Small Brewers Are Fermenting Hope for Passage of Brewery Law

Tara Nurin | July 18, 2012 | More Issues
By compromising and cooperating, New Jersey's craft breweries help ensure that an industry-altering law reaches the governor's desk.

Artisanal beer brewers around the state are cautiously optimistic about the governor taking action on a bill passed in late June that would greatly expand their ability to market and sell their products.

Supporters say the bill, which passed unanimously in the Senate and by a vote of 64-13-1 in the Assembly, sets a rare example of cooperation and compromise within the alcohol industry. Initially, stakeholders in the wine and spirits distribution and retail sectors lined up to oppose multiple provisions in the original bill drafted by the Garden State Craft Brewers Guild. By the time it passed, only the New Jersey Restaurant Association (NJRA) remained — and continues to remain — opposed.

“We worked for two years meeting with distributors, liquor stores, and taverns, among others, and they saw we have good intentions,” said guild treasurer Gene Muller, who helped negotiate a host of changes that eventually facilitated wide endorsement of the bill. “That never happens with liquor legislation in New Jersey because everyone’s got so much turf to defend.”

Among other things, the law, if signed, will allow owners of production breweries — brewhouses designed primarily for off-premises sales — to set up both an on-site tasting room to sell pints and bottles to visitors who tour the facilities and a sales room to sell up to half a keg of house beer, up from the current limitation of six packs. Owners of brewpubs — restaurants that brew their own beer — who can now operate only two in-state facilities, will be allowed to open 10. They will, for the first time, be able to sell their beer outside the restaurant by using licensed distributors to reach liquor stores, bars, and other restaurants. These brewpubs will also join production breweries in providing samples of their products at festivals and charity events.

In addition to the Anheuser-Busch InBev facility in Newark that produces Budweiser and Rolling Rock, nine production breweries and 15 brewpubs control the state’s microbrewed beer turf, a total number that’s grown by approximately 20 percent in little more than a year. Though figures aren’t available by state, small-batch beer production in the U.S. is surpassing most other beverages, as evidenced by its 13 percent increase last year. Members of the brewers guild are pleased that they were able to work with critics to avoid alienating most of their competitors and business partners on the way to stretching the parameters within which they conduct their operations.

That, however, doesn’t mean everyone was thrilled.

A Seat at the Table

“When all these amendments were put together, we did not have a seat at the table, and we would have loved one,” said Guy Gregg, who lobbied on behalf of the NJRA. According to Gregg, the association only opposes a single element of the final bill, the one that allows on-premises sales at production breweries. Muller contradicts Gregg’s account of the negotiating process, accusing the NJRA of refusing to compromise from the beginning, despite multiple meetings between stakeholders to attempt to craft a bill that would satisfy or at least mollify everyone involved.

Specifically, brewers made concessions to other liquor industry associations by eliminating provisions that would allow production breweries to sell food or operate exclusive retail outlets. It did the same with “free-standing” resaturants that would be owned but not located within a brewery and would be able to serve alcohol. The restaurant association, however, remained steadfast in its call for an amendment that would eradicate the on-premises sales that it believes poses a threat to its members’ bottom line.

“We don’t want to turn the brewery into a bar,” said Gregg. [Under normal circumstances], in order to sell product for consumption you have to have a C license.”

And those licenses, according to Gregg, are more expensive in New Jersey than anywhere else in the country. Unwilling to risk undermining the value of said license, the association refused to soften its position that drinkers should head to a bar to buy a beer, agreeing instead to allow brewery patrons to sample four-ounce pours after touring the brewhouse or join the public in buying up to half a keg for drinking elsewhere.

Muller, whose Flying Fish Brewing Co. will more than double production when it opens in its new home in Somerdale later this summer, contends that this kind of thinking is shortsighted, since it ignores the reality that breweries are drivers for tourism. And tourists, according to the owner of New Jersey’s largest and second-oldest independent brewery, tend to dine after they tipple.

“[The restaurant association] thinks that every dollar we get is a dollar they lose. We may get a dollar but they’ll get two dollars. After people take a tour they ask us where to go out to eat. And we have a list of places we tell them that sell our beer,” Muller said.

The Wine Factor

This concern proved a sticking point for at least one of the 13 Republican lawmakers who voted nay. Aside from fearing that the measure would ultimately lead to unintended competition, Assemblyman Anthony Bucco (R-Randolph) worries that this allowance would stoke a legislative uprising from the state’s wineries, who sacrificed a similar provision during their successful bid to update their regulations last year.

“If we give these breweries the ability to sell by the glass at their facilities the next thing we’re going to get is a response from wineries asking, ‘Why can’t we sell by the glass?’” he said. “Why don’t we just give everybody a liquor license? It would open the floodgates, and once we get to that step we’d be opening up all these mini-bars.”

Mark Edelson, who, as co-owner of the multi-award-winning Iron Hill regional brewpub chain possesses two state liquor licenses, argues that New Jersey’s border states, which all rank higher in per capita craft beer production, prove the model can work for everyone.

“Not only do they pour and sell beer, they can open a restaurant,” Edelson said in reference to production brewers in Pennsylvania and Delaware — two states where he also operates brewpubs. “There’s absolutely no degradation of liquor license value.”

Edelson also makes a strong pro-business case for loosening the laws. If they don’t change, he’ll reach his limit of two in-state brewpubs when he opens a location in Voorhees this winter. But the Ocean Township native has made no secret of his desire to expand “north and east” of his original Maple Shade store at a rate of one new location in the tri-state Greater Philadelphia region per year “if the climate improves in New Jersey.” If Governor Christie signs the legislation, Edelson and his business partners will be encouraged to develop up to eight more restaurants in his home state, with each new one adding 100 jobs to the economy.

Working in a Brewery

Supporters like Edelson tout the bill for being a job creator for other reasons, too. It’s estimated that every additional 1,000 barrels (31,000 kegs) of production requires one new full-time manufacturing employee. With 32,000 barrels of craft brew produced in-state in 2010, and brewpubs potentially soon reaching an eager audience outside their doors, even opponents like Gregg and Bucco acknowledge the law’s power to generate growth, and legislative sponsors credit job-creation and economic growth as motivators for their support.

“Companies like Flying Fish and Iron Hill continue to expand, and it’s important to foster that growth,” Senate co-sponsor Donald Norcross (D-Camden) wrote in a statement several weeks after attending the annual brewers guild beer festival that served beer from 19 New Jersey breweries to 600 attendees on the Battleship New Jersey. “That’s why I’ve pushed for broader regulations to encourage the economic development and job creation these businesses bring to the table. Otherwise we run the risk of allowing the industry to falter, pushing breweries into nearby states to spend their investment dollars.”

Primary Assembly sponsor Craig Coughlin (D-Woodbridge) adds that he’s “extremely hopeful” that Gov. Christie, who calls the creation of a business-friendly environment one of his top priorities and who approved a resolution to establish New Jersey Craft Beer Week, will sign it.

“It had bipartisan support. It passed overwhelmingly. It really is a pro-growth, pro-jobs, pro-business bill. It’s not inconsistent with a pro-business agenda,” he said.

If the governor agrees, Coughlin might enjoy celebrating the triumph over a pint brewed in the Garden State with those contributors who successfully compromised to bring what they consider to be needed progress to an increasingly popular sector of New Jersey’s small business owners, employees, and consumers.

“I enjoy a beer from time to time,” said the lawmaker whose district includes the J.J. Bitting Brewing Co. and Pizzeria Uno Chicago Grill brewpubs. “And I sometimes enjoy a craft beer.”

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