Advertisement

Beer Lovers Snap Up Supplies Before January Tax Hike : Beverages: The federal excise tax on brews will double. The surge in demand has wholesalers and retailers scrambling.

From Associated Press

Beer distributors are scrambling to find additional supplies to meet a surge in demand from drinkers seeking to stockpile their favorite beverage before the government doubles the beer tax in January.

The increased demand comes during the height of the traditionally brisk holiday season. It has pushed sales to the levels of the industry’s peak midsummer season and raised fears of an impending shortage, wholesalers say.

James Pyzyk, general manager of Beer Capitol Distribution, a Milwaukee wholesaler that provides specialty beers to about 900 retailers and 2,100 taverns, said his company is in the midst of a “beer-buying frenzy.”

“We’re ordering four times what we normally order to accommodate the anticipated additional demand,” Pyzyk said. “We had to make arrangements for outside public storage. We ordered so much beer it won’t fit in our warehouses.”

Advertisement

On Jan. 1, the government will raise the federal excise tax on a six-pack of beer to 32 cents. It is one of the large “sin tax” increases in the deficit-reduction bill that President Bush signed last month.

The Congressional Joint Committee on Taxation estimated that new alcohol-related taxes would raise $1.3 billion in revenue in 1991 and $8.75 billion over the next five years.

For the consumer, the tax will translate into an extra 16 cents on a six-pack or 64 cents on a case, analysts said.

The tax jump, however, isn’t the only thing that will strike beer buyers in the pocketbook next year.

Advertisement

The industry expects to raise the cost of a case by 33 cents at the brewery level, 20 to 30 cents at the wholesale level and 20 to 40 cents at the retail level to cover inflation and increased fuel costs, said Jerry Steinman, publisher of the industry newsletter Beer Marketer’s Insights in New York.

Anticipating a backlash next year after consumers learn of the estimated $1.50 rise in the cost of a case of beer, wholesalers are using a holiday marketing pitch that plays on consumers’ anger with the tax increase to spur additional sales in December.

Pyzyk’s company has ordered 500 signs urging consumers to “Beat the Tax Increase.” He expects the banners--posted at retailers--to fuel sales even further.

“I know what a normal holiday is, and I know what this holiday is, and the retailers aren’t going to be able to handle it,” he said. “We’re going to get clobbered.”

Advertisement

Other retailers said the likelihood of a consumer buying two or three extra cases adds up to heavy sales.

“Retailers are gearing up for a mass consumer crunch,” said Kevin Mehl, general manager of Beloit Beverage Co., which distributes beer to 700 stores and 2,500 Milwaukee-area taverns.

Unlike wholesalers, brewers are less concerned about the holiday surge.

“Because of our strong sales year, we are already producing at full capacity and have been since April,” said Patrick T. Stokes, president of St. Louis-based Anheuser-Busch, the nation’s top brewer.

Advertisement

Some brewers, such as No. 2 Miller Brewing Co. of Milwaukee, admit that they are nervous about the effect of the excise tax and price increases, however. They said they are not planning much beyond their holiday-season marketing.

“We’re moving right along with our plans,” Miller spokeswoman Patricia Brash said. “We’re in a wait-and-see position just like everybody else.”

G. Heileman Brewing of La Crosse, Wis., the No. 5 brewer, hasn’t increased production but “is ready to respond when the need arises,” spokesman Bill Eiler said.

“We do anticipate a major increase in sales in December, when consumers realize the retail price of beer will be increased on Jan. 1,” he said.

Advertisement

While the buying surge is welcomed by distributors and wholesalers, most are realistic that it won’t end with bare store shelves before New Year’s Day.

The main reason, analysts said, is that beer--unlike such durables as cars, boats or jewelry, which also face luxury tax increases next month--has only a 120-day shelf life.

“Older beer does not taste as good as fresh beer,” Steinman said. “It’s like bread. The fresher it is, the better it tastes.”


Advertisement