Craft Alcoholic Beverage Industry: Overview and Regulation

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Updated January 7, 2021
Craft Alcoholic Beverage Industry: Overview and Regulation
American production of craft alcoholic beverages—whether
beer accounted for about 14% of the total U.S. beer market,
beer, wine, liqueurs, distilled spirits , cider/perry, mead, or
highlighting the relatively higher market value of craft beer.
fermented drinks—has increased in recent years in response
to rising demand. In 2019, there were an estimated 20,563
Table 1. U.S. Craft Alcoholic Beverage Market, 2019
businesses producing craft beverages in the United States,
Selected “Craft” Definition
Sales ($bn)
with sales exceeding $36 billion annually (Table 1).
Spirits (<750,000 proof gal.)
Beer (<6 mil ion beer barrels)
The 116th Congress passed the Taxpayer Certainty and
Wine (up to 49,999 cases)
Disaster Tax Relief Act of 2020 (Division EE of the
Consolidated Appropriations Act, 2021; P.L. 116-260),
Source: CRS from various industry sources, including Wines &
which made permanent those temporary reductions in
Vines, Brewer’s Association, ACSA, and the Artisan Spirit Magazine.
federal excise taxes on alcoholic beverages (Table 2).
Notes: Data wil vary under different “craft” producer definitions.
Aside from tax relief, the U.S. beverage industries receive
#Operations are as of Aug. 2019. Craft spirit sales reflect CY2018.
indirect federal support through agricultural research and
b. Partial estimate, reflecting direct-to-consumer wine shipments only.
farm support programs that are periodically updated by
omnibus farm bill legislation.
Small-scale wineries span a more diverse range of business
Definitions of Craft Beverages
sizes and product categories. Wines & Vines, an industry
marketing company, defines a small vintner as one that
There is no statutory or universally agreed upon definition
produces 5,000-49,999 cases of wine annually. A very
of what constitutes craft production in the U.S. beverage
small vintner is defined as one that produces 2,378-4,999
industry. The concept of what is considered craft is often
cases, and a limited production vintner produces fewer than
controversial. In general, the craft beverage industry is
1,000 cases. Wines & Vines reports there were 10,131
characterized by small-scale production—usually by
wineries in the United States producing up to 49,999 cases
independent or startup companies—and by localized
of wine in 2019. Direct-to-consumer shipments from these
production and distribution, including direct-to-consumer
wineries were valued at $2 billion. (Total retail sales data
sales. Often the term artisan is used to indicate small-batch
for this market segment are not readily available, likely
production or the use of non-traditional ingredients (e.g.,
understating total retail sales for smaller-sized wineries.)
alternate grains, herbs, and botanicals) in production. Some
definitions also focus on the degree of innovation, on-site
Wine industry statistics include not only grape and other
venues, and community involvement.
fruit (or rice) wines but also other types of agricultural
, such as cider and perry (made with apples and pears,
respectively) and mead (considered a honey wine).
The American Craft Spirits Association (ACSA) defines
Depending on how it is produced and its alcohol content,
small-scale distilled spirit plant as producing less than
some cider, perry, and mead may be considered to be more
750,000 proof gallons, or about 394,314 cases (12 750-
similar to beer. Separate industry statistics for cider, perry,
milliliter bottles of 80-proof spirits/case) annually. Based
and mead production are not readily available, but many of
on this definition, ACSA reports there were 2,046 craft
these producers are likely smaller-sized operations. It is not
distillers in the United States in 2019. Retail sales of U.S.
clear, however, whether reported wine or beer sales include
craft spirits totaled $4.8 billion, or about 6% of the total
ciders, perry, and mead. Separate data are also not available
annual sales. However, definitions of what constitutes a
for other types of fermented drinks , such as 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
The Alcohol and Tobacco Tax and Trade Bureau (TTB),
distillers would comprise a smaller share of the market.
within the U.S. Department of Treasury, is the primary
Separate data are not available for craft liqueurs.
federal regulatory agency responsible for licensing,
advertising, labeling, tax, and formulation of alcoholic
beverages at distilleries, breweries, and wineries. TTB
The Brewers Association defines craft brewer as producing
establishes standards and guidance on how these beverages
annually fewer than 6 million 31-gallon beer barrels—about
may be produced, labeled, and sold in the marketplace.
83 million cases (24 12-ounce cans/case). In 2019, there
TTB’s principal authority is through the Federal Alcohol
were 8,386 craft breweries in the United States with retail
Administration Act (FAA, 27 U.S.C. §§201-219a).
sales of $29 billion—about 25% of the U.S. beer market,
according to the Brewers Association. By volume, craft
TTB regulations specify certain “standards of identity” for
the several classes and types of distilled spirits (27 C.F.R.

link to page 2 Craft Alcoholic Beverage Industry: Overview and Regulation
Parts 5.22, 5.27, and 5.35), beer and malted beverages (27
C.F.R. Part 25) and grape and other agricultural wines,
including cider and mead (27 C.F.R. Part 24).
Table 2. Selected Excise Tax Rates on Beer, Wine, and Distilled Spirits (Permanent Law)
Production Tier to
Excise Tax Rates per Unit
Excise Tax Rates per Unit
Which Lowest Excise
That Apply for the
That Apply to Higher
Tax Rates per CY Apply
Lowest Production Tier
Production Tiers
First 60,000 barrels

Still Wine

≤16% alcohol by vol. (incl. mead)
First 30,000 wine gal ons
>16% alcohol by vol.
First 30,000 wine gal ons
Artificially Carbonated Wine
First 30,000 wine gal ons
Sparkling Wine
First 30,000 wine gal ons
Hard Cider
First 30,000 wine gal ons
First 100,000 proof gal ons
Source: CRS based on tax rates from TTB, “Tax and Fee Rates,” at CY = calendar year.
Notes: The Tax Cuts and Jobs Act (P.L. 115-97) temporarily reduced many alcohol excise tax rates for CY2018-CY2019. Those temporary
changes were made permanent by P.L. 116-260. The wine rates are effective rates after wine gal on credits are applied. For a ful schedule of
tax rates, see TTB’s website, above.
TTB standards of identity establish a common name and set
importer level based on the per-unit production or
the content for a product, defining its composition and
importation of alcoholic beverages (i.e., distilled spirits,
prescribing both mandatory and optional ingredients. If the
wine, beer) for sale in the U.S. market. Although private
appropriate content or labeling requirements are not met,
production of beer and wine is allowed for at-home
the product is considered misbranded and in violation of
consumption without paying taxes, distilled spirits may not
U.S. laws. TTB also oversees designations and reviews
be produced for beverage purposes without paying taxes
petitions to establish new or expand existing American
and without prior approval to operate a still. Violations can
Viticultural Areas in the United States, identifying and
result in criminal penalties (26 U.S.C. §§5601-5602).
delimiting particular grape-growing regions based on
certain distinguishing features.
The Tax Cuts and Jobs Act (P.L. 115-97) temporarily
reduced many alcohol excise tax rates for CY2018-
In some cases, the Food and Drug Administration (FDA) is
CY2019. P.L. 116-260 made those temporary changes in
responsible for the regulation and labeling of some low
the federal excise tax treatment on alcoholic beverages
alcohol wine and beer that fall outside TTB’s jurisdiction.
permanent. As shown in Table 2, many craft producers are
Specifically, wines containing less than 7% alcohol by
subject to lower excise tax rates than larger producers.
volume (ABV) are not defined by FAA. This may include
Furthermore, credits against excise tax may be claimed by
wine coolers and ciders and wine made from non-grape
small wine or cider producers.
fruits or from other agricultural products (such as saké).
Some beers also do not meet FAA’s definition for malt
Role of Other Federal Agencies
beverages. Beer made from a malted barley substitute (such
Other federal agencies also play a role in the U.S. beverage
as corn, rice, or wheat) or made without hops are also not
industry as part of broader U.S. farm support programs. As
defined by FAA. These wine and beer products, however,
such, the industry receives support through a range of
may be subject to food labeling and packaging regulations
research and farm programs that are periodically updated by
under the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
omnibus farm bill legislation and administered by the U.S.
§§341 et seq.), the Fair Labeling and Packaging Act (15
Department of Agriculture (USDA).
U.S.C. §1454), and other FDA implementing regulations.
Products used in the production of wine, mead, cider, and
FDA labeling requirements cover ingredient and nutrition
beer—such as fruit, honey, and hops—are considered
facts, allergen declarations, standards of identity, and other
“specialty crops” and receive support from USDA
product identification information. FDA is also responsible
programs that provide market development, research, and
for food facility registration and safety inspections.
export and product promotion for specialty crops. Processed
Excise Taxation
products, such as wine, are also considered specialty crops
if they contain more than 50% of the specialty crop by
TTB also collects and enforces taxes and fees on the
weight, exclusive of added water. For a list of programs,
production and sale of alcoholic beverages (26 U.S.C.
see CRS In Focus IF11317, 2018 Farm Bill Primer:
Subtitle E). Excise taxes are levied at the manufacturer and
Specialty Crops and Organic Agriculture. The production

Craft Alcoholic Beverage Industry: Overview and Regulation
of grains used to produce beer and distilled spirits—
Renée Johnson, Specialist in Agricultural Policy
including corn, wheat, rye, and barley—is also broadly
Sean Lowry, Analyst in Public Finance
supported through various USDA farm programs. For more
information, see CRS In Focus IF11164, 2018 Farm Bill
Primer: Title I Commodity Programs.

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