THE GIST
For years, beer has been losing share of mind and dollars to spirits. Now, one organization is trying to rally Americans in this ongoing battle.
On June 22, the Beer Institute (BI), a trade group made up of beer companies of all sizes that includes some of the largest in the country, launched a website aimed at getting lawmakers and the public to support pro-beer lobbying efforts that are effectively anti-liquor. According to annual data compiled by the National Institute on Alcohol Abuse and Alcoholism (converted into volume of pure ethanol to even the cross-category differences in ABV), Americans’ per capita consumption of beer has dropped -14% since 2000 while spirits has increased +58%. This change is also represented more broadly in trackable sales at stores across the country.
StandWIthBeer.org takes a two-pronged approach to combat large gains that spirits have made in recent years:
First, it highlights the economic impact that beer has in terms of job creation and tax revenue. This information is shared annually in the BI’s “Beer Serves America” campaign.
Second, and most important for its lobbying efforts, it takes direct aim at what the BI portrays as the spirits’ industry’s unfair tax advantages and lack of transparency.
The website, which will be supported by online ad campaigns, is the most aggressive public-facing move the beer industry has made against the spirits industry in years. Founded as primarily a lobbying and public policy group, the BI hasn’t historically positioned these kinds of appeals directly to consumers, but it launched the effort at a time when spirits sales have knocked beer on its heels. Last year, the Distilled Spirits Council of the United States (DISCUS) reported that the spirits category saw its 13th year of alcohol market share gains, with dollar sales surpassing those of beer for the first time in modern history.
Beer’s peak market share in the 1990s was 61% of all servings of alcohol in the U.S., as determined by a mix of data from government and trade organizations, but has fallen below 50% for the last five years, including an all-time low of 45% of servings in 2022. The spirits industry, represented by DISCUS, has hoped to accelerate these gains by lobbying for excise tax reforms and other policies that would put canned, spirits-based cocktails on more retail shelves.
The BI and other beer trade groups such as the Brewers Association (BA) continue to lobby lawmakers for tax policies that would benefit beer, sometimes at the expense of distilled spirits. But the Stand With Beer initiative marks a new phase: a direct, emotional appeal to the public urging them to see beer as a social and economic champion for Americans. The campaign uses language that says spirits companies need to be “held accountable” for “exploiting tax loopholes … to the detriment of American consumers and taxpayers.” The BI does not allege spirits companies have engaged in illegal trade practices, so the judgment of whether their tax rates are detrimental to consumers is subjective.
A statement issued by DISCUS president Chris Swonger on June 22 pulled no punches in responding to the BI’s rhetoric: “It’s clear the beer industry is desperate after years of losing market share to distilled spirits. … It’s unfortunate big beer companies would stoop to the level of using misleading information to attack the spirits sector and its consumers, rather than investing in beer products that consumers actually want to buy.”
WHY IT MATTERS
Gone are the days when the beer and spirits industries collaborated legislatively on efforts such as the Craft Beverage Reform and Tax Modernization Act, which provided lower tax rates for producers of many types of alcohol. It only takes one look at chain retail volume sales to get a sense of why. In the most recent 52-week period:
Beer declined -2.7%.
Spirits increased +9.2%, with a significant boost from spirit-based seltzers (+71.4%) and premixed cocktails (+25.5%).
Without pre-packaged cocktails, spirits' growth rate shrinks but is still in the black at +1.2%, a few percentage points above negative growth for all alcohol in chain stores.
These shifts in sales have been consistent for years, and with the highest stakes beer has faced to retain customers in at least a generation, the gloves are off. Stand With Beer marks a new, more aggressive and more public chapter in beer’s struggle against spirits, a recognition that beer’s behind-the-scenes lobbying efforts haven’t reversed overall sales trends. In its Q1 report from this year, the Beer Institute listed four lobbyists doing work on its behalf and DISCUS listed two.
Stand With Beer’s policy aims are wonky and cover issues that aren’t on most people’s radars: amending certain excise tax rules related to spirits produced in Puerto Rico and the U.S. Virgin Islands, for example, as well as reforming Internal Revenue Code rule 5010, which governs distilled spirits that also include wine and flavorings. So why should an average drinker care about excise tax policy?
The campaign broadly characterizes the liquor industry’s efforts as nefarious, though not illegal, stating that the website “sheds light on how large liquor companies inflate their bottom line by exploiting loopholes in our tax code.” Its content is styled like a presidential campaign ad highlighting as opposition research against an opponent:
A video about the U.S. government’s refunding of excise taxes for spirits produced in Puerto Rico and the U.S. Virgin Islands says it’s a “secret” that much of this excise tax refund benefits liquor companies rather than funding infrastructure for residents of those islands.
A page about efforts to equalize tax rates for spirits-based canned cocktails describes liquor companies as “trying to pull the wool over the eyes” of state legislatures: “Instead of playing by the rules, the liquor lobby is seeking to manipulate the tax code to give canned cocktails an advantage over beer.”
In its statement, DISCUS notes that the spirits industry has a tax rate more than twice as high as that of beer. (Federal excise tax for a 12oz can of a 6% ABV beverage is 5 cents for a malt-based product (such as beer), 10 cents for one with a wine base, and 15 cents for one with a spirits base.) DISCUS also mentions that beer is legally able to be sold in more stores than liquor. “Despite the fact that the beer industry has for decades enjoyed significant distribution and tax advantages … they are still losing customers,” DISCUS wrote in its release.
Broadly, the BI’s efforts paint the spirits industry as competing unfairly in an effort to deceive lawmakers and drinkers.
The BI’s site points out that some liquor companies lower their effective tax rate by packaging liquor with wine and flavorings; most consumers aren’t aware that some distilled products could legally contain up to 49% wine and flavorings. (It’s also not clear whether drinkers care in the same way the BI says they do: Products that blur categories for the sake of creating desired flavor experiences are increasingly made by breweries, wineries, and distilleries alike.)
But beer companies have also benefited from drinkers’ indifference to the base fermentable in certain products: A July 2021 survey by alcohol e-commerce marketplace Drizly found that only a third of respondents could correctly define hard seltzer as a malt- or sugar-based product. The same percentage answered that hard seltzer is a “carbonated drink made with liquor like vodka or tequila.”
The BI’s site also makes references to “foreign” ownership of major spirits companies, while boosting beer companies as wholesome contributors to the U.S. economy. (Members of the BI and its leadership team represent global companies with U.S. affiliates, such as Heineke, based in the Netherlands, and Anheuser-Busch InBev, headquartered in Belgium.)
Such us-versus-them language may not be effective with drinkers, who are increasingly choosing to consume across types of alcohol depending on their mood and the occasion: For example, the 2022 Craft Insights Panel survey conducted by Harris Poll on behalf of the BA found 63% of weekly craft beer drinkers also drink spirits on a weekly basis. Referring to the increasingly “omnibiborous” consumer, BA chief economist Bart Watson explained that members of the public are increasingly looking across alcohol categories rather than pledging allegiance to only one.
At the 2023 New York State Brewers Conference, Watson responded to a question about the emergence of spirit-based products noting that "canned liquor" products "are going to eat from [craft beer]" for the same reason that craft took share from mass-market Lager years ago: "It's interesting flavor, it's variety, they're using kind of 'crafted'-type language that follows craft beer's playbook." As beer overall has struggled, the fast growth of canned cocktails provided distributors and retailers plenty of reasons to stock and sell brands like spirit-based seltzer High Noon, and “when craft's not backing it up with the numbers the retailers are going to try out some of that stuff and see what sticks,” Watson said at the event.
Despite consumers showing increased interest in choosing across all categories of alcohol, the Stand With Beer initiative challenges them to pick sides and become “advocates” for beer (and beer alone). Visitors to the campaign’s website can opt-in to emails and other communications from the BI which the organization says will generally be educational or casually informative. But if someone lives in a state where legislation regarding beer and/or spirits has been introduced, they may receive messages asking them to contact their lawmakers in support of the BI’s position.
The most critical drinker action, of course, will be what people choose to order off a bar menu or purchase from a liquor store shelf. In that regard, the spirits industry has the wind in its sails—and sales.
Words by Kate Bernot