Industry Update GLASS PACKAGING INSTITUTE BOARD MEETING, APRIL 30, 2015

Slide 2 The Business of Beer

Number of Breweries in US 1900 to 2014 February 1977 FET break provides a reduced excise tax rate for brewers that produce no more than 2 million of $7.00 tax on first 60,000 barrels. In 1979 President Carter legalizes home brewing.

US Domestic Beer Production 1990 to 2014 (31 Gallon Barrels) Source: TTB and Beer Institute, 2014.

Slide 5 Per Capita Consumption of Malt Beverages United States 1980 to 2013 (total gallons/total population) Source: Beer Institute, 2014

Slide 6 Beer, Wine, Liquor in Gallup Poll Young Males 18-29* years old Source: Gallup Poll, 2014; *legal drinking age is 21 - BI does not condone underage drinking

Slide 7

Slide 8 Overall Beer Industry Beer volume grew by 0.5 percent in 2014 – first year of overall volume increase since 2008 recession. The gains came mostly from imports and the craft segments. Lower unemployment rates and lower gas prices could have contributed to the upswing. But is that enough? Overall this year trends show a mixed bag – some channels up but some flat or down.

Slide 9 Package Mix

Slide 10 Share of U.S. Package mix in Glass

Slide 11 Threats and Trends to Beer Threats Volume declines as consumers switch to more expensive beer Loss of market share to wine and hard liquor/equalization Increased regulation or harmful legislation Trends Cider booming Continual growth of small brewers Consolidation

Slide 12 Taxes: The Most Expensive Ingredient

Slide 13 The Fair BEER Act The Fair Beer Excise and Economic Relief (Fair BEER) Act creates a graduated federal excise tax structure while maintaining a level playing field. Under the Fair BEER Act, all brewers and beer importers would pay a rising scale of federal excise tax:  No excise tax on the first 7,143 barrels;  $3.50/barrel on barrels 7,144-60,000;  $16/barrel on barrels 60,001-2 million; and  $18/barrel on every barrel above 2 million.

BarrelageCurrent Law 1-60,000 If annual U.S. production is under 2 million barrels, reduced rate is $7/barrel on first 60,000 barrels 60,001- 2,000,000 Every brewer and beer importer pays $18/barrel 2,000,001+ Every brewer and beer importer pays $18 per barrel on all barrels. No reduced rate on first 60,000 barrels Importers All importers, regardless of size, pay $18/barrel on all beer Small Brewer Definition Capped at 2M barrels (U.S. production only) BarrelageFair BEER Act 1-7,143 Rate reduced to $0/barrel on first 7,143 barrels 7,144-60,000 Rate reduced to $3.50/barrel on production between 7,144-60,000 60,001- 2,000,000 Rate reduced to $16/barrel 2,000,001+ Rate is $18/barrel with lower rates as shown above for first 2M barrels Importers Rates for all importers and all brewers are the same, making the structure WTO compliant Small Brewer Definition Unnecessary to define by barrelage Under the Fair BEER Act, all brewers and beer importers, regardless of size, pay the following taxes on a graduated scale. How is the Fair BEER Act different from current law?

Slide 15 Support for the Fair BEER Act Co-Sponsored by 64 House members and 8 senators Endorsed by: Beer Institute National Beer Wholesalers Association National Barley Growers Association National Association of Beverage Importers Hops Growers of America and the Washington Hops Commission Glass Packaging Institute Our goal is to either pass the Fair BEER Act or compromise with the BA to find common ground.

Slide 16 Other Issues FDA regulation of spent grains potentially imposes new costs. Rule to require menu labeling of nutritional information, including calorie count U.S. Dietary Guidelines, working with the Brewers Association and the Wine Institute to remove “standard drink” reference.

Slide 17 Our Answer to Equalization: Know Your Drink…Not all alcohol is the same

Slide 18 Thank you! The Beer Institute and its member companies want to work together for the common good of the entire industry. Our goal? To be United for Beer Jim McGreevy