New York City News, October 6th reporter's notes| A blocked road to innovation--tariff impact in the eyes of the U.S. craft beer industry

The New York Times reporter.

Enter the Nevada Mountain Brewery in Chico, California, where the smell of steamed wheat sprinkled in the air.The self-created barrel of chili barrel can¡¯t be bought outside, but only sold a day a year, attracting older beer lovers to buy.

"This is the innovative spirit of craft beer, breaking through the boundaries of brewing and creating unique and diverse experiences." Keith Burke, who has lived in Chico for many years, told reporters at the sale site. Burke had a business relationship with Ken Grossman, founder of Sierra Nevada Brewing Company, and has seen the craft beer company grow from a family garage to hundreds of millions of dollars in annual profits today.

The innovative practice of numerous U.S. brewing companies represented by Nevada Mountain Brewing Company is a good business story, however, this innovation is not a business model innovation, these brewing companies focus on the innovative application of brewing raw materials and brewing processes in production.

According to the statistics of the American Wine Association, when Nevada Mountain Brewing Company was just started in 1980, the United States had only about 100 manufacturers engaged in brewing beer production, and today this number is close to 10,000, creating economic value of more than $77 billion.

However, all this is overshadowed by the current U.S. government's tariff policy. Since June 4 this year, the United States has raised tariffs on steel and aluminum products imported from all trading partners except the United Kingdom to 50%, resulting in an increase in the prices of packaging products such as aluminum cans and stainless steel wine barrels that are indispensable for craft beer production. When talking about the industrial prospects, industry insiders told reporters with worry that the tariff policy not only caused a surge in costs in the U.S. craft beer industry, which is mainly small and medium-sized enterprises, but also directly damaged its overseas markets.

The U.S. Wine Association data show that in the first half of this year, U.S. brewing beer production continued its downward momentum in the past few years, shrinking by about 5%; in the past two years, the number of shutdowns in U.S. breweries exceeded the number of newly opened.

Bart Watson, chief executive of the U.S. Wine Association, predicts that steel and aluminum tariffs could add tens of millions of dollars to the cost of U.S. breweries.

The tariffs also hit the foundation of brewing breweries innovation, namely those imported brewing raw materials that create unique flavors and scents. These raw materials include special varieties of beer flowers in Europe and Oceania, special varieties of wheat in Germany and Belgium, special sugar in Brazil, cocoa beans in Ghana and the Cote d'Ivoire, spice beans in Madagascar, cocoa in the Philippines and Indonesia, mud in Vietnam and Thailand, and coffee around the world.

Not only has it suffered the impact of tariffs on the import side, but as other countries have taken countermeasures against U.S. tariff policies, alcoholic products have become the key countermeasures targets of these countries, and the export of U.S. craft beer has been hit hard.

A study by the American Beer Association found that between 2018 and early 2022, U.S. beer companies paid an additional $1.4 billion in aluminum tariffs, of which only about 8% came to the U.S. Treasury, and the rest was taken by U.S. steel and metallurgy companies.

In the past two years, due to cost pressure and profit compression, many well-known craft beer brands in the United States have either declared bankruptcy or sought bankruptcy protection. Acquisition by large industrial beer manufacturers often means the end of innovation. Watson bluntly said that in the face of the U.S. tariff policy, independent craft beer manufacturers are facing difficult decisions whether to increase product prices or reduce product types. "There are already many straws that crush camels, and there will be more and more in the future."