Increased aluminum and steel prices continue to hurt beer manufacturers, and equalization efforts by spirits companies threaten the beer industry’s stranglehold of retail cold boxes.
Those themes persisted throughout the Beer Institute’s (BI) annual membership meeting this week in Washington, D.C. Industry leaders from both large and small breweries met to hammer out a common agenda and lobby congressional members during an especially busy week in the nation’s capital.
BI president and CEO Jim McGreevy opened the meeting calling for a rollback of the aluminum and steel tariffs imposed by then-President Donald Trump in March 2018. The tariffs have added $850 million in costs for the beverage industry, he said. McGreevy also urged support of the Aluminum Pricing Examination (APEX) Act, which would increase the federal government’s regulatory authority of groups overseeing aluminum premium benchmarking, including the “Midwest Premium,” and bring “aluminum premiums back in line with market fundamentals.”
“The current system allows a few market players to benchmark aluminum premiums, not on what companies actually paid for the aluminum, but on the price companies have offered to pay for aluminum,” he said. “This has created a system where the premium price has strayed far from market fundamentals.”
The Midwest Premium was also the target of Molson Coors president and CEO Gavin Hattersley, who also serves as chairman of the BI. Hattersley described the Midwest Premium as a “logistics fee that’s added to the cost of every single can and cost to convert that aluminum into a can.”
Hattersley ticked off several issues related to the Midwest Premium:
- The premium has tripled over the last 12 months, “defying every single inflationary measure in the market;”
- The increases have outpaced the increases in the cost of aluminum over any metric in the market over the last 12 months;
- Half of the premium paid on aluminum is supposed to go to the tariffs, which Hattersley called “most troubling.”
“Every single person in this room is paying a tariff rate for every single ounce of aluminum we use, which might make sense if all the aluminum was imported, but it isn’t,” he said. “75% of the aluminum used for the production of aluminum cans is recycled. It never comes into the shores of the United States. So what are we paying for?”
Hattersley described the issue as “staggering,” noting that only $150 million of the $1 billion paid has gone toward tariffs.
“Two things are clear: We shouldn’t be paying for money, and no one knows where it’s going,” he added. “I’ll leave it up to the lawyers to evaluate whether that means that something deceptive or fraudulent is going on. But the bottom line is something’s off. And the government has actually admitted and confirmed that something’s off.”
Hattersley pointed to the Department of Homeland Security’s comments to Congress in March that companies such as Molson Coors were being charged tariffs on aluminum that was supposed to be exempt.
“Now Congress is asking more questions,” he said. “In June, Congress asked the Secretary of Commerce to investigate, and she confirmed that she would. It’s an important start to a serious problem for us.”
Equivalence the Biggest Threat to US Beer Industry
McGreevy also stressed the differences between beer and spirits and the urgency behind beating back attempts by the spirits industry to achieve equalization between the tax rates of beer and spirits.
“This encroachment on beer is the single biggest threat facing the U.S. beer industry today, and we must tackle it head on,” he said.
McGreevy added that whether the beverages are called ready-to-drink offerings, canned cocktails or alcopops, these drinks serve “as a gateway to equalize their taxes, move into more markets and further encroach on beer’s occasions.”
“So let’s be clear, these drinks are liquor, and they are a path to introducing consumers to the liquor industry’s more profitable, higher ABV products,” he said. “As an industry we must unite, like we did to fight for lower excise taxes, if we were to continue to protect our uniqueness.”
Hattersley backed up those comments saying “there’s no equivalence between hard liquor and a beer” and “there shouldn’t be any equivalency written into the tax code.”
Tax Credit For Spoiled Beer
McGreevy also called for support of a tax credit for unmerchantable beer during the pandemic. The BI, the National Beer Wholesalers Association, and the Brewers Association have worked with congressional members to introduce the Hospitality and Commerce Jobs Recovery Act of 2021, which McGreevy said could be passed in the coming weeks.
Bill Hackett, Eric Shepard Awarded Jeff Becker Service Award
The Beer Institute handed out two Becker Beer Industry Service Awards to two recipients — now-retired Constellation Brands chairman of beer Bill Hackett and Eric Shepard, executive editor of Beer Marketer’s Insights — during its annual membership meeting held Monday in Washington, D.C.
The Jeff Becker award is given to industry members for their accomplishments throughout their careers.
Hackett, who retired from Constellation in March 2019, said he was “really honored and humbled by the recognition.”
Shepard, who retired in August, was honored for his coverage of the beer industry for 44 years.