The Business of Beer: What is Cider, Anyway?

Alex Fossi, October 28, 2013 -   

Cider's a weird bird. It's kind of like beer, in that it's bubbly, fermented with yeast, and similar in alcohol content. It's kind of like wine, in that it's made from fruit. Maybe we can think of it as a Archeopteryx -- not quite a dinosaur, not quite a bird, just as cider is not quite a beer, not quite a wine. It's its own beast, but it's similar enough to both wine and beer that it can end up getting tossed in with either, just as the Archeopteryx gets categorized alongside both dinosaurs and birds.

/turns off Discovery Channel

Okay. Anyway, cider's in a gray area between beer and wine. As such, it shouldn't be shocking that federal and state laws have as much trouble classifying it as we do. By federal law, cider is beer... unless it's above seven percent alcohol by volume. In that case, it's wine. Of course, if you get at least 25% of the sugars (which will be fermented into alcohol) from malts, then it's beer again. Oh, and the apples you use in cider? They don't always have the same amount of sugar, even within a single variety of apple. That means that the 6.9% ABV cider you made in 2012 might end up being 7.1% the next, and suddenly your cider is taxed as wine. Why does this matter? Well, if it's classified as wine, the amount you're taxed per gallon rises from around 20 cents to over a dollar.

Does your cider happen to be especially bubbly?  If it's above .39% carbon dioxide, it's legally champagne! That'll run you about $3.40 a gallon in taxes, which is about 17 times more than you'd pay if your cider was classified as beer. Hope the fizziness was worth it. These are just the federal laws -- individual states have their own taxes and regulations which add another level of complexity. Some Congresspeople are working on simplifying this, but as of now, it's a difficult situation for cider producers to navigate.

Despite the complicated legal status, U.S. cider production has more than tripled in the last six years. Now, that means tripling a relatively low amount -- total U.S. cider production last year was about 690,000 barrels (to provide some context, Sierra Nevada produces about 780,000 barrels of beer a year).

Even so, this growing sector has attracted interest from many of America's largest brewers. You might have seen Stella Artois Cidre on shelves recently; that's Anheuser-Busch's entry into the field.  MillerCoors has Crispin, as well as a new cider called Smith & Forge (cider! for men! no fruit on the label, just blacksmith words!). This is all pretty much what you'd expect so far -- just as craft beer's growth led to macros releasing their own "craft" options, the cider industry's growth is creating a market that macros want a piece of.

This brings us to California, where an odd law was passed recently. Up until recently, California treated cider as wine, so there was one license for breweries and another for cider makers. However, this new law would allow breweries to also produce and sell cider without a separate license. There's a catch, though. It only grants this permit to breweries that produce at least 1.9 million gallons of beer per year.  

1.9 million gallons translates to about 60,000 barrels, which means that larger craft breweries and macros will qualify, while smaller micro/nano outfits will not. Obviously, there are a number of groups upset by this, especially since the bill was not well publicized. Several cider producers reported only learning of the bill when news outlets contacted them for comment after its passage.

The backlash against this bill is exacerbated by a couple facts. One, it seems explicitly designed to allow large breweries to elbow their way into the cider market. It allows breweries to produce cider, but not vice versa, and the only breweries it helps are those that are already fairly large distributors. Two, the bill was "suggested" by Anheuser-Busch and sponsored by a state assemblyman who doesn't even have any breweries in his district. It's certainly possible that there were no shady dealings here, but it's easy to see why cider makers and small breweries would raise an eyebrow.

Perhaps the worst aspect of all this is that it creates a situation where microbreweries and cider makers are pitted against each other. Small breweries want to have the same permits as large ones so that they, too, can make cider. Cider producers, on the other hand, want to see the bill repealed entirely, since it creates all of this new competition for them. Instead of the opposition to the bill presenting a united front, you have different factions that all have different desired outcomes.

I don't harbor any illusions that all brewers and cider makers will be best friends forever and always have each other's backs or anything. After all, they're competing with each other. I do, however, think that when Anheuser-Busch "suggests" a bill that just so happens to benefit mostly themselves, it's probably in the best interests of local beverage makers to recognize that this isn't a trend that should be supported, even if it does seem to help their short-term interests. If A-B has that kind of influence over state law, I doubt they'll stop at suggesting just this one bill about cider.

Laws governing cider are confusing as it stands now, but this kind of simplification isn't the way to fix that. Hopefully, the California assembly will recognize that this bill isn't supporting the best interests of California's cider/beer producers and drinkers.

You can follow Alex on Twitter @AlexanderFossi.

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