski, brewmaster and president of Victory Brewing Company, was one of those brewers at The Hill.
“American craft beer is in the hearts and minds of pretty much everyone here in the capital,” Covaleski said, as seen in the video above.
The current federal beer excise tax, which hasn’t been updated since 1976 — when there were about 30 brewers operating in the U.S., according to the Brewers Association (BA) — charges brewers $7 per barrel for the first 60,000 barrels. The Small BREW Act proposes to cut that charge in half and would add a new tax of $16 per barrel on beer production between 60,001 and 2 million barrels. The BA approximates that the bill would support more than 108,000 full- and part-time jobs, generate more than $3 billion in wages and pay more than $2.3 billion in business, personal and consumption taxes.
Covaleski said that he approves of the bill’s intent because the tax adjustment would free up capital for growing breweries. He said that while well-established breweries can ease the burden of the tax by drawing financial support elsewhere, this conventional process isn’t as easy for breweries with three-to-five-year track records that need new equipment and other means for expansion.
“Keeping the opportunities for entrepreneurs to enliven this marketplace with new and exciting products is not an obligation, it’s an opportunity,” he said.
The push for updated legislation comes during a transitional period for Victory Brewing. Covaleski said that in 2011, he felt unsure of his brewery’s direction. He noticed trends indicating that Victory’s wholesale growth was dipping from the mid-20s, only to experience 41 percent wholesale growth in that pivotal year.
“2011 changed our strategy tremendously and put us on the hot seat in order to build more capacity or start saying no to our wholesalers,” Covaleski sadi. “And we certainly wanted to make more beer.”
To meet this demand, Victory built a second brewery in Parkesburg, Pa., 17 miles west of its original location in Downingtown. The Downingtown brewery can produce about 105,000 barrels per year (it produced 93,000 in 2012). Meanwhile the Parkesburg location, a 212 square-foot building on 42 acres of land, can initially produce 225,000 barrels per year. Covaleski said that he expects to have test brews there in July and to be rolling out beer in August.
This rapid growth rate leads Covaleski to believe that Victory will soon enter new markets; possibly Arizona, New Mexico, Missouri and Alabama. He also believes that there’s more opportunity in exporting Victory beer.
While Victory already exports bottles to Singapore and draft to Japan, Covaleski said that he’s visited China three times in the past two years and conducted focus groups there. He said that he could envision exporting to Germany, Italy and the Netherlands.
“From all of the observations we’ve had,” he said, “we feel that American craft beer has a great future abroad.”