Craft Distillers Ask State to Repeal Prohibition-Era Laws

Tara Nurin | October 15, 2012 | More Issues
Discouraged by outsized fees, most small-batch distillers can't set up shop or add their contributions to state coffers, advocates argue

Credit: Tara Nurin
James Yoakum, founder, Cooper River Distillers.
The owner of New Jersey’s largest estate winery would like to do it. So would the mayor of Princeton Township. But so far, the only person to open a distillery in post-Prohibition New Jersey is James Yoakum. The 27-year-old Philadelphia real estate broker is waiting final approval to start legally making his Petty’s Island Rum and other spirits in a former garage in downtown Camden.

As a one-man operation that will at first produce no more than 2,500 gallons of liquor annually, Yoakum’s Cooper River Distillers falls well within the bounds of a “craft distillery,” according to a working definition adopted by The American Distilling Institute (TADI), the nation’s leading proponent for small-batch distilling.

But under current New Jersey law, Yoakum’s miniscule volume is not a factor in the type of license he will likely obtain by the end of the year. Because he plans to produce spirits from scratch, he’s waiting on a Plenary Distillery License that carries a $12,500 annual fee and will be one of just two active in the state. The other is by held by Monmouth County’s Laird & Co., which sells its famed Apple Jack and other spirits to 49 states, three foreign countries, and the District of Columbia. These fees have surely contributed to the fact that no other entrepreneur has fired up a from-scratch distilled spirits manufacturing facility in New Jersey since before 1919.

“The only thing stopping us currently is the price of the license,” said Tom Sharko, owner of Alba Vineyard and Winery in Milford, who would like to produce Port, grappa, brandy, and eau de vie from fruit he grows on his farm. He currently settles for fortifying his wines by buying brandy out of state and pouring it into his wine bottles.

Sharko is supporting the efforts of Princeton Township’s mayor, Chad Goerner, another would-be distiller, to raise awareness of identical bills languishing in the Assembly (A-1464) and Senate (S-463) law and public safety committees that seek to follow a national trend toward the creation of new classes of licenses that recognize the distinct needs of micro-producers.

The bills, introduced for the second year in a row into the Assembly by Reed Gusciora (D-Trenton) and into the Senate by Shirley Turner (D-Trenton), would establish a Craft Distillery License with an annual fee of $938. Producers manufacturing 20,000 gallons or less would qualify, provided they source at least 51 percent of their ingredients in-state.

The law would also clarify the rules covering on-site public sampling, allowing micro-distillers to pour up to three one-ounce samples per person per day. Gusciora and Turner modeled their bills after state laws passed earlier this year that relax regulations for sampling local beer at craft breweries and local wine at off-premises tasting rooms, as well as legislation that, by supporters’ accounts, has proven successful in other states.

The lawmakers introduced the bill last year at Goerner’s urging, moved by his arguments that, like craft breweries and farm wineries, small-batch distilleries would create a cottage industry to add to the 1,200 jobs directly supported by the nation’s micro-distilling industry and the estimated annual $200 million it contributes to the national economy. This new industry, Goerner argued to the receptive legislators, would supply additional sources of revenue to farmers and grow the state’s burgeoning agri-tourism revenues – but only if allowed to offer tours and tastings.

“A1464/S463 would help foster economic growth in our state while supporting another business outlet for our farmers. Small-batch, artisanal spirits are the next logical growth area from micro-breweries and farm wineries . . . Now it is time to focus and update our distillery licenses and at the same time help our agri-tourism industry continue its growth,” according to Goerner.

“There’s such pride in Kentucky bourbon. Local folks you talk to, they all say, ‘You gotta go to a local distillery,'” added Gusciora, who just returned from a trip to Kentucky and who noted that New Jersey’s distillery laws haven’t changed since the end of Prohibition. “I think you could foster the same thing in New Jersey. People would be supportive of New Jersey homemade products and they’d want to support a local industry that’s going to be supportive of New Jersey agriculture.”
Despite the fact that New Jersey is home to Laird’s — which holds the first distilling license issued by the United States, in 1780 — is one of just five states without a licensed craft distillery. It lags far behind neighboring states like New York, which boasts 22, in a national tally that counted at least 234 at the end of last year — marking a tenfold increase since 2000. That growth, which is expected to reach 1,000 craft distilleries in 10 years, closely tracks the rising interest in local and artisanal foods and beverages.

Cooper River’s Yoakum is a product of that interest in all things handmade. A former homebrewer, he tired of his office job and wanted to try working as a craftsman to create a product that could prove financially profitable. Settling on spirits, the native Kentuckian was discouraged by Pennsylvania’s Byzantine state-run liquor-control board and decided to invest in Camden because of New Jersey’s relatively streamlined regulations, as well as cheap rent and tax incentives.

And although he’d prefer to save nearly $11,500 per year on his license, he anticipates that he’ll likely forego the craft distillery permit if it materializes because it doesn’t contain a provision for on-premise sales, and its buy-local requirement would create annoying paperwork as part of the reporting process. Yoakum said he’s already planning to purchase most of his ingredients locally, and he’d like to be able to offer tours and samples to the public, but it’s not worth his time or expense if he can’t sell bottles to visitors on their way out.

“That’s great giving people free samples, but I’d be willing to pay much more than $938 year to sell bottles,” he said, mentioning that he’d have to locate a retail shop somewhere outside of his distillery because of local zoning laws and his landlord’s stated preferences. “Now there’s no way to generate enough money to let visitors take up your time, use your restroom, and increase your insurance.”

TADI’s founder and president, Bill Owens, agrees it’s crucial to have the ability to boost revenue by operating a gift shop in conjunction with tours and tastings, and he cites a few that ring up $30,000 a month on bottles and branded trinkets. Goerner says he eventually plans to fight to legalize direct-distillery sales but didn’t push for lawmakers to include this issue in the legislation, which didn’t receive a hearing or vote last year. The reason: he wanted to see the bill passed quickly, without inviting opposition from restaurateurs, liquor store owners, or wine and spirits wholesalers, all of whom initially opposed the winery and brewery bill on similar grounds.

Sen. Donald Norcross (D-Camden), after several conversations with Yoakum, is planning to introduce his own distillery bill as early as next week, and his will contain provisions for direct sales.

“We see an opportunity here to foster the growth of a new industry in our state — one that will generate revenue, jobs, and economic stimulus — and it couldn’t come at a better time. I want to make sure we have the right tools in place to help these businesses thrive as tourism destinations as well as production facilities,” Norcross said in an email.

Gusciora, whose office claims to have heard no dissent on the little-known bill, says the more he talks to colleagues, the more amendable they become. This leads him to believe the bill could actually pass this session, despite an unsuccessful attempt by the Trenton lobbyist who represents the sympathetic Garden State Craft Brewers Guild to generate some momentum.

Still, Gusciora acknowledges that it’s difficult for the measure to gain traction because no established industry or organization is behind the effort, just some “aged hippies who think it would be neat to open up a little craft distillery.” And although this legislature and governor have shown willingness to modernize antiquated liquor laws, Gusciora fears his peers might be “exhausted by liquor laws.”

Neither the New Jersey Restaurant Association nor the NJ Wine and Spirits Wholesalers Association, two of the initial opponents to the winery sales and craft brewery bills, could be reached for comment, though the Distilled Spirits Council of the United States, the national trade association that represents nearly three-quarters of all distilled spirits brands sold domestically, favors passage of laws that ease restrictions on micro-distilleries.

Goerner says controversies caused by the wine and beer legislation and the exhaustion they caused lawmakers proved worth it to the state and its residents. He assures fellow legislators that the latest fight will be less polemical, and he’s asking them to muster the energy to do it just one more time before year’s end.

“We have now a very flourishing wine and beer industry but we don’t have that with distilling,” he said. “This is not meant to compete with large distilleries of the country. It’s meant to foster state-level agriculture and to produce small-batch artisanal spirits that are unique to our region.”