Last Call: House Passes, President Trump Signs $2.2 Trillion Stimulus Bill; February Shipments Decline

President Trump Signs CARES Act

The U.S. House of Representatives passed the $2.2 trillion stimulus package Friday afternoon and sent the bill to President Donald Trump, who signed the bill into law at 4 p.m. ET in the Oval Office.

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) includes financial support for large and small businesses and individuals. The bill allocates $350 billion to the U.S. Small Business Association (SBA) to provide loans up to $10 million per company to companies with fewer than 500 employees.

Of note for business owners are these provisions:

  • Emergency grants of $10,000 for small businesses that have applied for Economic Injury Disaster Loans from the Small Business Association (SBA);
  • Debt forgiveness of the portion of loan money that small business owners use for payroll, rent or mortgage, so along as the companies maintain their employees;
  • A retention tax credit for companies that keep workers on payroll during the pandemic while those businesses are completely or partially closed or businesses whose receipts have declined 50% or more compared to this quarter last year;
  • The postponement of employer payroll tax payments over the next two years;
  • Unemployment benefits to self-employed workers, independent contractors and those with limited work history;
  • And a temporary excise tax exemption for alcohol used to produce hand sanitizer.

This bill is the third relief package Congress has passed since the COVID-19 pandemic began. The first funded testing and research to fight the novel coronavirus; the second offered paid sick leave for employees who are sick or caring for a sick family member and guaranteed that COVID-19 testing would be covered in full by health insurance companies.

The Brewers Association (BA), which represents the nation’s small and independent brewers, addressed the bill in a newsletter to members and clarified details about the SBA loans. Under the CARES Act, the SBA is required to pay the principal, interest and related fees that are owed on the covered loans for a six-month period, which starts with the next payment due date.

“We hope this piece of federal legislation will be the first of many that will provide relief to the brewing community, and subsequently the economy,” BA president and CEO Bob Pease said in the email. “The Brewers Association will continue to actively advocate for additional relief specific to breweries in future bills.”

To educate members further on SBA loans, the BA has created an online resource center. The BA is also offering free temporary memberships during the COVID-19 pandemic; interested brewers can email info@brewersassociation.org for more information.

Tax Paid Shipments Decline in February

U.S. brewers shipped 11,350,000 barrels in February, a decline of 0.7% compared to February 2019, according to national trade group the Beer Institute, which shared unofficial estimates of domestic tax paid shipments tallied by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

February’s decline amounted to a decline of 81,000 barrels. Shipments have declined in the first two months of 2020, with shipments declined 0.6% in January.

So far in 2020, domestic brewers have shipped 23,675,000 barrels of product, a decline of 0.6% from the same period last year.

FTC and DOJ Recommend California Rejects Franchise Law Bill

The Federal Trade Commission and the U.S. Department of Justice’s Antitrust Division submitted a letter to the California State Assembly last week recommending that lawmakers reject a bill that would shore up franchise law enforcement for the state’s wholesalers, saying the measure would “harm competition.”

“A.B. 1541 is likely to diminish competition between California beer wholesalers and increase manufacturers’ costs of obtaining distribution services from wholesalers; these effects, in turn, are likely to raise the costs of beer distribution,” the FTC and DOJ wrote. “For these reasons, if enacted, the Bill would likely lead to higher beer prices for California consumers; and it may reduce the variety of beers available to California consumers and impede innovation in the beer industry overall.”

The FTC and DOJ added that the bill’s language puts the burden on brewers to end contracts with wholesalers or even to reject a new contract, but notes that “no similar restrictions would be placed on beer wholesalers.”

The agencies argued that the bill, if passed, would decrease competition between wholesalers and create unfair advantages between brewers.

“Its provisions may affect smaller brewers to a greater extent than larger brewers, because larger brewers may be in a better position to incur the legal and regulatory costs of termination, and may thus have a greater ability to exercise control over wholesalers,” the agencies wrote. “Established brands that advertise heavily, moreover, may not rely as much on wholesaler effort; and established brands that own or hold interests in wholesalers will be able to exercise such control directly, without the same administrative and legal burdens and exposure.”

Of particular concern for the agencies is the Reyes Beer Division’s acquisitions of middle-tier wholesalers in California — nine since June 2018 — and that Anheuser-Busch InBev, the world’s largest manufacturer of beer, owns beer wholesalers in the state.

“We believe that the bill is likely to impede competition in California beer distribution, to the detriment of California consumers. We see no countervailing consumer protection benefits in evidence,” the agencies wrote. “Hence, we urge the California Legislature to reject A.B. 1541, just as it has rejected similar proposals in the past.”

Constellation Brands’ Mexicali Brewery Hits Roadblock

Constellation Brands’ $1.4 billion brewery in Mexicali, Baja California, Mexico, was rejected during a local referendum last weekend, with 76.1% of voters opposing the project, according to Mexico News Daily. The project was first announced in January 2016 and was expected to be completed by FY2023.

Residents are concerned the brewery will use too much water, and the National Water Commission will not provide necessary permits to open the brewery, deputy interior minister for democratic development and social participation Diana Alvarez said.

In a statement, Constellation CEO Bill Newlands said the company would “continue working with local authorities, government officials and members of the community on next steps related to our brewery construction project in Mexicali and options elsewhere in Mexico.”

Cowen analyst Vivien Azer noted that the rejection of the Mexicali brewery raises several questions, including capacity constraints beyond fiscal year 2021 and cash outlays (as Constellation has already invested $900 million in the plant).

Judge Rejects Preliminary Injunction Against Molson Coor’ Vizzy Seltzer

A federal judge has denied a request for a preliminary injunction by Future Proof, the parent company of Brizzy Seltzer Cocktails, which had sought to block Molson Coors Beverage Company from launching the Vizzy Hard Seltzer line.

“The federal judge’s ruling confirms what we’ve always maintained, we have the right to launch and fully support Vizzy, a new, differentiated hard seltzer with antioxidant vitamin C from acerola superfruit that has retailers and distributors excited,” Molson Coors chief communications and corporate affairs officer Adam Collins said in a statement.

Future Proof, the Austin, Texas-based maker of Brizzy, filed the lawsuit against Molson Coors last month, claiming that Vizzy infringed on the trademark it has for Brizzy, which it filed for in November 2018.

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