FINANCE AND BEER

Evening Post, Volume CXV, Issue 120, 24 May 1933, Page 12

FINANCE AND BEER

INFLUENCE ON REVIVAL

AMERICAN BANK OPINION

. '■• Evening Post," May 24. j legalisation of 4"per cent, alcoholic beer j 5n the "United States by an Act of Congress arid its results are ■ dealt with at 'some length by the Guaranty "Trust of j •INew York, one of the greater banking institutions of the world. On the date of ■; the Act, of 48 States in the Union, 23 sanctioned the sale of beer and -wine, 12 (•were in a. position to legalise the sale of these beverages by statute, and the other: S tales: had Prohibition clauses in their, Constitutions. ■ ' ' . ,• / The bank remarks that opinions, vary as' to the effect of brewing operations on business* 'They range from- the ultra-con-servative view that the legalisation of beer ■will \ have no material effect ori 'general business revival to the sanguine; belief that the consumption of beer by the American people will,, in some miraculous manner effect a speedy, and re f covery of business, ifree. the .Government from all' Budget difficulties, • and solve hiany economic problems that have stubbornly resisted tho efforts of _some <jf-the-best .minds'hi tho country. There is little support for either of these views —and fortunately so. A sudden wave ol peak business activity stimulated by nothing more than a temporarily abnormal demand fpr beer would very -likely prove to'-be-a'1 false prosperity';and> one. tlia^ would completely collapse as soon as legal' becrAceaaedto'be, a novelty, and demand dropped to :iiormal proportions. On the other hand, it would be extremely1 disappointing if (the weltoeasoned and conservative beliel that processes necessary to place'beer'before the American public ■\youldhavo a-moderate, but far-reaching, beneficial influence, on many branches ot industry should prove false,THE BREWING INDUSTRY. "However, all available data make it inconceivable that the revival of an industry as large as the brewing busiuess, with its vast network of /relationships to many other branches of industry, could take place without exerting'a Very substantial influence on actual trade levels, and, what is more important, on business sentiment. ""An idea of the size of the brewing industry before the war is gained from a report of the Bureau of Internal Revenue in 1914 that listed 1392 breweries, ..having an estimated capital ,' investment At 792,014,000 dollars and employing morfc than 77,1)00 workers, with about ■' 350,000 more engaged in allied •.industries. In--1916, the farm products cpnsumed_by the breweries amounted to about 107,750,000 pounds of rice; 604,890,000 pounds of corn aiid corn products; 39.000,000. pojuids :gf Lops; 109.000.000 pounds of sugar"- and syrup; 146,000,000 pounds of grits;'wheat, and barley; and 69,000,000 pounds of 'acids, jfctracts, salts, and yeast.', ■ .-...':-■■' To renew operations of an industry ,01 this size, especially at. a. .time of general Imsinass stagnation, tlxe.bank observe*, is bound to Quicken the pulse oF many lines; of business; but views regarding the ex■teij; Of these) benefits vaiy. Many such "estimates emanating at' tins early . date from various lines of business appear to be^generously flavoured with hopes aiid •wishes; and, until their validity becomes •established, it is'best to avoid using them in' any prognostication. . , t t ON OTHER TRADES. * ' "Notwithstanding this: thoroughly human (enthusiasm, there are several; estimate's of fcmore reliable nature that leave no doubt that the economic activity required to rehabilitate the brewing industry is far from »,negligible factor in the business outlook. ■The P. W. Dodge Corporation has estimated an outlay of 65,000,000 dollars during the four months, ended August; 31 to remodel old plants and to build new ones, end an expenditure of nearly 400,000,000 dollars'in construction will be- required to bring the industry up to its pre-war jsapacityi ■'.'/. ,'.'■' '■ . • ■■"■ • ■ Another'estimate stated that about SfJO.OOO.OOO dollars in extra, advertising, was placed' in- newspapers during, the 'week following the legalisation/of beer; A recent tally-showed only 200,000 kegs hvailableY while -the requireihehts before Prohibition totalled 17,000,000 kegs. Reports indicate, that the steel industry .is planning to. produce on a large scale steel pitchTHned ,keg*, an innovation in ;the'l),eer industry...'. ~ • ,■•. '. '•'. ", ~ . ■•■ '■ ;-. .' ."Plants producing wooden kegs, bottles, (ttoqden cases, tin bottle caps, and a fe>V -'^others' are: n6iy operating at capacity, jwhereas a' few months ago their' operations' limited. Motor vehicle manufacturers' are prepared.to. increase operajti'ons as soon as orders for delivery_ equipia'ef\t.arc ; placed; the railways anticipate 'a ;'jnew source1, of freight. '! ; , ESTIMATED REVENUE. i'The United States Treasury Department lias estimated an .annual.tax yield from beer of 125,000,000 to 150,000,000 dollars, jwhile. the/ brewers'' estimate is 200,000,000 collars..: However, if certain, assumptionsare accepted, the taxation of beer contains some'very amazing possibilities, the ' bank, remarks. Should the consumption of iftalt liquot's in any year in the future reach the 1913-16 average; the Federal Government's income at the current-tax i;k'te of's dollars a keg would' approximate 323,350,000 dollars, or almost half 'pi the total expenditures chargeable against jordinary income in 1917. •• If allowance is made for the\ increase in population since 3916, the total. becomes even larger. In .weighing this consideration, however, it should be remembered that the present tax rate, and the cost of the product to ihe Qonstimer.are substantially higher than .they were before Prohibition. , 'MAY QIVE IMPETUS TO TRADE. '■JThe actual contribution to business rejftjval that may be made by-the psychological, influences of the legalisation of beer \H: admitted by the. bank to be problemja,tical;..but on one point many are agreed. •3;he business .structure of the United I States has been readjusted and reorganised i,te a point where, barring unforeseen adi yirse' developments, a measure of revival ' jftay ■ occur in the hot distant future. ' At, [similar periods in the past, some one ', stimulating. economic factor served as the [fiprce that gave the initial impetus to the Ijyrocess of recovery. It is hot impossible [that the.activity growing out of the manufacture and distribution of beer, combined |jwith the' 'greater confidence that' it lias ;tepread -throughout business communities, [may bring to American business a rouch'■jieeded "push." ■■•■.-.■ : •