Brewbound Podcast: The Beer Institute’s Jim McGreevy Discusses Priorities for the Trade Org.

[00:00:00] Jessica Infante: Heading to CBC? Kick things off the day before at Brewbound's meetup at Love City Brewing in Philly, Sunday, April 19th from 5 to 7 p.m. Connect The Beer industry leaders, grab a drink, and catch up with Check Brewbound team. It's free to attend and walking distance from the convention center. Head to Brewbound.com slash lovecity.rsvp. And don't forget to catch Check Brewbound team at booth 956 during CBC.

[00:00:39] Justin Kendall: Hey everyone, welcome to a special edition of Check Brewbound Podcast. My name is Justin Kendall, and I am the editor of Brewbound. And I'm joined as always by my co-host in all things Brewbound, Jessica Infante. Jess, are you ready to get back on the road?

[00:00:53] Jessica Infante: I am really ready to get back on the road, and I'm excited to get to DC. It's one of my favorite cities.

[00:00:57] Justin Kendall: Well, by the time everyone's listening to this, we will absolutely be in Washington, DC, knock on wood, and we'll be in the midst of The Beer Institute's annual meeting. And joining us today is a special guest, Beer Institute president and CEO, Jim McGreevy. Jim, how are you doing?

[00:01:14] Jim McGreevy: How are you, Justin? Thanks for having me. Hi, Jess.

[00:01:17] Justin Kendall: We're psyched to have you here and we're psyched to be at The Beer Institute meeting. So we're in two places at once while we're doing all of this. The Beer Institute is a trade organization that represents all brewers, unlike The Beer Association, which is more specified with the small and independent craft brewers. Maybe for the folks who are unfamiliar with The Beer Institute's work, could you give them a quick overview of who you represent and what you all do?

[00:01:46] Jim McGreevy: Yeah, well, thank you very much. Thanks for the opportunity to talk to you guys. As you say, we'll see you here just in a few days at The Beer Institute's annual meeting. For those of you that don't know who are listening, The Beer Institute is one of the oldest trade associations in Washington, D.C. We were founded in 1862 as the U.S. Brewers Association. And in 1862, the Civil War began, and the U.S. government put the first federal excise tax on beer in place to help fund the Civil War. That excise tax has been around every day since its imposition in 1862. But at the time, The Beer of the time were largely German immigrants and first-generation Americans to the country. They wanted to show their country that they cared about winning the Civil War and preserving the nation. So when the excise tax was put into place, they created the U.S. Brewers Association to help collect the tax. And the organization documents for the U.S. Brewers Association are written in German and English. And it says right in the documents, the organization's founding is to help in the, quote, orderly collection of the tax. And The Beer Institute came to be about 31, 32 years ago when it was fashionable, I guess, in D.C. name your trade association and institute. So there are Beer Institute still around. The Beer Institute, a number of them in food and beverage. The Beer Institute, Can Manufacturers Institute, just to name two. But we became The Beer Institute, and we are a trade association for beer brewers and suppliers to the industry. So from the big brewers to smaller brewers, we're engaged in the issues particularly the federal issues in Washington, D.C. So I think we've had a particular emphasis, probably unlike NBWA and BA, on the federal issues in particular. So very involved in the Craft Beverage Modernization Act and all of its precursors, very involved in the issues around aluminum procurement, aluminum costs, aluminum supply, which has been a big issue for brewers here for the last at least 10 years and probably longer than that. Certainly making sure that we're watching what's happening and having a voice around what's happening on the regulatory issues to think about last year, their dietary guidelines, for example. We are mainly focused on Washington, D.C. politics, but we're also there to help our brewers with any policy issue they have, particularly from a public affairs perspective. So, like I said, one of the oldest trade associations in Washington. We are just down the street here from the U.S. Capitol building. We have a great bar in our office that we, at least before COVID, used to welcome many members of Congress too, so that they can understand who The Beer industry is today. And it's just a great place to, great place to work, great industry to represent.

[00:04:41] Jessica Infante: Jim, I remember you and I spoke last summer and you told me about the founding of The Beer Institute dating all the way back to the Civil War. And I thought that was so interesting. And over dinner that night, I told my husband, who's a high school history teacher, like, did you know that this was how The Beer Institute came to be? And he was like, yes, Jessica, everybody knows that that's how excise taxes were started during the Civil War. I was like, sir, not everyone knows that.

[00:05:03] Jim McGreevy: I guess in terms of excise taxes, The Beer industry was able to get—the government was able to get along without them for a few years into the nation's history before they needed to impose it.

[00:05:16] Jessica Infante: So he does a survey of his students every year, he teaches a lot of class, and this week asked what they thought about raising taxes on alcohol, and all of them said no, so.

[00:05:26] Jim McGreevy: There you go. Yeah. Oh, very good.

[00:05:28] Jessica Infante: And none of them wanted the drinking age to be raised, or lowered, which I thought was interesting.

[00:05:33] Jim McGreevy: I think many in beer agree with that, actually.

[00:05:35] Jessica Infante: Yeah. Jim, we've had a wild couple of years in this industry and you guys certainly have your work cut out for you. So what would you say is the biggest issue facing Beer Institute members right now? And how do you balance priorities when everything feels urgent?

[00:05:51] Jim McGreevy: Well, you know, it's interesting when you think about the biggest issue or biggest threat facing the industry, I think, by and large, it would be Spirit's desire to equalize their taxes and market access The Beer. You know, Jess and Justin and others listening know The Beer is The Beer moderation, it is significantly lower in ABV than spirits products are as sectors of the industry. But we just know that it's really in the DNA of the spirits industry to want parity The Beer and wine. And we're seeing that more and more in the state legislatures where they're positing their canned cocktails as the same as beer, both for lower taxes and for market access. This issue of equivalence sort of waxes and wanes, it has peaks, it has valleys. I think we're headed for a sort of a peak in the sort of the battle over equalization between spirits and beer. So I think that's the number one issue facing The Beer industry right now, whether you're a small brewer or a large brewer or a distributor, you have to be concerned that spirits thinks it deserves the same treatment as beer.

[00:07:04] Justin Kendall: What are the challenges in conveying this to a state legislator, for example, when you've got a product that is similar in ABV, similar in calories, similar almost in every facet except for the way that it's produced, whether it's malt versus spirit?

[00:07:25] Jim McGreevy: I think you have to remind state legislators and policymakers who beer is and who spirits are. The aggregate ABV of beer in 2020 was 4.6 percent. The aggregate ABV of spirits was closer to 39 percent. they are in the business of making high ABV products, and we are not. So I think you have to remind policymakers of the differences between who the sectors of the industry are. It's easy for them to say that all alcohol is the same. All alcohol is not the same. Policymakers, for many years, particularly for the last 80 or more in the United States, and policymakers throughout the world have always recognized the lower ABV nature of beer. They've recognized the fact that alcohol is cheap and cheaper to make The Beer. So the economies of, market economies of the sectors are different and treated them differently from a tax and market perspective. So I think it's the job of all the advocates in beer and everybody else to remind people who who make the laws in this country and elsewhere why we're different, and frankly, why beer is better. The occasions around beer are different. We celebrate beer in a different way than we celebrate spirits. We have a much greater impact on downstream suppliers. Our connection to agriculture in particular is significant, both from a jobs perspective and a cultural perspective. So I think it's incumbent on folks in beer to constantly tell them why we're different and why we're better.

[00:09:05] Justin Kendall: So we've seen a number of B.I. members dabble and spirits based products recently even though you've got a lot of players doing that there hasn't really been a softening in that stance toward equalization.

[00:09:20] Jim McGreevy: No, no, not at all. You guys report on this every day, that the industry is evolving. The alcohol industry generally is evolving. The Beer sector is evolving. More and more brewers, no matter what the size, are getting involved in these beyond beer products, right? And whether that's in the spirits segment, whether that's non-alcohol, just to name two. Companies want to be where the consumer is. But that doesn't mean the policy that has been in place for generations based on sound logic and the differences in the industry need to change. I don't think you're seeing any of our major members in The Beer Institute or other members of The Beer Institute changing their opinions about the need for beer to be seen and treated differently by policymakers.

[00:10:11] Jessica Infante: So what harm could befall BI members if spirits makers are taxed equally?

[00:10:17] Jim McGreevy: I think the harm would be right in the cold box, quite frankly. You'd see a change in what is offered potentially to consumers. That could hurt local craft in particular, but I think it just hurts The Beer industry generally. So, you know, spirits are cheaper to make. they're able to deploy it in a way, if they have lower taxes and more market access, that would swamp beer potentially. So I think that's a major concern. But I think you have to focus on the policy issues in particular. Heck, there's a lot of competition out there, and that competition will continue. But the policy creates changes to the marketplace that can be harmful. So I think you really have to focus on why we have the tax structure we have in alcohol, why we have the market structure we have in alcohol. And it's incumbent on us, as I said, to make sure that policymakers understand why that system has been in place for years and should continue to be in place.

[00:11:17] Jessica Infante: So it sounds like to me there's two things here. There's the tax implications, but there's the market access.

[00:11:23] Jim McGreevy: I think you're seeing spirits in the state legislatures over the course of the last couple of sessions focused primarily on some of the tax reduction proposals. But we saw in Pennsylvania just there near the end of the legislative session in Pennsylvania in the spring, a discussion around market access. I think it's, again, incumbent on us to be prepared to fight whatever the issue is, wherever it comes. And I see a connection or an agreement or an alignment there amongst brewers of all sizes, amongst distributors, that this is a major threat to the industry from a policy perspective that needs to be dealt with.

[00:12:04] Jessica Infante: So how does the BI view differentiation in beverage alcohol?

[00:12:09] Jim McGreevy: As I said, beer is lower from an aggregate ABV standpoint. We have an impact on the economy that's different from spirits and from wine. We see beer as different and better from a policy perspective in particular and from a marketplace perspective than spirits or wine. So when we talk about differentiation, we talk about the significant economic impact The Beer has on economies all over the world, particularly state and local economies in the United States. You know, just thinking of the state of New Jersey, 134 breweries in that state. And that's probably a state that's sort of a little bit behind in terms of the number of breweries they have, but still a significant presence of craft breweries there in the state. We talk about the obviously the lower ABV of our products, which allows more session ability and more opportunities for people to have occasions where beer is present in the occasion the whole time. Heck, you even see in some places where, in some countries like in Russia, where the government has promoted through public policy, the consumption of beer, a decline in the harmful use of alcohol. Listen, across the board, beer is better and beer is different than spirits and wine.

[00:13:32] Justin Kendall: So let's switch gears a little bit and talk a little bit about the tariffs, the 232 tariffs that have been a big issue for The Beer Institute in the past. We saw them come into effect under the Trump administration. It doesn't seem like there's been much movement on that with the Biden administration. What sense are you getting from the White House on maybe some relief in that regard?

[00:13:56] Jim McGreevy: Well, you're going to hear Justin and Jess on Monday from Wendy Cutler, who is a former diplomat in the U.S. Commerce Department and in the U.S. Trade Representative's office, and she's now the vice president of the Asia Society Policy Institute, an expert on trade and expert on Asia in particular. And she's going to tell you that tariffs are easy to put in place and very difficult to get rid of. Once the tariff is in place, it creates stakeholders who want to see it continue. So I think what we're seeing in the Biden administration is a I guess a considered review of what's happening and what the pros and cons have been related to the tariffs generally and related to the 232 aluminum tariffs in particular. So I guess it's probably not surprising that President Biden has not lifted the 232 tariffs, although it's disappointing at this point, 10 months or so into his administration. We're hoping that this review that they're doing of trade in general and tariffs in particular gets them to understand that at least for downstream users, Really, for everyone related to the tariffs, these 232 tariffs have been a failure. There was a hearing earlier this week, a confirmation hearing in Washington for one of the Commerce Department nominees to go to work in the Commerce Department, and he described the tariffs that we are dealing with these 232 tariffs, which have a particular connection to national security. They're really only supposed to be used to deal with issues of national security. And we've been saying for a long time, you know, beer has nothing to do with national security. That nominee to the Biden Commerce Department said the 232 tariffs should, quote, only be used for the strictest security means, end quote. And we agree with that. So, you know, here's one nominee who understands publicly how the 232s tariff should be used. We think that there are others in the administration who agree with that. But I do think that there's a sort of an inbred inertia around getting rid of tariffs once they're in place. And we're working hard with lots of others. make sure that they understand the downstream user's opinion about why these tariffs should be repealed. So we're hopeful for repeal. The tariffs also exacerbated the continuing issues around the cost and supply of aluminum. I think at this moment, aluminum is at its highest cost ever for beer brewers and all other users of aluminum. So we're focused on the repeal of the tariffs, but we're also focused through our Aluminum Pricing Examination Act on trying to shed a little more light and give regulators a little more opportunity to understand what's going on in the benchmarking and the pricing of aluminum. So the tariffs need to go. We need to create some better market fundamentals and some stronger government oversight on the benchmarking of aluminum. So we're really, you know, when you talk about the biggest issues facing The Beer industry today, equivalence is a big one, probably the biggest, but getting our arms around the cost and supply of aluminum is a critical issue for all the advocates in beer.

[00:17:20] Jessica Infante: Jim, what does your vision for the BI look like moving forward?

[00:17:24] Jim McGreevy: I'd like to see the BI be the primary trade association for packaged brewers in the United States. We represent a lot of domestic companies and beer importers, but I'd like to see a lot more folks joining our efforts here in Washington, D.C. and around the country. So really, my vision for the organization is to make this as strong an organization as possible with as many members as possible. with a particular focus on the issues that package brewers have from a policy perspective. I also want to see us having the strongest voice possible in Washington, D.C. We just did a strategic planning review last year and implemented our new strategic plan This is the first year of a three-year plan, and really it's around making The Beer Institute the voice of beer in Washington, D.C., protecting our members' freedom to operate, making our research. We have a new research director who I think you guys know, Danelle Cosmo, who's had a wonderful career at Nielsen before coming over to the BI. We want to make our research component the strongest in the industry. We already have one of the most critical data sets in the STR program. We want to make sure that that continues to be a strong, provide strong insights to the folks involved in that program. But then there's also so much more that we think DINEL can do to make our research components particularly important. So we're looking to up our game here, be a stronger voice, have more of a role in helping our members with air cover in the states where they have issues, strengthening our research capacities, and then fighting equivalence. There is no, in my view, no greater policy issue The Beer can be working on, both from The Beer and soup perspective, but really everybody collectively in beer working together on pushing back on spirits.

[00:19:18] Justin Kendall: Well, Jim, it's been awesome having you on. We're looking forward to seeing you in D.C., and thanks for the time, man.

[00:19:25] Jim McGreevy: Yes, indeed, Justin. Thank you so much. This is great. Great to talk to you guys. Great to look forward to seeing you in a few days in Washington, D.C. You guys and everyone else are coming to D.C. in a very consequential week. I think we're going to have the vote on the infrastructure bill, a vote on the reconciliation bill, a vote on the debt ceiling. Next week will be a pretty important week for the Biden administration and for all Americans. So we're glad that you're coming and look forward to having a beer with you.

[00:19:53] Justin Kendall: It's going to be an exciting time to be in D.C. We're looking forward to it, too. And that's our show for this week. Thanks for listening. Thanks to our AD team. We will be back in a couple of weeks.