Stateways Sept-Oct 2014

StateWays is the only magazine exclusively covering the control state system within the beverage alcohol industry, with annual updates from liquor control commissions and alcohol control boards and yearly fiscal reporting from control jurisdictions

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47 StateWays Q Q September/October 2014 room for everyone in the market, basic math might sug- gest otherwise. If a typical bar has every tap dedicated to a beer but for the one that's reserved for specialty bever- ages, then the huge infl ux of new hard ciders likely means that each cider brand will enjoy shorter and shorter rota- tions, leaving smaller windows of time in which brands can attract new devotees. To keep the consumers coming back and asking for their brands, the smaller, established makers swear by the relationships they've built over the years with distributors and consumers. Mammoth new- comers, on the other hand, are saturating the airwaves with ads. Someone's going to be proved wrong, unless bar owners can be convinced that it makes sense to add another specialty tap for a drink has currently has only one taker for every 100 beer drinkers. "It's not an industry for the faint of heart," House says. "Distributors are diffi cult to deal with, and there are fewer and fewer of them. Some of these artisanal guys will have to take a farmhouse position, or do direct mail. It will be diffi cult to be a marketer of a cider brand if you don't have years of experience with it." Then there's hard cider's fuzzy tax status with the Inter- nal Revenue Service that penalizes cider makers more than brewers or winemakers. Under the present code, cider is taxed as a beer until its alcohol content reaches 7% by vol- ume, at which point it's taxed at the higher rate for wines. On top of that, cider suffers an even higher champagne tax if its carbonation level reaches 39%. Of course, it's impos- sible to explain the vagaries of federal tax code to apples, whose sugar content varies from year to year, making hard cider's alcohol content change from vintage to vintage. It's a no-win situation, as observers have noted, be- cause American consumers like fi zzier ciders. So if makers put out the cider that consumers want them to, the IRS takes more of their money. But if they put out the cider the IRS encourages them to, fewer consumers buy it. In the House of Representatives and the U.S. Senate, respec- tively, U.S. Rep. Earl Blumenauer (D-OR) and U.S. Sen. Chuck Schumer (D-NY) have sponsored their versions of the Cider, Investment & Development Through Excise- Tax Reduction, or CIDER, Act, which would loosen tax restrictions and bring U.S. cider laws more in line with their European counterparts. But no one's holding their breath on any law getting passed in Congress these days. There's even debate about where hard ciders belong in stores — no small matter when, according to Rowell, grocery sales account for 40% to 43% of sales. He says it's time cider came to be considered its own category, instead of being lumped in with beer. "We want to defi ne ciders within themselves, and we still need to defi ne ciders within the market," he says. "It's led to a lot of confusion in the market, even with the big guys coming in. Some say cider should be in the beer The Vermont Hard Cider Co. has been producing the Woodchuck line of hard cider for de- cades and is riding the wave of the category's new- found popularity. Imported and marketed in the U.S. by Heinek- en USA, Strongbow launched two additional hard cider fl avors earlier this year, Strongbow Honey & Apple and Strongbow Gold Apple. cooler. Some say it should be in an alternative place. I think ciders should be with ciders." Still, big or small, premium or value, cider makers don't hesitate to say they expect the sweet times to only get sweeter in the near future. "It's an exciting time for our category," Aguilera says. "And we really believe we've got a big winner here." ACE Hard Cider positions itself as a higher-end product in the growing num- ber of segment offerings. At 4.5% abv, Somersby Hard Cider is made by Carlsberg, in Denmark. The brand debuted in the U.S. last year.

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