NORTH BAY -- After a number of accounting and advising firms have found a focus in serving the specific needs of the North Bay wine industry, demand from a different beverage category -- craft beer -- is highlighting another niche for tax and bookkeeping.
Many North Bay accounting firms with clients in both industries drew parallels between brewing and winemaking, including the heightened financial reporting requirements required as alcohol producers.
Yet as craft beer explodes in popularity in the North Bay and beyond, the accounting and tax nuances facing an ever-growing roster of craft brewers are becoming a topic of increased interest for the region's large and small brewers alike.
[caption id="attachment_75530" align="alignleft" width="160"] Tom McCormick[/caption]
"For many years, a lot of us were driving in the dark, trying to help each other. It was easier to get someone to help you with equipment and sourcing ingredients than finances," said Tom McCormick, executive director of the industry trade group, the California Craft Brewers Association. "It's just now beginning to develop where we're seeing some people who are popping up to serve our industry."
Sonoma County craft breweries, along with distillers and cider makers, were responsible for nearly $450,000 in outside accounting, tax preparation, bookkeeping and payroll services in 2012, according to the first-ever Sonoma County Craft Beverage report released last week by the Sonoma County Economic Development Board.
Those breweries -- currently 18 in Sonoma County alone -- range widely in size. The largest in the region, Petaluma's Lagunitas Brewing Company, produced more than 250,000 barrels of beer last year and plans to produce over 2 million after expansion both locally and within a new Chicago facility, according to the EDB. Other larger-scale producers include Cloverdale's Bear Republic Brewing Company and Boonville's Anderson Valley Brewing Company.
Yet production volume drops significantly from there, with even venerable brewers like Santa Rosa's Russian River Brewing Co. producing 12,480 barrels in 2011 -- the only other North Bay craft brewery producing more than 5,000 barrels that year. And even Chico's Sierra Nevada Brewing Company, which produces nearly 1 million barrels a year as the largest craft brewer in California, still represents only 1 percent of the production of Anheuser-Busch Inbev, Mr. McCormick said.
[caption id="attachment_75531" align="alignleft" width="180"] Ken Dansie[/caption]
The majority of breweries "are essentially small businesses," said Ken Dansie, partner in the Private Company Services Group of BPM, accountants and consultants in the North Bay. Limited resources make planning for a capital-intensive expansion more difficult, even when a large demand exists.
"When you have a small craft brewery starting to produce, the underlying capital costs just to get started are significant," he said, noting the cost of production brewing equipment. "Going from doing your first brew underneath your stairs to selling 1,000 barrels a year are very different things."
The depth of planning required for an expansion puts a premium on professionals catering specifically to the craft brewing industry, though Mr. Dansie noted that the number of specialists are still relatively few in number. And even amid surging demand, a small brewery may find those advisers out of financial reach.
As one aspect of financial planning, the tax code has continued to evolve in respect to craft brewers in recent years. While aging beer in wooden barrels once used for wine or spirits has become a widely adopted brewing technique, those beers were until recently subject to the higher excise tax reserved for liquor in California. That changed last year, when North Coast Assemblyman Wes Chesbro's proposal to reclassify those beverages as beer was signed into law.