Purser Talks Politics, Issues

FILED MARCH 27, 2013

March 27, 2013

Dear Client:

At a pub in Washington DC, your editor got a chance to sit down with NBWA chief Craig Purser to get a primer on the upcoming NBWA Legislative Conference and talks about a few issues. Here is an excerpt of our talk.

BBD: So Craig, given the political climate, is it really as bad in DC as everyone says it is?

CRAIG PURSER: Oh, Harry you know how it is. Things are never as good as your think they are and when things are bad, it's never as bad as you think it is either. But when it comes to the current environment and Congress working together to positively deal with the big issues of the day, I have to say, it's been pretty bad. I mean we had the end of the year "fiscal cliff" and the expiration of the Bush tax cuts. There was a lot of talk that maybe some "grand bargain" could be reached to deal with the tax issues and spending. Many Americans saw the Bush rate cuts made permanent, but certainly not everyone. Yet nothing was done to address the very real issues around long-term spending. But you know, there are glimmers of hope.

BBD: Like what?

CAP: Late last week the House voted to keep the government open through September and for the first time in four years, the Senate passed a budget. Now the Senate budget is substantially different than the House budget, and it's a long shot that the two chambers will find common ground. Beer distributors will get to hear more about that at the NBWA Legislative Conference in a few weeks from House Budget Committee Chairman Paul Ryan.

BBD: I saw you have Ryan speaking, but back to the political environment. It seems like our lawmakers divided by such huge extremes. Is any progress being made?

CAP: Maybe. You crawl before you walk, walk before you run. But make no mistake about it, the game has changed. The end of the year rate expiration and the game of chicken played between Congress and the Administration resulted in a tax increase for many small business owners and operators like beer distributors. The tax increase is the first we've faced in 20 years, and some in Congress and the Administration are clear that they want more. Add to that the expiration of the payroll tax holiday for all working Americans and most households are dealing with less take home pay every two weeks...not because of the economy, but because of tax policy decisions made in Washington. With a deeply divided Congress still needing to address long-term spending and revenue concerns and you have talk of comprehensive tax reform in what is a very uncertain environment.

BBD: So what does this mean for beer distributors?

CAP: It means we have to work harder than ever telling our story to a Congress which includes over 90 new members. I've been at NBWA for 16 years and up until now, we really haven't had to worry about an increase in taxes. We've done a lot of good things to build defenses on the tax issues that matter most to businesses that are structured the way most beer distributors are, but we have not had a battle royal regarding additional revenues from taxes on small businesses. There are folks in this town who would like to take advantage of this environment to focus solely on so-called corporate tax reform. Many have tossed around the idea of a rate cut for public companies that sounds great until you examine how it would be paid for. We have to ensure Congress knows that any tax reform discussions must include maintaining the treatment used by closely held small businesses and that any comprehensive tax reform must include the millions of small businesses like beer distributors working week in and week out to provide quality jobs for 130,000 Americans.

BBD: Yeah, I wanted to ask you about that. Tell me about the NBWA's new economic impact report.

CAP: For the first time in recent years, NBWA commissioned a report that concentrates on the economic contributions of the distribution tier. The number of beer distributor jobs is what it is because we did a better, more thorough job of counting and because we really drilled down into the data to look for every type of beer distributor out there. It's a comprehensive look inside the commercial and economic activities of beer distributors across the country, and we've been really pleased that it's received media coverage in just about every state. Something else to point out -- TTB shows that the largest number of permits it regulates is at the wholesale level, and it is getting larger every day. There is actually a link we've had on our website for several years on how to become a beer distributor. [Ed. Note: Check it here: http://nbwa.org/industry-tech/how-to-become-a-beer-distributor ]. Maybe some of these new entrants are actually using it. As you know, for nearly a decade now, we have partnered with the Beer Institute for what is a comprehensive, broad brush look at the beer industry as a whole. Grain growers, can and glass manufacturers, imports, domestics, craft, distributors and retailers at all levels are all compiled into a jobs and economic report called Beer Serves America. We were thrilled that NBWA's data was able to match up with BSA this year.

BBD: The BA released some very powerful numbers last week about the growth of craft beer. We and others have been predicting that craft would be a 10 share in the next few years and the fact is they have now pierced the 10% mark of dollar sales. How do you think distributors will react to that?

CAP: Distributors are thrilled of course, because these numbers continue to accentuate the great excitement that craft beer is bringing to the market and that consumers are craving. Look Harry, there is no doubt we are witnessing history, and many of the leading craft brewers today will continue their growth. Some may be large brewers of tomorrow. These brewers should be celebrated, and we should also celebrate that much of this success has occurred because of a viable independent, three-tier distribution system and an effective state-based regulatory system that works to level the playing field between all market participants.

BBD: I agree. Brewers wouldn't be as successful without independent distributors.

CAP: That's right. And I want to continue to celebrate the current success all brewers including these local, American emerging brewers. Bill Butcher of Port City Brewing in Alexandria, Virginia, and the guys at DC Brau will get props this week at CBC in DC because they make great beer and they are local.

[Ed. Note: Butcher penned an op-ed in Roll Call yesterday. Check it here: http://www.rollcall.com/news/butcher_a_growing_economy_is_brewing-223427-1.html?pos=oopih ]

BBD: So I guess I get to see you again next month in DC for the NBWA Legislative Conference. What is on tap this year's fly-in?

CAP: First of all, members have told us they like to economize travel. So on Sunday afternoon we have the Media & Messaging seminar for those who want to learn how they can more effectively use the media and share best practices in that area. We will have the annual How to be a Beer Distributor Advocate session for first time and repeat attendees who want to learn how to lobby - or do a little brushing up before heading to the Hill. And on Wednesday morning, we will have a Insurance Program Safety Summit for HR personnel and operations professionals. We are seeing folks bring members of their teams that haven't always come to DC so they can learn and Congress can hear from them about this great industry. In addition to Paul Ryan, we are going to hear from a couple of leaders in the states. John Bruning of Nebraska and Roy Cooper of North Carolina are both past presidents of the National Association of Attorneys General and have been on the front lines when it comes to defending state alcohol statutes. We will also hear first hand from industry leaders including Beer Institute President Joe McClain, Brewers Association President Charlie Papazian and National Association of Beverage Importers President Bill Earle. And we will celebrate the association's 75th Anniversary in style.

BBD: Where's the party?

CAP: Members of Congress, congressional staff,and Washington insiders will join us for an event we are calling CHEERS: The World of Beer Delivered by America's Beer Distributors. This is going to be on Monday night during the Legislative Conference. We are so excited that we are able to host this event in the historic Great Hall of the Library of Congress. Harry, I have to tell you that if you haven't ever been inside this place, it really will impress you. The CHEERS event will highlight the remarkable success of the beer industry in America by showcasing the unparalleled choice and variety in the U.S. marketplace. And if that isn't reason enough to celebrate, we'll be raising a glass in honor of NBWA's 75th anniversary Washington style.

BBD: Sounds great. Thanks.


BBD has learned that three of the bills pushing for big changes in Texas beer laws - Senate Bills 639 (making code Granholm-proof), 515 (brewpub bill) and 518 (allowing craft brewers to sell beer on-premises) - passed the Texas Senate 31 to 0 on Monday. They are headed to the House.

The other two Senate bills - SB 516 and 517 (Granholm-proofs self distribution law) - was heard on the Senate floor yesterday and also passed. "We fully anticipate those passing and going to the House as well this week," Rick Donley, president of the Texas Beer Alliance, told BBD.

The Senate bills must now go to the House "where there has already been a hearing on subject matters. We anticipate the House committee reporting them out pretty quickly" to the governor, said Rick. It's expected that SBs 516 and 517 will share a similar fate.

You will recall that if these bills pass, we can expect the following: (1) brewpubs who give up their mixed beverage permit will gain the ability to self-distribute or go through distributors; (2) Texas craft brewers will be able to serve up to 5,000 barrels a year of beer for on-site consumption; (3) codified marketing practices on reachback pricing will replace an earlier provision for uniform FOB pricing; (4) the bills will include language that says it's in the interest of the state to protect the independence of the members of the three-tier, but allow contractual agreements; (5) and finally, it makes it illegal for breweries to receive payment for exchange of distribution rights. (You can read more background in BBD 03-13-13 and BBD 03-12-13).


MILLERCOORS HAS LAUNCHED A NEW BLOG called Behind the Beer, which seeks to "put a human face on MillerCoors. It'll give readers a behind-the-scenes look at the company and its initiatives, as well as a chance to hear from a broad range of employees in different parts of the business," said a spokesman. Check it out at: http://www.millercoorsblog.com

BEER EDGES OUT WINE FOR YOUNG WOMEN. According to a 2012 Gallup poll, beer has been the favorite beverage among drinkers since 1985. It typically held second place as the adult beverage of choice for females, but recently, craft beer has edged out wine among women ages 18 to 34.

WE KNOW THE BEER INSTITUTE will not support the tax relief bill that the BA is pushing for small brewers. In fact, they may actively block it. Developing......

Until tomorrow, Harry

"If it weren't for Philo T. Farnsworth, inventor of television, we'd still be eating frozen radio dinners."
-Johnny Carson (1925 - 2005)

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