Craft Beverage Modernization and Tax Reform Act-  5 Things to do with the extra $11 per case.

Craft Beverage Modernization and Tax Reform Act includes a reduction in the Federal Excise Tax for craft distillers. The rate will drop from $13.50 to $2.70 for the first 100,000 proof gallons. 

When my grandfather first taught me about excise tax at the age of 15, I didn’t understand why spirits were taxed differently than beer or wine.  I recalled quoting freshman high school chemistry logic that a unit of alcohol was a unit of alcohol.  Well thanks to the relentless efforts of the ACSA and our brewery and winery brothers and sisters, it appears that the playing field may be getting a touch more even.

Since early 2017 we have been strategizing with clients on what this might mean for their businesses and what they should do if it passes.  On average, each distiller will have an extra $11 per 6x750mL case or roughly $80K per annum.  Smart, dedicated distillers will invest these savings back into their company; others may pass this discount on to the marketplace (loser’s game). Here are some top-level ideas to consider on how to invest the savings for a strong company and brand:

New packaging design Your package is the single biggest statement about your brand, and the way consumers make a lot of their purchase decisions. Revisiting your brand positioning/packaging design can garner a lot of your bang for your buck.

Sales management. Distributors are over-loaded, and with the latest mega-merger announced, average craft distillers need to sharpen and better organize their sales arm in order to garner the proper attention needed to compete. The distinction between marketing and sales continues to fade. As such, the traditional role as sales rep has become much more complex than simply communicating your product differentiation. While $80K may not bring you the guaranteed results you deserve, investing additional monies either internally or with a sales management partner will certainly help to engage distributors and customers alike with one succinct message.

Tactical.  Allocating a portion of this budget per case to the field will allow initiatives like price support, tastings, and incentives to be more on par with that of the big boys.  Having it tied to sales also hedges your budget based on performance.

Inventory.  These savings will bring you about 100 free 53-gallon barrels of whiskey per year.  While the items above need to be in place ahead of this, having more inventory will likely never be a bad investment.  And if you blend in these savings by lowering COGS, this may help you properly price your products at the right price to attract consumers and drive volume.

Salaries.  If your staff is underpaid, this is a nice way to bring them up to par.  Knowledge and talent are rare in this space, and with all of the new distilleries popping up, poaching is very popular.

Whatever you do, focus your investment.  It is often far better to pick one strategy and really drive it home.  And if you need assistance in determining the right path forward, click here since Thoroughbred is here to help!

 

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