Taxes and Inflation

Two things I read recently reminded me of the central argument of my dissertation and Brewing Battles. At the beginning of the month, I read a review of Roger Lowenstein’s new book Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War. Eric Foner wrote the review. Eric is a very prominent historian and was my dissertation sponsor.

The other thing I read was from a newsletter I get from the New York Times DealBook. DealBook which is about business and economic news had a post that Roger Lowenstein wrote discussing inflation and how war can affect the economic climate of the country.

Both Eric’s review and Lowenstein post talked about the need of the north to finance the war which resulted in a myriad of taxes being a placed on a variety of objects and activities. Many years ago, I discovered that Salmon P. Chase, Treasury Secretary, and the Lincoln administration established taxes on alcohol and tobacco as well as creating an income tax. Although Congress repealed almost all the other taxes from following the end of the war, the Internal Revenue taxes on liquor and tobacco remained. These taxes provided over 50% of the federal government’s revenue until the enactment of the Internal Revenue tax in 1913.

What follows is an excerpt from Chapter Two of Brewing Battles that describe the efforts by Chase and the Lincoln administration to finance the war.

“From the moment Southern troops fired on Fort Sumter the Federal government required large sums of money to finance the Civil War. A Special Session of the Thirty-Seventh Congress (July­–August 1861) attempted to meet this need by increasing certain customs duties, imposing a direct tax of $20 million on the States, and instituting an income tax.[1]

It soon became clear that these measures alone could not relieve the country’s financial burdens. Secretary of the Treasury Salmon P. Chase was hoping to raise $85 million and sent a bill to the Thirty-Seventh Congress. Congress, which reconvened on December 2, 1861, reviewed his request for a small increase in the income tax and excise taxes on manufactured goods. Distilled spirits, malt liquors, cotton, tobacco, carriages, yachts, billiard tables, gross receipts of railroads, steam boats and ferries, and playing cards all became taxable items. Signed by President Lincoln July 1, 1862, the measure became effective the following month.[2] By the 1870s Congress had repealed most of the excise taxes; the liquor tax, however, has remained in effect until today. The Internal Revenue Act of 1862 marked the entrance of the federal government into the affairs of the liquor industry; it has never left.

The federal government did not regard the liquor industry as an ordinary business. Alcohol was more than a manufactured item — officials saw drinking as a luxurious, even evil, habit that deserved a heavy tax. Ignoring the mixed history of ante-bellum attempts at taxation, collection, and sumptuary legislation, Civil War legislators assumed that an excise on distilled and fermented beverages would raise a large amount of much needed revenue.

Civil War legislation of 1862 established the federal system of taxation of alcoholic beverages. At that time, the government instituted excise taxes on liquor, tobacco, and other items as well as imposing an income tax. Most of these Civil War taxes were short lived; the liquor and tobacco taxes were permanent. Until the imposition of the federal income tax in 1913, liquor taxes generated a significant portion of the nation’s internal revenue and played an important part in maintaining the economic health of the country.

Taxation provided the context for an explicit relationship between the state and industry, a pattern that would become more common later in the century. For the liquor industry as a whole the relationship did not develop smoothly. Throughout the nineteenth century, mismanagement and politicization of the Bureau of Internal Revenue led to fraud and corruption. The government did not seek and could not maintain regulatory power over the liquor industry. Although several individuals devoted themselves to reform efforts, officials failed to develop or maintain long range plans for efficient tax collection. Within this context, the brewing industry developed a good working relationship with the Bureau of Internal Revenue and was able to hold the line on tax increases”

[1] U.S. Department, Internal Revenue Service, History of the Internal Revenue Service 1791-1929, prepared under the direction of the Commissioner of Internal Revenue, (Washington, D.C.: U. S. Government Printing Office, 1930), 2.

[2] Ibid., 3; Charles A. Jellison, Fessenden of Maine: Civil War Senator (Syracuse, N.Y: Syracuse University Press, 1962), 149; Leonard P. Curry, Blueprint for Modern America: Non-Military Legislation of the First Civil War Congress (Nashville: Vanderbilt University Press, 1968), 149–181; Bray Hammond, Sovereignty and an Empty Purse: Banks and Politics in the Civil War (Princeton: Princeton University Press, 1970), 52; Charles Estee, The Excise Tax Law (New York: Fitch, Estee, 1863), passim.

©All Rights Reserved. Do not reproduce without the permission of the author. Amy Mittelman, 2022.

 

Smoking


Any practicing nurse in Massachusetts has to renew his or her license every two years. As part of the license renewal process every nurse has to have done 15 hours of continuing education credits otherwise known as CEU’s. Before I retired it was very easy for me to acquire those 15 hours because of trainings and in service workshops that the agency I worked for provided.

This year the renewal process snuck up on me and I had to figure how to meet the CEUs requirement. There are places online that allow you to fulfill the requirements by reading scholarly articles on various topics and then filling out a questionnaire. One of the essays I chose was about tobacco and smoking cessation.

I found the article informative. Something that stood out is that young people are continuing to become smokers. This is concerning because once you have the habit it is very hard to break it. Reading the essay about tobacco reminded me that in 2009 I had written a blog post about the liquor industry facing new regulations that the Obama administration had passed. I am reposting it below.

The interesting thing about the original post was that I discussed how tobacco’s fortunes had fallen while brewers and distillers were enjoying a great deal of public support. Public health advocates were not gaining much traction in their attempts to convince the public to drink less.

Society approval of the liquor industry, particularly beer, has only continued to increase in the 13 years since I posted about those tobacco regulations. Not only did the liquor industry get a tax break from the Trump legislation but most municipalities are thrilled to have a craft brewery in their town or city.

Neither the article I read for my CEUs or the blog post from 2009 talk about marijuana, but marijuana has also gained in public approval as many states including Massachusetts where I live now have recreational sale of THC.

Tobacco Legislation

6/16/2009

Last week, Congress passed, and President Obama signed legislation that greatly enhances federal regulation of the tobacco industry. As a historian, I generally think change happens slowly but the rapidity with which American society has transformed from cultural acceptance, even approval of smoking, to a completely negative view is startling.

When I was growing up, my parents and almost all the adults I knew smoked. As a teenager and young adult smoking was both everywhere – bars, restaurants, public events, and arenas – and heavily advertised on television. In the forty-five years since the Surgeon General’s report on the harm smoking causes, there has been a warning label, a ban on television advertising, the creation of smoke-free indoor space and, recently, smoke-free outdoor spaces.

The newspaper stories discussing the pending legislation use the term “addiction” to describe the practice of smoking. This also represents significant change. For much of American history, society has characterized nicotine, caffeine, and alcohol as legal, primarily harmless habits. Alcohol was usually the most problematic of the three. Now, nicotine, although legal, falls under the broad category of psychoactive, addictive substances, similar in their effects on the body.

Moralists have always viewed smoking as undesirable behavior. This attitude kept women from smoking for many years. When smoking and exposure to second-hand smoke became a public health issue, the battle lines changed. If alcohol use and or abuse ever became predominantly a public health issue rather than one of individual choice or morality, brewers and distillers could face more of an uphill battle to maintain the legitimacy of their industry.

 

Peoria Beer

When we were dealing with the flood in our basement because of tropical storm Ida, many of my files were damaged. We were able to save the files that pertain to my current book on faculty wives. Two other file drawers were also wet. Most of those files were either materials from nursing school or from Brewing Battles. Nothing smells worse than wet paper so we threw most of it out.

One thing we saved was a Works Progress Administration (WPA) catalog about breweries in Peoria, Illinois. This was very interesting to me because I think of that area of the country as being a distilling center. Whenever I have a question about brewing or distilling that I can’t answer from my own knowledge base or from Brewing Battles, I turn to the indispensable Dictionary of the History of the American Brewing and Distilling Industry, by William Downard. This is a phenomenal source but since Downard compiled it in 1980, it needs to be updated with new entries for craft beer and micro distilling.

Downard has an entry about Peoria distilling but nothing about Peoria brewing. Chicago, the largest city in Illinois, did have a substantial brewing industry but was never a center of brewing like Milwaukee or New York.

One of the breweries described in the WPA document is Gibbs which existed in Peoria from 1881 to 1954. John M. Gipps, Willis H. Ballance and Leslie Robinson were the incorporators. Each owned one-third of the corporation amount of $150,000. Eventually Ballance owned the brewery. He died in 1913. His son, Willis H Balance, Junior ran the brewery from 1912 to Prohibition. The company’s most well-known beer was Amberlin.

During prohibition, the company manufactured, among other things, non-alcoholic beverages, chemicals, and Illuminating gas. After Repeal, the company re-incorporated. In 1954, Canadian Ace Brewing of Chicago purchased Gibbs and moved the brewing of Amberlin to Chicago. You can read more about Gibbs here. It was fun to learn about Gibbs and in the future, I may write more posts about Peoria breweries.

Information for this post came from  the Peoria Historical Society as did the photograph. You can find out more about them here.

Michigan Beer

I recently finished reading a book about sex discrimination at the University of Michigan in the 1970s. The same day, a news item about craft brewing in Michigan appeared in my Google alerts. You can read that here.

Stroh’s was Michigan’s largest brewer. Here are some excerpt’s from Brewing Battles about that brewery.

Detroit had thirty-three breweries in 1890. Stroh’s was the most famous and long lived; the owners were descendants of Germans who had been brewing since 1775. By selling ice cream as well as beer it existed as an independent brewery until 1999.[1]

One of the most significant transactions which indicated that brewing was moving firmly away from its nineteenth century heritage occurred on June 10 1982, when the Stroh Brewing Company of Detroit purchased Schlitz. Stroh’s, a long established regional brewery based in Detroit vaulted itself into the first tier of the industry by acquiring Schlitz, one of the country’s largest brewers. Donald Shea, a vice-president of the USBA at the time of this acquisition, assessed the deal and its implication for the industry as “constant concentration within the industry, and as that happened, more and more larger breweries were building up their own shops.”[2]

Competition in the industry continued unabated even while brewing organizations sought reductions in taxes and campaigned against various neo-temperance initiatives. In 1996, Stroh’s continued its ascent into the top tier by purchasing Heileman Brewing. Heileman had made a run at achieving top tier status in the 1980s, but the Justice Department had halted its program of aggressive acquisitions. Russell Cleary, the son-in-law of Ray Kumm and his successor, spearheaded the expansion of the company. Stalled, the company became vulnerable; 1987 Alan Bond, an Australian investor, purchased the nation’s fourth largest brewer. In 1992, Bond went to jail for fraud in connection with a deal to save an Australian bank.[3]

In the 1980s Heileman brewed many different brands of beer including Old Style, its original product, Lone Star, Schmidt, and Carling Black Label. The company was responsible for forty percent of all the new brands in the decade.[4]

In 1991, Heileman developed yet another new product, Power Master, which was a malt liquor with 5.9 percent alcohol; most malt liquors contained 5.5 percent, regular beer 3.5 percent. African-Americans and Hispanics were the core market for malt liquors. Heileman’s marketing featured a young black man. The tagline was “bold, not harsh.” African-American political and community leaders objected to the beer and its marketing. Eventually BATF intervened and prohibited the company from marketing Power Master. The agency felt the name was a subtle attempt to convey the strength of the beer to the public.[5] Heileman’s marketing struggles indicated how far the brewing industry had come from the self-regulation policies that they had pursued from the 1930s on.

The USBA had always stressed restraint in marketing. The Nebraska plan that brewers developed during Repeal was the cornerstone of their approach. Increased competition in the industry and the diminished influence of the USBA led individual brewers to be bolder in their advertising. The specter of Prohibition had diminished.

In 1996, Stroh’s, planning to buy Heileman, was the country’s fourth largest brewer. Coors, in third place, had 10.1 percent of the market. Stroh’s and Heileman’s combined market share would be a little over nine percent. Stroh Brewing Company had been in existence for 149 years; in 1999 the company sold its brands to Miller and Pabst. Pabst got Schlitz. This sale marked the completion of forty years of consolidation of the brewing industry. The dismantling of Stroh, which employed 2,800 people, gave Miller and Anheuser–Busch seventy per cent of the market.[6]

 

[1] William H. Mulligan, “Stroh Brewing Company,” in Blocker et al., Encyclopedia, 598-600; Downard, Dictionary, 56-57, 185-186.

[2] “Shakeout in the Brewing Industry”; Shea interview, 2005.

[3] “Heileman’s Aggressive Style,” New York Times, August 15, 1979, D1; “Alan Bond Gets Jail in Australia,” New York Times, May 30, 1992, 35; Bob Skilnick, “Heileman, G., Brewing Company,” in Blocker et. al, Encyclopedia, 292-293.

[4] Philip E. Ross, “Bid for Heileman Spurs Stock,” New York Times, September 5, 1987, 31.

[5] Anthony Ramirez, “U.S. Is Challenging New Heileman Label,” New York Times, June 21, 1991, D15; “The Threat of Power Master,” New York Times, July 1, 1991, A12; “Heileman Told It Can’t Use the Power Master Name,” New York Times, July 2, 1991, D6; Kurt Eichenwald, “U.S. Rescinds Approval of A Malt Liquor,” New York Times, July 4, 1991, D3.

[6] Robyn Meredith, “Stroh to Buy Heileman in Big Brewery Deal,” New York Times, Match 1, 1996, D2; “Last call: Detroit-based Stroh Brewery will sell beer brands to Pabst, Miller,” Minneapolis Star Tribune, February 9, 1999, 3D http://www.elibrary.com/education (accessed January 23, 2001).

© Copyright, Amy Mittelman 2021

 

Workers and Unions

Union House and Union Bar Cards used in earlier years. Courtesy of UniteHere.

Workers at the Bessemer, Alabama, Amazon warehouse are trying to form a union. The story has gone national with both President Biden and Senator Marco Rubio weighing in on the side of the workers. Amazon has engaged in hard-ball anti-labor tactics in the past and we can assume they will pursue that course in Alabama.

Union membership and ensuing political power has been declining for years. Labor law most often favors the employer rather than the employee. The Bessemer workers hope that if they succeed this will prompt other Amazon workers in different parts of the country to attempt unionization as well.

Here is an excerpt from Brewing Battles about the brewery workers union in the late 19th century.

In the 1870s, the number of breweries in America reached a record 4,131 and by 1890, output had risen to over 227 million barrels from 3 million at the end of the war. Although there were breweries throughout the country, the business concentrated in urban areas. Lack of appropriate refrigeration made far flung distribution of beer impossible. Demographics also played an important role. Urban areas, with their large ethnic populations, particularly German, were the perfect marketplace for brewers. As a result, certain cities, such as New York, Milwaukee, and Chicago became brewing centers. In the South beer drinking and brewing did not really take hold perhaps because of the small immigrant population there as well as persistent illegal distilling or moonshine.[1]

Urban areas had the most breweries and also the most workers. Cities became the focal point of emerging labor and union activity. In 1886 the newly founded United Brewery Workers (UBW) engaged in a boycott of Peter Doegler Brewery, Brooklyn, New York. Boycotts, as well as union labels, were major weapons in ongoing union struggles with the brewers. A mass product such as beer befitted the use of both strategies. Working class-drinkers contributed greatly to the sales of malt liquors, which they purchased from local brewers. The boycott had originated in Ireland around issues of land and rent. Irish-American radicals adopted the concept of social ostracism which was the foundation of the tactic. The boycott was one element in the social adaptation of immigrants to their new world. Boycotts, parades, and mass demonstrations “provided opportunities for immigrant workers to participate in familiar patterns of protest and recreation.”[2] Pervasive in labor struggles in the 1880s, boycotts and the practice of social ostracism often went hand-in-hand. Both worked best in neighborhoods and small communities and helped foster consumer consciousness. The UBW strove to increase class consciousness.

The new union successfully negotiated a contract with the Brewers Association in the spring of 1886 which gave workers a weekly wage of $15 to $18 for a six day week, 10 hours a day. The young organization had certainly gained an “extraordinary victory.”[3]

1886 was a good year for brewery workers nationwide as unions developed in Baltimore, Chicago, New Jersey, St. Louis, Philadelphia, Detroit, San Francisco, and Buffalo. Many of the unions operated under the auspices of the Knights of Labor. In California Alfred Fuhrman, a sailor and the Federated Trades Council organized the Brewers’ and Maltsters’ Union of the Pacific Coast. Through a boycott of one San Francisco brewery, Fuhrman organized workers in five companies and achieved support throughout the Coast area.[4]

Brewery workers used tactics like the boycott and the union label to encourage workers from other industries to support their struggles with management. The UBW sought to build a strong union and to fully legitimate organized labor in the brewing industry. Towards that end, in conjunction with boycotts, the brewery workers and other unions promoted the concept of “union labor” which implied cooperation with pro-union management against anti-union owners. The average brewery laborer had a hard and grueling life before the advent of the union movement yet the UBW won changes in working conditions, hours, and wages more easily than they did advancements in recognition and jurisdiction. The early successes of the union in gaining ten hour days and increased wages in various cities served as the prelude to ten years of fighting with the brewers and the Brewers Association for union legitimacy.

Many unions formed in the 1880s evolved from strong craft heritages and traditions. Brewing, in many ways, was a traditional occupation; brewers certainly sought to present their business to the public in this light. Yet, at least since the Civil War, brewing required primarily unskilled and thus replaceable labor. The second convention of the UBW recognized this fact of life. Although the union strongly supported the hiring of experienced brewery workers over inexperienced ones, the convention proposed an inclusive union for all workers and trades in the industry; an industrial union. Organizing all the workers in an industry made it more difficult for management to break strikes. Thus the UBW consisted of beer-drivers, maltsters, firemen, and engineers, and became the first industrial union in the country to survive. This commitment to industrial unionism would lead to chronic jurisdictional difficulties with other unions and the American Federation of Labor (AFL). The union sought to organize all workers in the industry, yet it did not consider distillery workers as part of its jurisdiction. On this point the union agreed with the brewers’ view of division within the liquor industry.[5]

[1] For information about moonshine and illicit distilling in the South after the Civil War, see Wilbur R. Miller, Revenuers & Moonshiners: Enforcing Federal Liquor Law in the Mountain South, 1865-1900 (Chapel Hill: University of North Carolina Press, 1991).

[2] Michael A. Gordon, “The Labor Boycott in New York City, 1880-1886,” Labor History, 16 (Spring 1975), 194.

[3] Schlüter, The Brewing Industry 117; Gordon, “The Labor Boycott in New York City,” 213.

[4] Schlüter, The Brewing Industry, p 117-127; Ira Cross, A History Of the Labor Movement in California, 191-192.

[5] James Morris, Conflict Within the AFL, A Study of Craft Versus Industrial Unionism, 1901–1938, (Ithaca, N.Y.: Cornell University Press, 1958), 20. Another name for the UBW was National Union of United Brewery Workmen of the United States.

 

Jewish Brewing, Revisited

At the end of 2020 , I was contacted by two different people who had  read my post from 2009 about Jewish Beer and Brewing. One was Arieh Lebowitz who is the executive director of the Jewish Labor Committee and the other was Gerry Regan, whose father worked for Rheingold Beer. He has a blog and has written about Rheingold.

Rheingold Beer is apparently brewed in Wilton, Connecticut. There is a Facebook page devoted to the beer and here is a rating from the Beer Advocate.

Some of the links from the 2009 post don’t work and I can’t figure out how to fix them so here is a different version of the Rheingold jingle. Here is picture of a Rheingold can:

I know this is a short post but I originally thought I would be away from Thursday to Sunday and was planning not to post at all. Hopefully I will be better prepared next week and produce a completely scintillating post.

 

Biden Administration

As I was thinking about what to write for today’s post, I came across a post from November 2008 that I wrote about the incoming Obama administration. We are in the first few weeks of the Biden administration which I think has been going very well and is a great change from the previous regime.

The post is one of those that I wrote before I had a wordpress blog; when Network Solution hosted my website. It is interesting that twelve years Obama was facing a huge financial crisis and that today Biden is facing multiple crises including Covid and the economy. Since I can’t link to the original post, I decided to post it today.

November 18, 2008

The New Administration

It is interesting that President-Elect Obama is reading Abraham Lincoln since there are many parallels between Lincoln’s first term and Obama’s. Lincoln was the first Republican president; he faced the mammoth task of financing the Civil War as well as staffing all of the departments and agencies of the government. Many loyal Republicans sought rewards for their support of the party and the President.

Here is an excerpt from Brewing Battles: A History of American Beer  about the issues the new government faced.

From the moment Southern troops fired on Fort Sumter the Federal government required large sums of money to finance the Civil War. A Special Session of the Thirty-Seventh Congress (July­?August 1861) attempted to meet this need by increasing certain customs duties, imposing a direct tax of $20 million on the States, and instituting an income tax.[1]

It soon became clear that these measures alone could not relieve the country’s financial burdens. Secretary of the Treasury Salmon P. Chase was hoping to raise $85 million and sent a bill to the Thirty-Seventh Congress. Congress, which reconvened on December 2, 1861, reviewed his request for a small increase in the income tax and excise taxes on manufactured goods. Distilled spirits, malt liquors, cotton, tobacco, carriages, yachts, billiard tables, gross receipts of railroads, steam boats and ferries, and playing cards all became taxable items. Signed by President Lincoln July 1, 1862, the measure became effective the following month.[2] By the 1870s Congress had repealed most of the excise taxes; the liquor tax, however, has remained in effect until today. The Internal Revenue Act of 1862 marked the entrance of the federal government into the affairs of the liquor industry; it has never left.

On July 22, 1862, President Lincoln appointed George Boutwell to be the first Commissioner of Internal Revenue. A two-time Governor of Massachusetts, Boutwell had been a Whig and a moderate anti-slavery man. This work plus political alliances with the Governor of Massachusetts, John A. Andrew, and Senator Charles Sumner led Secretary of the Treasury Salmon P. Chase to give Boutwell the job.[3]

Staffing and organizing the Bureau preoccupied Boutwell, who had almost four thousand jobs at his disposal. The size of the Federal Government expanded tremendously during the Civil War; the Treasury Department was no exception. The endless patronage possibilities caused both Boutwell and Secretary Chase to devote the first year of Internal Revenue’s existence to staffing. They paid little attention to other administrative or regulatory concerns. On August 7, 1862 Chase complained that he had “very little accomplished as yet, though much, I hope, in the train of accomplishment. Engaged nearly all day on selections for recommendation of Collectors and Assessors.”[4]

Six months after Boutwell took office, he had the department organized, at least nominally. The majority of employees were in the field. There were 366 collectors and assessors, 898 deputy collectors, and 2,558 assistant assessors. The Washington office consisted of the Commissioner, fifty-one male clerks and eight female clerks. The law authorized the establishment of collection districts which corresponded roughly to congressional districts. There were 185 districts in the loyal states.[5]
[1] U.S. Department, Internal Revenue Service, History of the Internal Revenue Service 1791-1929prepared under the direction of the Commissioner of Internal Revenue, (Washington, D.C.: U. S. Government Printing Office, 1930), 2.

[2] Ibid., 3; Charles A. Jellison, Fessenden of Maine: Civil War Senator (Syracuse, N.Y: Syracuse University Press, 1962), 149; Leonard P. Curry, Blueprint for Modern America: Non-Military Legislation of the First Civil War Congress (Nashville: Vanderbilt University Press, 1968), 149?181; Bray Hammond, Sovereignty and an Empty Purse: Banks and Politics in the Civil War (Princeton: Princeton University Press, 1970), 52; Charles Estee, The Excise Tax Law (New York: Fitch, Estee, 1863), passim.

[3] Thomas H. Brown, George Sewall Boutwell: Public Servant 1818-1905, (Ph.D. dissertation, New York University, 1979), 53, 56, 59, 110.

[4] Salmon P. Chase, Inside Lincoln’s Cabinet: The Civil War Diaries of Salmon P. Chase, ed. David Donald (New York, 1954), 110-111.

[5] History of Internal Revenue, 4; Schmeckebier and Eble, Bureau of Internal Revenue 8; Estee, Excise Tax Law, 310.

©

Copyright, Algora Publishing, 2007.

A few points about this history: It makes clear the large burden of setting up a new presidential administration especially during a crisis. It is also clear that in times of financial need the federal government often turns to the liquor industry and taxes for help. It is entirely possible that the Obama administration will eventually look at excise taxes for help with financing projects and reducing the deficit. State governments will probably follow suit.

Jay Brooks at Brookston Beer Bulletin has been writing a fair amount about taxes recently and nicely cited Brewing Battles as a sourceOne slight correction however- Jay maintains that the taxes stayed after the Civil War due to pressure from temperance advocates and prohibitionists. It is more accurate that the taxes remained because they developed into a steady, secure source of revenue for the federal government. It was not until a new source, the income tax, developed in the early twentieth century that the federal government could contemplate losing the money from liquor taxes. The prohibition movement had an ambivalent relationship to the federal liquor tax. They often decried the legitimacy the tax provided to the industry.

Of course when the federal government, in the depths of the Great Depression, needed a quick source of revenue, the 18th amendment was repealed. The liquor industry and the liquor tax became legal on December 5, 1933, seventy-five years ago. I will be writing more on the subject of Repeal in the coming days.

Shelton Brothers

Earlier this month, the big news in craft brewing was the closing of beer importers, Shelton Bros. The company existed for twenty-four years and were early importers of craft beers. They introduced America to different beer styles, such as sour beer. The company’s bank pushed them into liquidation; a victim of COVID-19 and the recession. You can read more about the closing of Shelton Bros. here.

I found this news interesting  because of a personal  connection to the firm. One of the Shelton brothers is Will. He is the dad of Zach and Max who are among my son Alan’s best friends. I have  known Will for over twenty years.

For a while he owned a brewery in Western Massachusetts, High and Mighty, which made great beer. I gave a book talk about Brewing Battles at the Jones Library and we served Will’s beer.  The brewery only lasted a few years and then Will moved to California. There, for a while,  he worked with Pete Slosberg from Pete’s Wicked Ale.  He then started a new brewery, Concrete Jungle. Will is now back in Massachusetts.

The demise of Shelton Bros. reflect changes in the brewing industry. The country has over 7,000 breweries. Many of them are very local and supply farm to table restaurants. American brewers now make many of the unusual and exotic styles that Shelton Bros imported, making them less competitive. You can read more about Shelton Bros, in an article from 2017 by Andy Crouch.

 

September Beer Roundup

Here are some articles about beer that I thought were interesting.

“September 9 Day of Action Planned to Urge Passage of Craft Beverage Modernization and Tax Reform Act.” The Brewers Association  and other allied trade associations such as American Mead Makers Association are spending today lobbying  for passage of the Craft Beverage Modernization and Tax Reform Act, S.362/H.R. 1175. The bill would make the temporary tax benefits that brewers, distillers, and other actors in the liquor industry received from Trump’s tax cuts of 2017 permanent Those tax cuts flowed mainly to very rich people and corporations while poor and working-class people received little benefit. Brewers did not complain since they were also beneficiaries of the law.

The liquor industry like other businesses has suffered during the pandemic. If the tax cuts go away, it could worsen their economic situation. This article reports that two breweries with beer gardens and beer-to-go in Everett Massachusetts have closed because a customer went bar hopping while awaiting the results of a COVID-19 test.

The Great American Beer Festival has been held for thirty-nine years. This year it will be virtual. I have always wanted to go but I haven’t made it out to Denver yet. The upside of everything being virtual during the pandemic is that you can attend events that in real life you might not have been able to go to. It runs October 16–17. On the 17th Marcus Baskerville, Weathered Souls Brewing Co. , will be speaking about the Black is Beautiful brewing project that I wrote about here.

Magic Hat

Last month, the owners of Vermont’s Magic Hat Brewery, FIFCO USA, a subsidiary of Florida Ice and Farm Co. announced it was moving all Magic Hat production to the Genesee Brewing headquarters in Rochester, N.Y. This move, during COVID-19, meant that forty-three people lost their jobs. Magic Hat had employed forty-six people in Vermont.

Bob Johnson, the original brewer, and Alan Newman co-founded the brewery in 1994. Newman sold the company to North American Breweries in 2010. He feels that was the end of Magic Hat as an innovating craft brewery. KPS Capital Partners formed North American Breweries to manage its beer investments.

Companies like KPS buy breweries as an investment; they do not really have any interest in running the company or building the business. They cut expenses, which usually involves cutting jobs, extract value and then sell the company. That is what happened to Magic Hat. In 2012, Magic Hat and the brewing investments were sold to FIFCO for $388 million dollars.

In 1994, at the time of Magic Hat’s founding, there were only a few other breweries and a few brew pubs in the state. Greg Noonan founded Vermont’s first brewpub in 1988. Today, Vermont has 61 breweries. In 2018, Vermont breweries produced 350,000 barrels (61 gallons per barrel) which had a value of $362 million dollars.

Magic Hat’s story of being a pioneer in craft brewing, seeking to expand and then being sold for investment value could be the tale of many of the country’s over 7,000 brewers as they faced the economic consequences of COVID-19.

For more information about Magic Hat’s move, click here

 

 

%d bloggers like this: