Beer – An Economic Snapshot

Everyone drinks beer, or so it seems. It has been a part of the country since it arrived with the first settlers. Since that time it has provided countless Americans with nourishment, comfort, camaraderie, and employment, all the while adding fuel to the nation’s economy.

In the 400 years that beer has been in America, consumer demand continually pushed the industry forward with sure and steady progress. Then, in the last 25 years, the introduction of the craft brewing movement created additional opportunity, and the public responded with still further support. Firmly entrenched as a part of the country’s social fabric, beer’s economic impact is readily visible. A quick glance tells it all. From supermarkets and convenience stores, restaurants and taverns, hotels and convention centers, ballparks, arenas, clubs and homes, consumers purchase a nearly unfathomable ocean of beer. Hardly a moment goes without a beer being poured somewhere. It was there from the beginning and it was there when the country needed it most.

When Roosevelt was elected in 1932 the country was battling a crippling depression. One of FDR’s strategies to end it was a repeal of prohibition. Roosevelt believed that reopening breweries would not only create jobs, it would put money in circulation, and bolster the treasury’s coffers with new tax money. He was right, and beer helped turn the tide. Its impact on the economy has continued ever since.

The economy of beer may begin in the brewery, but its influence stretches to the furthest corner of every state and congressional district. A logical starting point in tallying beer’s influence is sales. In 1998 alone, the country’s 2,000 operating breweries sold 194 million barrels of beer. An impressive number in its own right, it translated to a total sales figure that netted 50 billion dollars.

From the money brought in, businesses selling beer - brewers, wholesalers and retailers – understandably use a portion to pay workers. Altogether, beer industry employers either directly, or indirectly, provided jobs for over 2.5 million Americans, and those workers earned more than $60 billion in wages that were redirected back into the economy. Those earnings also provided another $14 billion in federal, state and local taxes.

Wages only tell part of the story, to grasp fully the tax impact of the beer industry requires a closer look. Breweries and related businesses themselves pay additional Federal levies that include excise, business, and personal income tax, all adding to the amount contributed to the government. State and local treasuries also profit from beer. Taxes and fees vary from state to state, and community to community, but in one form or another brewers, wholesalers and retailers pay state excise taxes, gross receipt taxes, retail tax, license fees, real estate and personal property taxes. Other business sectors that supply the beer industry pay still more taxes, all of which adds to the country’s strength. According to numbers compiled from public record by ‘The Beer Institute’ of Washington, DC, and calculations based on US government models, in 1997 (the last year of complete data) the total tax picture had a direct impact of $13,700,700,000 and an indirect contribution of $45,436,4000,000 further increasing the impact of beer.

Employment is only the beginning of the story. A true appreciation of economic impact must also weigh the indirect ‘value added’ benefit of associated businesses, and taxes. ‘Value added’ calculates the extended benefit realized through sales made by brewers, wholesalers and retailers. Likewise, money spent by beer-related companies on purchases from other industries must be considered. Brewery procurements from related sectors includes: grain, hops, paper goods, bottles, cans, kegs, tanks, cleaning supplies, and other purchases that again extends the economic gain. Wholesalers and retailers make similar purchases, lengthening beer’s reach still more. These benefits to the economy include both the ‘direct impact’ of the beer industry, which nationally reached a value added total of $47,976,900,000 and the ‘full impact’ of associated businesses raised the total to $187,078,200,000.

Without doubt, beer is an indisputable factor in the nations economic health. It provides jobs, pays taxes, and makes further contributions by its added impact on related businesses. From the simple home breweries of the first settlers to the largest breweries of today beer has been there helping the country grow. Our founding fathers, who themselves were brewers and beer drinkers, would have been proud of beer’s role in the nation’s economy.

Reprinted courtesy of Gregg Smith and Lisa Variano.

Copyright 2000 North American Brewers' Association