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Looming Tax Increase Spurs Beer Sale Boom During Holidays

December 2, 1990

MILWAUKEE (AP) _ Beer distributors are scrambling to find additional supplies to meet a surge in demand caused by drinkers seeking to stockpile their favorite beverage before the government doubles the beer tax in January.

The increased demand comes during the height of the traditionally brisk holiday season, pushing sales to the levels of the industry’s peak mid-summer season and raising fears of an impending shortage, wholesalers say.

James Pyzyk, general manager of Beer Capitol Distribution, a Milwaukee wholesaler providing specialty beers to about 900 retailers and 2,100 taverns, said his company is in the midst of a ″beer-buying frenzy.″

″We’re ordering four times what we normally order to accommodate the anticipated additional demand,″ Pyzyk said. ″We had to make arrangements for outside public storage. We ordered so much beer it won’t fit in our warehouses.″

On Jan. 1, the government will double the federal excise tax on a six-pack of beer to 32 cents. It is one of the large ″sin tax″ increases included in deficit-reduction bill signed by President Bush last month.

The Congressional Joint Committee on Taxation estimated the alcohol-related taxes would raise $1.3 billion in added revenue in 1991 and $8.75 billion over the next five years.

For the consumer, the tax will translate into an extra 16 cents on a six- pack or 64 cents on a case, analysts said.

The tax increase, however, isn’t the only thing that will strike beer buyers in their pocketbook next year.

The industry expects to raise the cost of a case next year by 33 cents at the brewery level, 20 to 30 cents at the wholesale level and 20 to 40 cents at the retail level to cover inflation and increased fuel costs, said Jerry Steinman, publisher of the industry newsletter Beer Marketer’s Insights in New York.

Anticipating a backlash next year after consumers learn of the estimated $1.50 rise in the cost of a case of beer, wholesalers are using a holiday marketing pitch that plays off consumers’ anger with the tax increase to spur additional sales in December.

Pyzyk’s company has ordered 500 signs urging consumers to ″Beat the Tax Increase,″ and he expects the banners posted at area retailers will fuel burgeoning sales even further.

″I know what a normal holiday is and I know what this holiday is and the retailers aren’t going to be able to handle it,″ he said. ″We’re going to get clobbered.″

Other retailers said the likelihood of a consumer buying two or three extra cases adds up to heavy sales.

″Retailers are gearing up for a mass consumer crunch. We’re seeing a peak summer season buying right now,″ said Kevin Mehl, general manager of Beloit Beverage Co., which distributes beer to 700 stores and 2,500 Milwaukee area taverns.

Unlike wholesalers, brewers are less concerned about the holiday surge. The nation’s top two brewers, St. Louis-based Anheuser-Busch Cos. Inc. and Miller Brewing Co. in Milwaukee, don’t plan to increase production.

″Because of our strong sales year, we are already producing at full capacity and have been since April,″ Anheuser-Busch president Patrick T. Stokes said.

Other brewers, like Miller, admit they are nervous about the effect of the excise tax and price increases and are not planning much beyond the standard holiday season marketing.

″We’re moving right along with our plans,″ Miller spokeswoman Patricia Brash said. ″We’re in a wait-and-see position just like everybody else.″

G. Heileman Brewing in La Crosse, the nation’s No. 5 brewer, hasn’t increase production yet but ″is ready to respond when the need arises,″ spokesman Bill Eiler said.

″We do anticipate a major increase in sales in December when consumers realize the retail price of beer will be increased on Jan. 1,″ Eiler said.

While the buying surge is welcomed by distributors and wholesalers, most are realistic that it won’t end with bare store shelves by New Year’s Day.

The main reason, analysts said, is that beer - unlike more durable items like cars, boats or jewelry which also face luxury tax increases next month - is not a pantry item because it has only 120-day store shelf life.

″Older beer does not taste as good as fresh beer. It’s like bread, the fresher it is, the better it tastes,″ Steinman said.

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