Legislation Brewing to Help State’s Small Brewers

Tara Nurin | March 5, 2012 | Budget, More Issues
New law would expand production, remake sales structure for NJ's microbreweries

When Ocean Township native Mark Edelson opened Iron Hill Brewery & Restaurant in Maple Shade almost three years ago, he hired 100 employees to prepare and serve food, clean dishes, work the bar, and brew his nationally award-winning beer. As owner of eight other Iron Hill locations in Pennsylvania and Delaware, Edelson dreams of spreading his concept and his beer across New Jersey. But he won’t be able to do that. State law limits him to two brewpubs and prohibits him from selling or sampling beer outside his always-bustling establishment.

So Edelson is supporting legislation being considered by the Senate Law and Public Safety Committee today that would revolutionize the laws that govern the microbrewing industry in the state. If passed as written, the bill will raise the amount breweries can produce per year and will allow brewpub owners to own an unlimited number of properties, participate in tasting events, and sell their beer to stores and restaurants. Additionally, the bill seeks to permit small production breweries (those that brew for distribution instead of on-premise consumption) to sell their beer directly to the public by the case and by the glass, both at the brewery and at up to 10 exclusive salesrooms. As it stands, production brewers can sell direct only to visitors who tour the facilities and only in amounts not to exceed two take-out six-packs. Visitors can sample four two-ounce beers after their tour but can’t drink a full adult-sized serving.

“We’re a company that’s expanding. But what the law currently allows seems ridiculous,” said Edelson, who’s in the early stages of siting a second Iron Hill in South Jersey. “If we couldn’t do anything else in New Jersey, we’d continue to expand in other states.”

Boasting 15 percent growth in the first half of 2011, the artisanal beer industry is one of the nation’s few economic bright spots. Since the mid-1990’s, New Jersey’s nearly two-dozen craft breweries and brewpubs have added 700 jobs. With at least four more breweries slated to open this year and the state’s largest craft brewery doubling its capacity, New Jersey’s brewing industry continues to generate jobs and tax revenue.

Despite this, New Jersey remains 32nd in domestic beer production, while Pennsylvania ranks second, New York ranks seventh and Delaware ranks 19th. Supporters of the bill argue that New Jersey’s prohibitively restrictive laws in relation to those of its bordering states provide yet another example of its anti-business climate.

“Most of what this bill’s about is allowing us to market and support tourism,” said Gene Muller, co-owner of Cherry Hill’s Flying Fish Brewing Co. and the treasurer of the Garden State Craft Brewers Guild, which spearheaded the bill. “A lot of the small brewers aren’t even in liquor stores yet so people are coming from a distance to buy their beer. And they can only buy two six packs.”

State Sen. Donald Norcross (D-Camden, Gloucester), who chairs the Law and Public Safety Committee, is a co-sponsor of the bill. He’s sensitive to these limitations, thanks in part to extensive conversations with his high school friend, Andy Newell, who’s Muller’s partner at Flying Fish. Norcross, who noted 95 percent of the calls and emails he’s received on this issue have been in favor of the bill, said he’s confident it will pass committee because it enjoys bipartisan support.

“What we’re talking about is economic development,” he said. “It’s about putting New Jersey first. I think it’s a win all around.”

But not everyone views it this way. Before changes to the legislation were negotiated, the New Jersey Restaurant Association opposed the bill, as did the NJ Wine and Spirits Wholesalers Association and the NJ Licensed Beverage Association, among others. The restaurant association worried primarily about a provision that would allow owners of production breweries to open restaurants where they could cheaply sell their beer, plus wine and spirits and beer brewed by others. The other associations also feared this component, along with those that would expand brewers’ ability to sell directly to the public without utilizing a wholesaler as a middleman, as is generally required by current law. As lobbyist Jeff Warsh, who represents two of these organizations, explained, the U.S. Supreme Court ruling that requires states to apply alcoholic beverage laws equally to in-and-out-of-state producers means that large-scale outside brewers could open dining establishments in New Jersey that would enable them to bypass the wholesalers and restaurants that currently distribute and serve their beer.

“It may seem innocuous on the surface. And it’s nice to help the in-state guys. But we have to be careful if we open the door and let in out-of-state entities. The impact may not be good for New Jersey interests,” said Warsh.

Though no one would discuss specifics of the changes, several sources interviewed for this story hinted that the restaurant ownership provision has either been eliminated or drastically modified. As to arguments that wholesalers and restaurants stand to lose money any time a producer circumvents them, supporters of the bill believe these entities can actually benefit from encouraging brewers’ efforts to attract more customers. After all, they say, breweries of any measurable size will still choose to distribute through wholesalers and bars and restaurants, as well.

“I don’t understand where they think they would ever be losing any money,” said Jeff Linkous, founder of BeerStainedLetter.com, New Jersey’s primary website for beer policy news. “If it is a top-notch beer that people like, they only thing they have to do is carry that beer.”

Despite their stated desire to work with their wholesale and bar/restaurant partners on crafting a compromise bill, brewers are frustrated that these critics claim it’s reckless to pass a law that demands such “major structural change,” as Warsh called it.

“It’s not a huge structural overhaul,” insisted Edelson, who said proponents of small-scale brewing took a tentative approach when they drafted the 1994 bill that allowed for the creation of independent breweries and brewpubs. Just as New Jersey’s winery laws have modernized with the growth of the state’s viticulture industry, he said, it’s time for brewery laws to catch up, too.

“They put in a little bit of a foot in the door,” he said of the original craft brewers. “And now we’re bumping up against these [regulatory problems] because we were so far behind.”