Brazilian craft brewers struggle to keep taps open during economic recession

PORTO ALEGRE, Brazil —At Lagom Brewery & Pub, a beautiful, dark-wood room with tall ceilings and long tables, brewmaster Maurício Chaulet looks nervously around the mostly empty bar. Beer sales are down 10-15 percent at his pub, which has 35 craft beers on tap. With pints costing about $6 — three times as much as a mainstream beer — fewer Brazilians are ordering expensive beers in a slumping economy.

“Beer sales are slowing down with the economy,” said Chaulet, who has already been forced to lay off staff. “We spoke with other bar owners and they say the same. It’s becoming an expensive luxury.”

Chaulet says he’s continuing with plans to start bottling and distributing his craft beer next year, but he’s less confident that other small brewers will survive; he predicts that upwards of 100 smaller craft brewers will be forced to close in the months ahead.

Drinking beer has never been a problem for Brazilians. The country leads Latin America in per capita consumption of beer. But the idea of spending more for a craft beer is a novel idea in a nation where about 98 percent of beer-drinkers swill watery mass-market lagers such as Brahma, Antarctica, Bohemia, and Skol — all of which are owned by Anheuser-Busch InBev. Until recently, Stella Artois and Heineken were considered high-end suds in Brazil.

That started to change over the past decade as the country’s emerging middle class developed a taste for finer beers. Inspired by the artisanal beer movements in the U.S. and Europe, thousands of homebrewers popped up in the more affluent southern cities of Porto Alegre, Blumenau, and Curitiba, which already had a strong beer culture from the influence of German immigrants. But brewpubs have also appeared in poorer northeastern cities such a Belém and Fortaleza, turning out creative new beers like an açaí-infused stout.

But when the economy entered into recession this year, craft brewers felt the pinch. Brazilian beer production fell 11 percent in the third quarter of 2014, while the price of beer rose 6 percent with inflation, according to the Brazilian beer industry association Cervbrasil. In an attempt to stay afloat, some microbreweries told Fusion they are underreporting sales to avoid paying taxes, while others are smuggling products such as yeast to avoid import costs.

“Nobody pays taxes, except for us,” said Eduardo Bier, the founder of the nation’s oldest craft brewery, Dado Bier, which opened in 1994 in Porto Alegre. “People from the government have been asking me about this, they’re starting to crack down.”

Where the government sees tax-dodgers, proprietors see an unfair and unruly tax regime. The average Brazilian company invests about 2,600 hours calculating how to pay nine different taxes that suck up 69 percent of their profit, according to the World Bank. Craft brewers say that for every beer they sell, nearly two-thirds of the price is consumed by the government. The remainder is split between producer, distributor, and seller. That makes the math of craft beer hard to swallow.

Larger commercial breweries reduce costs through economies of scale and tax breaks. But the little guy is left with a bitter aftertaste.

“We’ve been complaining for a while about how all the big brewers are given lower taxes,” said Murilo Foltran, founder of DUM Cervejaria in Curitiba Foltran. “It’s why we make beer at home— if you want to afford good beer, you have to make it yourself.”

Other small brewers hope the quality of their beer will help them ride out the economic downturn.

“Now it’s like a fashion movement — people are really discovering the taste of different beers,” said Leo Sassen, a national beer judge and homebrewer in Porto Alegre. Sassen thinks quality beer is only now coming into more consideration, and the economic downturn may actually help weed out the lesser brews. “People working in craft beer can barely pay their bills. They all think they’ll make money in the next year.”

While some brewers are hoping for relief in the form of tax cuts, others are banking on innovation to save the industry.

And they might not have to look much futher than the biology laboratory of Dr. Glauco Caon at the Federal University of Rio Grande do Sul, home to the country’s first 100 percent Brazilian-sourced homebrew — the first made with Brazilian yeast, barely and hops. The new formula could potentially reduce costs for craft brewers struggling under a burden of high taxes on expensive imports, which push up the price tag for a single 12-ounce bottle of craft beer to $5 – $10 in grocery stores and restaurants.

“We always take things from North America and Europe and try to replicate it. But this is Brazilian,” said Dr. Caon, 46, who discovered the new strain of yeast in the Serra Gaúcha highlands of Rio Grande do Sul.

It will be years before Dr. Caon’s new variety of yeast might be commercially available, but the development can’t come soon enough for Brazilian brewers.

“The volume of beer consumption is not enough to support all the breweries,” said Dr. Caon. “It’s a dangerous market situation.”

Stephen Kurczy, a Brazil correspondent, has reported from the favelas of Rio de Janeiro to the jungles of the Amazon. Somewhere along the way he became addicted to açaí, a purple slushy made from the powerfruit.