Craft-Distilling Bill Will End Prohibition-Era Restrictions

Tara Nurin | July 29, 2013 | More Issues, Social
With easing of laws, up-and-coming industry will join craft beer and wine as liquid boon to state's tourist economy

whisky glass
Over the past five years, an intense national interest in artisanal spirits has taken moonshine mainstream. And as of this summer, New Jersey is no longer regulating its commercial distilling industry according to laws written just after the United States repealed Prohibition. Encouraged by the recent easing of laws governing wine- and beer-making, several pro-alcohol legislators, with the help of a few loosely affiliated handcrafted liquor enthusiasts, lobbied their peers in Trenton to lower barriers to entering the distilling business.

They succeeded more quickly than observers anticipated.

At the end of June, the state Assembly approved New Jersey’s first craft-distillery license with almost no dissent. Although they’re still awaiting the governor’s expected signature, supporters say the passage of this category of bills heralds a new age for entrepreneurship and agri-tourism.

“Whether it be distilled spirits in this instance, or craft beer and wine previously, legislators in Trenton are warming to the idea that what was thought to be good for the industry in the early 20th Century may not be entirely appropriate in 2013 and beyond. I hope these trends continue and interest persists in making the state more open to the craft-alcohol industry,” emailed Eric Orlando, a lobbyist who informally channeled public support for the bill.

The updates usher in a dramatic shift for small-batch distilling in New Jersey. They create a category of license that reduces the state’s annual permitting fee from the current $12,500 for a plenary license (which allows the holder to distill for commercial purposes) to $938 for a craft license, which allows up to 20,000 gallons a year to be produced.

The pending legislation also green-lights on-premises tours, tastings, and sales. Considering that the American Distilling Institute estimates the average craft distiller generates $30,000 per year in gift shop sales, the ability to retail in-house should more than subsidize a visitor-friendly shop. Bill sponsors and supporters tout this as a major benefit to the state’s tourism industry.

“We get calls or emails every day from people wanting to come see the distillery in action, and it is hard having to turn them away,” said Krista Haley, co-owner of the six-month-old Jersey Artisan Distillers in Fairfield, the first distillery to open in New Jersey in at least a century. Haley is working with the owners of the nearby Cricket Hill Brewing Co. to package a weekend itinerary that includes stops at both production facilities, plus restaurants and hotels.

Haley, who’s releasing her first batches of Busted Barrel Silver rum statewide on August 12, will source as many ingredients as possible from local farms and vendors. She’s calling her next round of products “Jersey Artisan Vodka” and “Jersey Artisan Gin” because she wants to emphasize her use of Jersey sweet corn as their base, with vodka flavorings (think tomatoes, blueberries, cranberries) coming from Garden State crops. Because her vodka and gin will contain at least 51 percent Jersey ingredients, she’ll be able to label them “New Jersey Distilled.”

Though the “New Jersey Distilled” designation serves as a point of pride for legislators who moved the bill through Trenton, it was actually a stumbling block that delayed its passage. The original Senate bill sponsored Donald Norcross (D- Camden) required that applicants for the craft license manufacture their goods using a majority of New Jersey raw materials. Lawyers argued that the provision was unconstitutional, so local sourcing was made optional and the “New Jersey Distilling” label came into being. (The constitutional question turns on whether the law could mandate where ingredients had to be sourced from.)

It was a small concession among a host of others. In a compromise with the New Jersey Restaurant Association and other trade organizations that unsuccessfully argued against the bill and its two predecessors, distillers may not provide food to visitors — an agreement that mirrors the one negotiated last year for craft breweries.

Additionally, when lobbyists for the state’s farm winery and craft brewery associations inserted language that would have permitted vintners and brewers to use their existing facilities and equipment to produce spirits, the restaurant association upped its opposition.

For that reason distilleries can’t occupy the same premises as wine- or beer-making plants. However, Norcross, who says he agreed to the provision in order to get the bill passed as speedily as possible, anticipates raising this issue again . . . soon.

“This is still on my list of items we need to address. It could come back up sometime this summer,” he said last month. “The thought behind this was to have some efficiencies in these types of businesses, given that many times the wineries are seasonally dormant and we thought to use the ‘backside’ for spirits. We’re trying to open doors for businesses, not close them.”

Tom Sharko, owner of the state’s largest vineyard and winery, is one of two farmers who’ve publicly stated their desire to launch distilling operations. Former Princeton Township mayor Chad Goerner, who purchased a five-acre farm in Hopewell Township several months ago, is the other.

“It’s just another value-added product from the farm. Every little bit helps economically,” said Sharko, who owns Alba Vineyard in Milford, where he’d like to produce fortified wines like grappa, port, brandy, and eau de vie.

“It’s not meant to compete with large distilleries,” added Goerner. “It’s meant to foster state-level agriculture and produce small-batch artisanal spirits that are unique to our region.”

Haley, a lawyer who does not practice, bought her first state license for $12,500 so that she wouldn’t have to wait for the legislation to pass, doesn’t have a farm to consider. But she wishes politicians had spent more time thinking about the specific needs of distilling businesses before setting a production limit.

“My only complaint about the legislation is that the maximum threshold for being a craft distillery is set very low, far below the national average for what qualifies as craft distilling. This law only allows us to produce 20,000 gallons per year, which sounds like a huge amount, but the national average is about 100,000 gallons,” she said, noting that large distilleries produce 100,000 gallons per day, on average. “By so limiting production, the law actually limits our ability to grow and hinders the benefits we can provide the state through tax revenue, agricultural purchases, tourism, etc.”

By contrast, James Yoakum plans to produce just 2,500 gallons annually once he receives final approval for his distillery in downtown Camden. Working with a business plan he wrote, he doesn’t plan on opening his doors to the public for the foreseeable future. Still, as a one-man operation, he does appreciate the fact that — assuming the governor signs and implements the bill within the next 12 months — he’ll recoup some savings when he renews his license next year. For a startup entrepreneur, the ability to withhold spending more than $11,000 every year can make running a small business in New Jersey that much easier to swallow.