Craft breweries, distilleries look to capitalize on lower alcohol taxes

David Dorsey
The News-Press
Le Roy List finishes bottling Mr. Tom's Spirits Apple Pie Flavored Rum on Thursday, at List Distillery in Fort Myers.

Tax cuts for creators of craft beer, rum, vodka and other alcoholic beverages have Southwest Florida brewers and distillers clamoring to create new business strategies.

Whether the sudden savings for these companies trickles down to long-term, lower-priced liquor at stores, bars and restaurants remains to be seen. But some of the area companies already are looking to hire more employees. Some are lowering prices. Most are taking a more cautious, wait-and-see approach.

Wicked Dolphin Artisan Rum owner JoAnn Elardo estimated her Cape Coral company would save $70,000 this year from the excise tax cuts, which were incorporated into the new tax codes signed into law Dec. 22 by President Donald Trump. Elardo already has decided to make three additional hires this year because of the tax savings, and she has lowered prices on some of her products.

“It will help us in our marketing,” said Elardo, whose distillery opened in 2013. “You really have to thank our local congressman and senators to be able to keep this in the bill. This was taken off the bill a couple of months ago, and it was added back at the last minute.

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“What I definitely need is more manpower. Our brand is growing throughout Florida. Right now, we have probably 14 part-time ambassadors who go out and do tastings at different stores and restaurants. We’ll be increasing that as well. We are looking for sales ambassadors in north and south Florida. And we’re looking for some marketing people. I’ve been hoping for this for years.”

Congressman Francis Rooney, R-Naples, who represents parts of Lee and Collier counties, said his office heard from a number of these business owners, which furthered his desire to vote in approval of the new tax codes.

“These are small businesses that we are happy to have and see grow in our community,” Rooney said in an email.

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Skeptics of the tax cut, like J.T. Griffin, chief government affairs officer for Mothers Against Drunk Driving in Washington, D.C., said it could fuel an increase in alcohol abuse.

“We didn’t necessarily oppose this, but we did raise some concerns about it,” Griffin said. “There is a big body of research that says if you make alcohol cheaper, it can become more accessible. When it becomes more accessible, you have more instances of drunk driving and more instances of underage drinking. Those are two areas in MADD’s mission.”

Wicked Dolphin Distillery in Cape Coral bottles rum using 100% Florida sugar.

Other detractors of the excise tax cut have said it would result in lower alcohol prices and therefore more abuse.

Rooney disagreed.

“A slight decrease in the cost of alcohol beverages will not lead to people choosing to abuse alcohol,” Rooney said. “Alcoholism and addiction are diseases to be treated/rehabilitated from, and the idea that it can be diminished to a factor of a minor change in pricing is wrong.”

Fort Myers Brewing Company co-owner Jen Gratz-Whyte estimated the brewery would save $17,500 in 2018, a pivotal point in the company’s history. The brewery, which opened in 2013, just boosted its capacity from 5,000 to 13,000 barrels of beer per year. It will pay a $3.50 tax instead of $7 for every barrel of beer. The tax reduction is good for up to the first 60,000 barrels. A barrel contains about 31 gallons of beer.

Millennial Brewing Company in Fort Myers produced about 1,000 barrels in its first year of existence in 2017. It hopes to double that output in 2018.

Owner Tom List finishes fills bottles of Mr. Tom's Spirits Apple Pie Flavored Rum on Thursday, January 4, 2017, at List Distillery in Fort Myers.

But beer prices aren’t going down any time soon, Millennial co-founder and business manager Kyle Cebull said. He explained why not.

“If you break it down into how the math works out, if you take the $7 original impact in 31 gallons of beer, you’re going to get approximately 225, 16-ounce pints. You take that $7 and divide it by 225, and you’re talking about three cents. For a pint.”

With the excise tax lowering to $3.50 per barrel, it amounts 1.5 cents per pint.

“So on the whole, the net impact of excise taxes isn’t significant,” Cebull said. “But cutting expenses helps. Every dollar matters. We love investing in our business. Every good business reinvests. It’s a good opportunity for us to add another couple of fermenters to increase production.”

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The Millennial Brewing Company in downtown Fort Myers offers a variety of beers to include Second Amendment brown ale, left, American Revolution pale ale, center, and Angry Bird IPA, right.

Fort Myers Brewing Company will be adding three employees this year. One of those positions would not have been feasible without the tax cut, Gratz-Whyte said.

The cost of a pint of beer there, $4-$7 depending on the alcohol content, would not change, she said.

“We were expanding without this,” Gratz-White said. “But the tax cut is a huge help in that respect. If you’re spending less on taxes, we can put that money back into our business either to employees or new equipment.

“The flip side is the cost of all of our core ingredients have gone up. The price of grain and hops have gone up.”

The “craft beverage modernization act,” proposed last year by Senator Ron Wyden of Oregon, a Democrat, rolled into the new tax codes as a bipartisan effort. The tax rates have not changed since 1991.

TJ Jewell, left, the director of brewery operations and owner Rob Whyte watch as cans are filled with their beer on Friday at Fort Myers Brewing Company.

Scott Drenkard, director of state projects and an economist for the Tax Foundation, a non-profit tax policy analysis firm in Washington, D.C., said the two-year tax cut would generate some immediate benefits for businesses.

“You’ve got to remember, with any tax that’s levied on a business, the costs end up being passed on to individuals in one of three ways: Higher prices, lower wages or lower payouts to investors,” Drenkard said. “If you decrease the tax, you get commeasurable improvements in each of those three ways. So you’ll either see higher wages, lower prices or healthier shareholder payouts. It depends on the supply and demand curve in those industries.”

Parker Stafford sorts and boxes bottles of C Note Vodka on Thursday, January 4, 2017, at List Distillery in Fort Myers.

The microbrewers and distillers who don’t lower prices at the onset of the tax reduction may be forced to change their minds down the road, Drenkard said, depending on market conditions.

“The anecdotal evidence that it would allow them to bring on additional jobs, I think that’s a welcome sign,” he said. “We might see them forced to cut prices if other competitors in that market start cutting prices. Prices are determined by everybody in the market. Buyers, sellers, competitors. Even if they don’t plan on cutting prices, they might find themselves in a place that they have to if their competitors start cutting prices. It remains to be seen.”

At Mr. Tom’s Spirits in Fort Myers, owner/visionary Thomas List has five employees. He estimated his savings under the new excise tax codes to be $10,000-$15,000 a year.

“It’s perfect news,” he said.

Bottles of Mr. Tom's Spirits Apple Pie Flavored Rum move on the conveyor belt after being filled on Thursday, January 4, 2017, at List Distillery in Fort Myers.

But List did not plan on changing prices or personnel at this time. His shop offers 20 varieties of rum, vodka and other spirits ranging from $16.75 to $29.99, depending on the content and the bottle size.

“It’s only temporary, and nobody knows how it’s going to work out,” List said of the excise tax reduction. “If it works out (for the long-term), of course we want to hire more people. We want to see the reality of what happens next.”

Connect with this reporter: David Dorsey (Facebook), @DavidADorsey (Twitter).

Bottles of Mr. Tom's Spirits Apple Pie Flavored Rum are filled on Thursday, January 4, 2017, at List Distillery in Fort Myers.