There was a time when craft and artisan beer styles were the domain of small craft brewers operating in relative obscurity. Today the wave of continued growth of craft breweries has caught the attention of mega brewers. Milwaukee‘s MillerCoors LLC has caught the wave and is replicating the art of craft beer brewing and taking lessons from craft brewers on a larger scale.

Within MillerCoors LLC’s State Street Brewery, research supporting new beer formulations takes place in a dedicated pilot brewery. Here, various combinations of hops, malts and other ingredients are test brewed in hope of developing a uniquely flavored beer product with great appeal.

Focus groups are used to provide further refinement of the development process. Group members provide feedback that may result in changes to the recipe. Development costs can be significant. The payback for the risk is the expectation of a new offering with strong market demand.

The formulation process can be a bit speculative in nature. Not every formulation may result in a payback. This reality is common to megabreweries, microbreweries and everything in between. Fortunately there is a financial offset for product formulations that don’t pan out. The IRS allows a tax credit for research and development costs. It’s applicable to a number of industries including those that produce beverages and food products.

Most large organizations take advantage of it to the extent allowed by the IRS. Certainly MillerCoors captures this credit. For smaller organizations such as microbreweries and small boutique food makers, the tax break is often overlooked. Other times organizations may not pursue the research and development tax credit due to the amount of documentation and recording keeping required to substantiate the credit.

Are you a craft brewer testing new formulas? Or a regional brewer struggling to keep your head above foam with an endless array of flavor options? Maybe it’s time to take a lesson from the beer giants. If your business hasn’t tapped into research and development tax credits Chortek can help. We can advise you of accounting methods and process controls that accurately capture and compliantly report your R&D costs to the IRS.

Chortek LLP – Offering beer barons small and large, a better choice for accounting and business advisory services.

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Written by Mark Albrecht, CPA, CGMA | Partner
Posted in Business Advisory, Craft Brewing