Every day, craft beer fans around the DMV go into their favorite breweries, or perhaps a new spot they are excited to check out to enjoy a fine locally produced beverage. What they may not always appreciate is the set of laws and regulations that allow them to do so, or not do so, and the other privileges and restrictions that may determine whether that brewery can be a viable business.
To ensure their businesses enjoy a more favorable regulatory environment, the craft brewers in DC, Maryland, and Virginia have formed state guilds to advocate for their interests. Recently, DC Beer had the opportunity to sit down with Paul Dean of the DC Brewers Guild (DCBG) and Kevin Atticks of the Brewers Association of Maryland (BAM), to discuss their organizations’ accomplishments in 2019 and their upcoming legislative agendas for 2020.
DC Brewers Guild 2019 Legislative Roundup
DC Beer: What are some key accomplishments for the DC Brewers’ Guild for 2018-2019?
Paul Dean: We were supportive of overturning Initiative 77 and were pleased the Council did so. Overall, we were able to work with the Alcohol Beverage Regulation Administration (ABRA) on the implementation of the 2018 omnibus amendment.* Due to an ambiguity with the wording in that law, there was some confusion as to whether brewpubs (like Blue Jacket or District Chophouse) could continue to sell packaged beer to go. We were able to introduce legislation to reaffirm that brewpubs have that privilege.
DCB: What are the initiatives that the DC Brewers Guild is pursuing for the end of 2019 and into 2020?
PD: There are currently two bills that the Guild is pursuing. The first is the Manufacturers’ Satellite Taverns Amendment Act, introduced by Councilmember David Grosso, and supported by all the manufacturers. We did a guild letter and testified, along with several brewery members, and put together a coalition of all the beverage manufacturers. It would allow up to 2 satellite taverns for each manufacturer. That bill faced some pushback during the public hearing and we’re waiting to see what changes can be negotiated.
DCB: Is the hold up because of tied-house concerns?
PD: In opposition are the wholesalers, who have their usual complaints about maintaining the three-tier system and their roles as middlemen. The other group is the retailers, who expressed concerns about undercutting price points. We’ve listened and we understand the concerns. The DCBG tried to get together with manufacturers and retailers and try to find some middle ground.
DCB: How successful do you think this effort will be?
PD: Any attempt to introduce something new into a three-tier system creates issues. However, we’re trying to compete with out of town manufacturers and get parity. A number of brewers from outside the District have been able to setup taprooms (see: Voodoo Brewing and Aslin). Under current rules, we need to split ownership or set up another whole brewery in order to have a brewpub/bar and manufacturer location.**
DCB: The second bill you’re pursuing is?
PD: The Manufacturer and Pub Parity Act. The goal is to allow brewpubs the same rights as manufacturers. We also want clarification that brewpubs are permitted to sell beer in sealed containers for off-premises consumption. This legislation has advanced out of committee and confirms the ability after some confusion from the 2018 amendment. We’re hoping to see it passed in December if not January.
The other parity issue is self-distribution. We want brewpubs to have the same rights as manufacturer licensees. The lack of self-distro can cause some problems. For example, we ran into an issue with getting the DC Beer Week Solidarity Brew out to accounts this year, because Blue Jacket doesn’t have a wholesaler and is a brewpub. That is not currently a part of the legislation, but we will continue to push for it as an amendment or as a separate bill.
DCB: What are the new priorities for 2020?
PD: Trying to find a way to move forward on satellite taverns so that our members can compete on equal footing with breweries outside the District. We’re always looking to work with the Council to make sure members can be competitive and combat issues like increasing real estate prices, and push for things like grants and tax relief.
DCB: Are the members concerned about the looming federal excise tax increase?
PD: Those tax cuts have been important to help members reinvest in businesses and cope with unexpected added costs from tariffs. The tax relief was offsetting the higher costs from vendors. We’re hoping the tax extenders package will pass. In my experience tax extenders can be passed later on and applied retroactively.
DCB: Is there anything else you’d like to add?
PD: Councilmember Grosso is retiring this year and we want to wish him well. He’s been a great advocate for local manufacturers and will be missed.
Brewers Association of Maryland 2019 Legislative Round-up
DCB: The 2019 legislative session in Annapolis was a big success for BAM. In addition to the franchise reform, there were increases in the production, sale, and self-distribution limits across all classes of craft breweries. What has been the fallout from those bills?
Kevin Atticks: We’ve worked with the Comptroller’s Office to hammer out some of the outstanding vagueness in the laws that were passed last year. This year we are going to put in a number of clean up bills to clarify the language from last year. None of them are controversial.
DCB: There was some ambiguity in the law about whether existing distribution agreements between brewers and wholesalers would be subject to the new law. There was also an issue of whether BAM and the wholesaler’s association would decide upon some sort of standard arbitration process. Have those issues been worked out?
KA: Yes, come January 1st, the new rules will apply to both new and existing franchise agreements. The associations have not discussed a uniform arbitration process [to resolve disputes or end distribution relationships]. It will be business to business between brewers and wholesalers.
DCB: Towards the end of this year’s legislative session, there was a lot of talk about “bringing peace to the land.” Essentially, stabilizing the relationship between the three tiers in the beer industry. Given that, what are BAM’s plans for 2020?
KA: There are two categories of bills we are pursuing, clean up and streamlining the law. In the rush of legislative negotiations and fast-moving events, some of the bills from last year and prior years had inconsistencies or unintentional vagueness. We are going to work and fix some of that.
DCB: Without any new legislative initiatives, how is BAM maintaining relationships with legislators?
KA: As we discussed, in politics support develops from the ground up. The craft brewers came up after a lot of those relationships were cemented with [Annapolis] leadership and the wholesalers and retailers. There is no new leadership in the State Assembly and Senate, and our members are working to educate them on the benefit of the craft beer industry to the state. We’re having ongoing meetings and fundraisers. We have a hill climb planned for the start of the session.
DCB: Following the passage of the franchise reform has there been an uptick in Maryland breweries signing with distributors?
KA: We have heard a lot of discussion among the smaller brewers about building relationships with wholesalers, and I think that after January 1, we will see brewers making the leap into distribution. After the passage, it has given more brewers confidence to open in Maryland and do business as a brewery. We are hearing of expansion plans and new entrants.
DCB: Is there anything else you’d like to add for readers?
KA: Two things. One, the industry is the strongest it has been in terms of scale, quality and creativity, and strength. Two, Craft Beer Lovers’ month is in February and we’ve got two promotions that we’ll be announcing at the start of December that will tie into the anniversary of the suffrage movement.
DCB: On a final note. In addition, all the positive bills that passed last year, there was legislation that would strip the Comptroller’s Office of its authority to regulate alcohol and creates a new body approved by the Senate, with additional public health mandates. Given the strong support that Comptroller Franchot has shown for the craft beer industry, is BAM worried?
KA: BAM has concerns about the way the bill would be implemented and some of the requirements put forth in that effort. We are in discussions about a path forward. Too soon to say anything else.
*Author’s note: The 2018 Omnibus Amendment, among other changes: permitted the filling and sale of crowlers, allowed local manufacturer breweries to transport and sell their collaboration beers into the District, allowed beer to be moved between facilities owned by the same brewery, made event permits easier to obtain, and breweries to sell and ship beer direct-to-consumer.
** Originally, both Right Proper and ANXO had to create separate ownership structures between their brew/wine pub and manufacturing operations.
DC Beer would like to thank Paul Dean and Kevin Atticks for their time and insights. If you would like to find out more about the DCBG or BAM, please go to their website or follow them on social media.
One more thing for readers. As we’ve covered previously the excise tax relief that was passed in 2017 for craft brewers will expire at the end of this year. After that taxes per barrel will double from $3.50 to $7.00. Close to half of all breweries operating in the United States today have not previously had to pay the higher rate. All the area brewers’ guilds, along with the national Brewers Association, are currently working to find a way to extend the tax cut. If you would like to get involved, please reach out to your local brewery and find out how to support their efforts.