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September 7, 2018
Craft Alcoholic Beverage Industry: Overview and Regulation
American production of craft alcoholic beverages—whether
Table 1. U.S. Craft Alcoholic Beverage Market, 2017
beer, wine, liqueurs, distilled spirits, cider/perry, mead, or
Selected “Craft” Definition
#Operations
Sales ($bn)
fermented drinks—has increased in recent years in response
Spirits (<750,000 proof gal.)
1,589
3
to rising demand. In 2017, there were an estimated 16,800
Beer (<6 million beer barrels)
6,266
26
businesses producing craft beverages in the United States,
Wine (up to 49,999 cases)
8,906
2a
with sales exceeding $31 billion annually (Table 1).
Total
16,761
31a
As part of the 2017 tax revision (P.L. 115-97), Congress
Source: CRS from various industry sources, including Wines &
Vines, Brewer’s Association, ACSA, and the Artisan Spirit Magazine.
enacted temporary reductions in the federal excise tax
Notes: Data will vary under different “craft” producer definitions.
treatment on alcoholic beverages for the 2018 and 2019 tax
years (Table 2). Aside from tax relief, the U.S. beverage
a Partial estimate, reflecting direct-to-consumer wine shipments only.
industries receive federal support through agricultural
Wine
research and farm support programs that are periodically
Small-scale wineries span a more diverse range of business
updated by omnibus farm bill legislation.
sizes and product categories. Wines & Vines, an industry
Definitions of Craft Beverages
marketing company, defines a small vintner as one that
produces 5,000-49,999 cases of wine annually. A very
There is no statutory or universally agreed upon definition
small vintner is defined as one that produces 2,378-4,999
of what constitutes craft production in the U.S. beverage
cases, and a limited production vintner produces fewer than
industry. The concept of what is considered craft is often
1,000 cases. Wines & Vines reports there were 8,906
controversial. In general, the craft beverage industry is
wineries in the United States producing up to 49,999 cases
characterized by small-scale production—usually by
of wine in 2017. Direct-to-consumer shipments from these
independent or startup companies—and by localized
wineries were valued at $2 billion. (Total retail sales data
production and distribution, including direct-to-consumer
for this market segment are not available, likely
sales. Often the term artisan is used to indicate small-batch
understating total retail sales for smaller-sized wineries.)
production or the use of non-traditional ingredients (e.g.,
alternate grains, herbs, and botanicals) in production. Some
Wine industry statistics include not only grape and other
definitions also focus on the degree of innovation, on-site
fruit (or rice) wines but also other types of agricultural
venues, and community involvement.
wines, such as cider and perry (made with apples and pears,
respectively) and mead (considered a honey wine).
Spirits
Depending on how it is produced and its alcohol content,
The American Craft Spirits Association (ACSA) defines
some cider, perry, and mead may be considered to be more
small-scale distilled spirit plant as producing less than
similar to beer. Separate industry statistics for cider, perry,
750,000 proof gallons, or about 394,314 cases (12 750-
and mead production are not readily available, but many of
milliliter bottles of 80-proof spirits/case) annually. Based
these producers are likely smaller-sized operations. It is not
on this definition, ACSA reports there were 1,586 craft
clear, however, whether reported sales for wine or beer
distillers in the United States in 2017. Retail sales of U.S.
include ciders, perry, and mead. Separate data are also not
craft spirits totaled $3 billion, or about 4% of the total
available for other types of fermented drinks, such as
annual sales. However, definitions of what constitutes a
kombucha.
craft distillery differ. For example, the American Distilling
Institute defines craft distillery as producing up to 100,000
Regulatory Oversight
proof gallons (about 52,575 cases). At that limit, craft
distillers would comprise a smaller share of the market.
The Alcohol and Tobacco Tax and Trade Bureau (TTB),
Separate data are not available for craft liqueurs.
within the U.S. Department of Treasury, is the primary
federal regulatory agency responsible for licensing,
Beer
advertising, labeling, tax, and formulation of alcoholic
The Brewers Association defines craft brewer as producing
beverages at distilleries, breweries, and wineries. TTB
annually fewer than 6 million 31-gallon beer barrels—about
establishes standards and guidance on how these beverages
83 million cases (24 12-ounce cans/case). In 2017, there
may be produced, labeled, and sold in the marketplace.
were 6,266 craft breweries in the United States with retail
TTB’s principal authority is through the Federal Alcohol
sales of $26 billion—about 23% of the U.S. beer market,
Administration Act (FAA, 27 U.S.C. §§201-219a).
according to the Brewers Association. By volume, craft
beer accounted for about 13% of the total U.S. beer market,
TTB regulations specify certain “standards of identity” for
highlighting the relatively higher market value of craft beer.
the several classes and types of distilled spirits (27 C.F.R.
Parts 5.22, 5.27, and 5.35), beer and malted beverages (27
C.F.R. Part 25) and grape and other agricultural wines,
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Table 2. Selected Excise Tax Rates on Beer, Wine, and Distilled Spirits (CY2018-2019)
Production Tier to Which
Excise Tax Rates per Unit
Excise Tax Rates per Unit
Lowest Excise Tax Rates
That Apply for the Lowest
That Apply to Higher
Beverage
per CY Apply
Production Tier
Production Tiers
Beer
First 60,000 barrels
$3.50
$16.00-$18.00
Wine
Still Wine
≤16% alcohol by vol. (incl.
First 30,000 wine gallons
$0.07-$0.57
$0.17-$1.07
mead)
>16% alcohol by vol.
First 30,000 wine gallons
$0.57-$2.15
$0.67-$3.15
Artificially Carbonated Wine
First 30,000 wine gallons
$2.30
$2.40-$3.30
Sparkling Wine
First 30,000 wine gallons
$2.40
$2.50-$3.40
Hard Cider
First 30,000 wine gallons
$0.16
$0.17-$0.23
Spirits
First 100,000 proof gallons
$2.70
$13.34-$13.50
Source: CRS based on tax rates from TTB, “Tax and Fee Rates,” at https://www.ttb.gov/tax_audit/taxrates.shtml. CY = calendar year.
Notes: “Regular Tax Rates Per Unit” are illustrative of the range of excise tax rates that apply to higher levels of production under the
temporary excise tax rate changes enacted by P.L. 115-97. For a full schedule of tax rates, including comparisons of alcohol excise taxes before
and after enactment of P.L. 115-97, see TTB’s website, above.
including cider and mead (27 C.F.R. Part 24). Standards of
and without prior approval to operate a still. Violations can
identity establish a common name and set the content for a
result in criminal penalties (26 U.S.C. §§5601-5602).
product, defining its composition and prescribing both
mandatory and optional ingredients. If the appropriate
The 2017 tax revision (P.L. 115-97) temporarily changed
content or labeling requirements are not met, the product is
alcohol excise tax rates for 2018-2019. As shown in Table
considered misbranded and in violation of U.S. laws. TTB
2, many craft producers are subject to lower excise tax rates
also oversees designations and reviews petitions to establish
than larger producers. Furthermore, credits against excise
new or expand existing American Viticultural Areas in the
tax may be claimed by small wine or cider producers. P.L.
United States, identifying and delimiting particular grape-
115-97 also adopted temporary excise tax rules for mead
growing regions based on certain distinguishing features.
and low-ABV wine.
In addition, H.R. 1089/S. 389, introduced in the 115th
In some cases, the Food and Drug Administration (FDA) is
Congress, would exempt low-alcohol versions of kombucha
responsible for the regulation and labeling of some low
from taxation under the beer excise tax rates.
alcohol wine and beer that fall outside TTB’s jurisdiction.
Specifically, wines containing less than 7% alcohol by
Role of Other Federal Agencies
volume (ABV) are not defined by FAA. This may include
Other federal agencies also play a role in the U.S. beverage
wine coolers and ciders and wine made from non-grape
industry as part of broader U.S. farm support programs. As
fruits or from other agricultural products (such as saké).
such, the industry receives support through a range of
Some beers also do not meet FAA’s definition for malt
research and farm programs that are periodically updated by
beverages. Beer made from a malted barley substitute (such
omnibus farm bill legislation and administered by the U.S.
as corn, rice, or wheat) or made without hops are also not
Department of Agriculture (USDA).
defined by FAA. These wine and beer products, however,
may be subject to food labeling and packaging regulations
Products used in the production of wine, mead, cider, and
under the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
beer—such as fruit, honey, and hops—are considered
§§341 et seq.), the Fair Labeling and Packaging Act (15
“specialty crops” and receive support from USDA
U.S.C. §1454), and other FDA implementing regulations.
programs that provide market development, research, and
FDA labeling requirements cover ingredient and nutrition
export and product promotion for specialty crops. Processed
facts, allergen declarations, standards of identity, and other
products, such as wine, are also considered specialty crops
product identification information. FDA is also responsible
if they contain more than 50% of the specialty crop by
for food facility registration and safety inspections.
weight, exclusive of added water. For a list of programs,
see CRS Report R42771, Fruits, Vegetables, and Other
Excise Taxation
Specialty Crops: Selected Farm Bill and Federal Programs.
TTB also collects and enforces taxes and fees on the
production and sale of alcoholic beverages (26 U.S.C.
The production of grains used to produce beer and distilled
Subtitle E). Excise taxes are levied at the manufacturer and
spirits—including corn, wheat, rye, and barley—is also
importer level based on the per-unit production or
broadly supported through various USDA farm programs.
importation of alcoholic beverages (i.e., distilled spirits,
For more information, see InFocus CRS In Focus IF10718,
wine, beer) for sale in the U.S. market. Although private
Farm Bill Primer: Title I Commodity Programs.
production of beer and wine is allowed for at-home
Renée Johnson, Specialist in Agricultural Policy
consumption without paying taxes, distilled spirits may not
Sean Lowry, Analyst in Public Finance
be produced for beverage purposes without paying taxes
IF10973
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Craft Alcoholic Beverage Industry: Overview and Regulation
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