Change may be brewing in Oklahoma beer market
BY WAYNE GREENE World Senior Writer
Saturday, October 15, 2011
10/15/11 at 7:21 AM
Oklahoma's official state beverage is milk, but you can drink that anywhere. The drink that is uniquely popular in the state is 3.2 beer.
Last year Oklahomans consumed 76.5 million gallons of beer - 28.8 gallons for every person of legal drinking age - and more than 89 percent of that brew was the low-point variety available in grocery and convenience stores.
Low-point beer is sold in six states and is only popular in one - Oklahoma.
The Sooner State accounts for 55 percent of the nation's consumption of 3.2 brew, according to the Beer Institute, the national trade group and lobbying arm of the brewing industry. But change may be brewing in Oklahoma's beer market.
Strong beer is increasingly popular in the state. In 2010, strong-beer sales were up 32 percent in Oklahoma, while low-point beer sales declined 4 percent, the Beer Institute reports.
Low-point beer is still dominant in the Oklahoma market - accounting for 89.7 percent of beer sales in the state - but two proposals fermenting in the state Legislature could cause strong-beer sales to foam.
- A task force is considering whether strong beer should be sold in convenience and grocery stores. That plan may or may not come with a provision that would allow liquor stores to sell refrigerated strong beer.
Either move would almost certainly undercut the low-point beer market. Kansas has refrigerated beer in liquor stores and sells less than a fifth of the 3.2 beer as Oklahoma. Missouri has strong beer in retail outlets. While low-point beer remains legally available, its sales are insignificant.
- Another legislative proposal would move the state sales tax on 3.2 beer upstream from the retailer - either combining it into the existing excise tax or having the sales tax collected from the retailer by the beer distributor.
Either way, the shelf price of 3.2 beer would go up. While backers of the proposal say the actual cost would remain the same because low-point beer would be sales tax-exempt at the checkout counter, beer distributors worry that the higher shelf price would change consumer decisions, pushing buyers to go for smaller quantities, lower-priced products or strong beer at the liquor store, which would appear relatively less expensive.
The pending legislative initiatives put a new focus on the state's unofficial beverage of choice.
While Oklahomans may be familiar with 3.2 beer, its definition and history are obscure.
Also known as low-point beer, it's brew that is 3.2 percent alcohol by weight, which is one of the beverage's peculiarities. Most alcohol is measured in alcohol by volume. Low-point beer is actually 4 percent alcohol by volume. Strong beer can be of any strength higher than 3.2 alcohol by weight.
Historically, 3.2 beer came to the state in 1933, when the 21st Amendment repealed national Prohibition. Prohibition was still the law in Oklahoma, but a state referendum defined 3.2 beer as a "nonintoxicating beverage," which allowed its sale, largely so it could be taxed.
Regardless of what the law says, many Oklahomans know that 3.2 beer certainly can be intoxicating. There remains a healthy debate about whether it's any good or not.
One major brewer says its product should taste the same - whether it's brewed to Oklahoma strength or not.
"We brew our beers for consistent taste, regardless of the alcohol content allowable under state regulations," said Mark Bordas, region vice president for state affairs for Anheuser-Busch, maker of the two best-selling beers in the U.S. - Budweiser and Bud Light.
Charlie Bamforth, Anheuser-Busch Endowed Professor of Brewing Science at the University of California-Davis, said there's no reason a low-point beer can't be as tasty as a higher-octane alternative.
Although he hasn't done a side-by-side comparison of Oklahoma's low-point beer, many beers in the United Kingdom keep their alcohol levels low for tax reasons.
The average beer in the United Kingdom is 4.2 percent alcohol by volume, which is 0.2 points stronger that Oklahoma's brew.
"Clearly ... it is possible to make pretty strongly flavored yet lower alcohol products," he said.
Bamforth said 3.2 beer drinkers have the advantage of being able to drink more without getting drunk.
"There is a constant rate of metabolism of approximately 100 milligrams of alcohol per hour per kilogram of body weight," he said. "Clearly the lower the quantity of alcohol that is ingested, the lower will be the concentration in the system prior to its removal."
Low-point beer isn't strong beer that has been diluted at the brewery, Bamforth said.
"The standard approach is to brew in the normal way, but to a lower gravity, which basically means a lower concentration of fermentable material presented to the yeast," Bamforth said.
Would the big brewers still be interested in making 3.2 beer if Oklahoma changed its laws in such a way as to undercut its dominance of the state marketplace?
Bordas said that's too hypothetical a question to address at this point.
"We would certainly look at and evaluate any changes to Oklahoma law, but we cannot speculate on changes that would be made to our business model before considering the impact on the industry and our consumers," he said.
Oklahoma beer facts
- Oklahoma accounts for 55 percent of the 3.2 beer sales in the nation. Utah accounts for 27 percent. The rest is sold in Kansas, Colorado, Minnesota and Missouri.
- Oklahoma ranks No. 30 in the nation in per-capita beer consumption. New Hampshire - at 44.2 gallons per legal-age person is No. 1 - although that figure is somewhat skewed by sales to out-of-state buyers taking advantage of a tax differential. Utah has the nation's lowest per-capita beer consumption: 19.4 gallons per person over the age of 21.
- Canned beer accounts for 62.9 percent of Oklahoman beer sales, compared to 51.9 percent nationally. Draft beer accounts for 5.6 percent of Oklahoma beer sales, compared to 9.5 percent nationally.
- Oklahoma is home to 13 breweries, 45 beer wholesalers and 6,738 beer retailers. That adds up to 16,172 jobs and $493.6 million in wages.
- Beer distributors pay $11.25 in excise tax for every 31-gallon barrel coming into the state. That added up to nearly $25 million in 2010. Strong beer pays a $12.50 per barrel excise tax, which produced about $3.2 million in state revenue last year. Low-point and strong beer are both subject to state and local sales taxes.
- Beer is responsible for $68.6 million in excise and sales tax revenue for state and local government and another $85.4 million in business and personal tax revenue from the companies and workers linked to it. Oklahoma beer contributes another $144.6 million in federal tax revenue.
Source: Beer Institute
Original Print Headline: Change may be brewing in Oklahoma beer market
Wayne Greene 918-581-8308
wayne.greene@tulsaworld.com
Associated Images:
The first legal appearance of beer in the history of eastern Oklahoma took place July 12, 1933, in Tulsa in front of the World building. At that time, W.L. Suycott of Tulsa, on behalf of the Anheuser-Busch Brewing company, presented a case of beer to Eugene Lorton, publisher of the World and one of Oklahoma's original beer advocates. Tulsa World file
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