At the start of 2020, the outlook for local breweries was generally very bright. The Maryland and Virginia brewers’ guilds had significant legislative victories in 2019. The DC Brewers’ Guild had success in pushing back against Initiative 77, achieved progress on reforms to gain regulatory parity for brew pubs, and for DC breweries to have the same opportunities for expansion as out of state brands. And then, as with everything else in 2020, the COVID-19 pandemic hit. Along with the rest of society, the restrictions necessitated by the pandemic have put incredible stress on local brewery owners. It has forced them to innovate, to pivot more of their business to a to-go model, to find new ways of selling products, and to somehow–in the midst of it all–keep themselves and their employees safe. Despite these challenges, the need to maintain relationships with elected representatives and advocate for government support and regulatory reforms has remained. What follows is an edited transcript of interviews with the District Brewers’ Guild discussing: (1) their experience with the federal and local government’s support for small businesses in 2020: (2) a key legislative victory on federal excise taxes; (3) their legislative and regulatory goals for 2021. Look for part two of this legislative round up, interviews with Maryland and Virginia brewery representatives, tomorrow.
DC Brewers’ Guild
For this interview we with spoke with Leah Cheston (Right Proper Brewpub) and Justin Cox (Atlas Brew Works).
DC Beer: What has been your experience with the federal relief programs that were passed in 2020? The What do you hope will happen differently/additionally in 2021?
Justin: Atlas applied for and received [Payroll Paycheck Protection] (PPP) loans for both of our locations. Keeping everyone employed at a time when there were close to no sales was critical. With the changes in the last COVID bill, passed in December 2020, it is unclear how the forgiveness program for payroll loans will work moving forward. The SBA [Small Business Administration] is still finalizing the regulations around that. The employer retention tax credit has been a huge help too. Now you can use both the PPP loan funds and employee retention tax credit in the same year, but not for the same employees obviously.
Leah: We’ve had a lot of success with both the PPP loan and [Emergency Income Disaster Loan] (EIDL). We worked with a small local bank which I think helped a lot. We also received full forgiveness on the first round. In terms of what could work better, the PPP loans issued under the December 2020 relief bill has a multiplier for the loan amount that restaurants vs. manufacturers can receive that was different. A restaurant could get a maximum loan of 3.5 times (certain) monthly expenses vs 2.5 times for manufacturers. The BA [Brewers Association] worked to change that on the federal level. If there are any additional funds left, I would like to see manufacturers get some clarity [on taxes] and parity for the loans.
Justin: The extra multiplier for restaurants was necessary but does not capture how much of a brewery’s business is hospitality. The designation does not take in to account the on the ground reality.
DC Beer: One of the major issues for breweries during the previous administration were the tariffs that were placed on aluminum and steel imports. This impacted cans and kegs/brewing equipment used by the industry. How have those tariffs impacted your business?
Leah: The cost of kegs has not really been an issue for us because draft sales have stalled. Cans were a big issue in 2020, especially just getting supplies because of increased demand. Getting cans can now be a three to six month wait and we’re paying three times as much. Not sure if that is a tariff issue or just a factor of the pandemic.
Justin: Leah covered it mostly. Not sure how to parse out demand vs tariff impact. Hopefully, the administration will adopt policies that will expand raw material access.
DC Beer: One of the bright spots in 2020 was that Congress made permanent the previous temporary reduction in excise taxes for craft breweries enacted in 2017, which brought the rate down from $7.00 to $3.50 per barrel. What does that change mean for craft breweries?
Justin: I think that it means a lot. The monetary portion of it is great, but the reliability is what allows for planning beyond the year to year cost reductions. We can plan for the future.
Leah: It is a huge win to not need to worry about. It frees us up to deal with the next thing.
DC Beer: What has the local response looked like regarding COVID and small business relief?
Leah: I’ve been pleased overall in terms of the District expanding outdoor seating and increasing to-go sales options for bars. The maximum cap on third party delivery apps [passed by the DC Council in May] was very helpful. Previously, some apps were charging up to 30% of the order. I was appreciative of those quick actions, but the permitting process [for additional seating] could be streamlined. There are a lot of different agencies to coordinate with.
A fair amount of local grants have been provided. The Bridge and Resiliency grants were approved for us, but the Bridge grant is still delayed. The Resiliency grant didn’t provide the flexibility that we needed to cover operating costs, since it needs to be spent on new equipment or somehow assisting with a pivot in business operations. We’re still really grateful of course.
Justin: I think DC did a pretty phenomenal job of finding the money from various federal sources to help us out. The “streatery” and expanded outdoor space has been critical and helped to alleviate the drop in indoor seating. I hope that gets expanded and extended post-COVID.
DC Beer: What are your legislative and regulatory goals for 2021?
Leah: One of the main goals is extending and making permanent the emergency COVID allowances for to-go alcohol and streateries. A big thing I would like to see is enacting self-distribution rights for brewpubs to retailers. Currently, only manufacturing breweries have that option and it unfairly limits how brewpubs can operate. Another priority is a law we were first pushing last year that would allow DC breweries to have up to two satellite tavern locations. At the start of 2020, we had our first lobby day to discuss satellite taverns and brew pubs. It was right after that that COVID blew up.
Justin: During COVID, direct to consumer beer shipping has become more of an issue. We would like to expand the beer shipping into more states. Any out of state brewery can direct ship their product to consumers in DC and it would be nice to see some reciprocity from those jurisdictions.
Leah and Justin: The Mayor has also introduced the Re-Open DC Alcohol Act. It is an omnibus bill that would make operational changes to allow the creation of outside entertainment zones on private property permitting folks to open carry within a defined area. Additionally, the definition of a spirit goes up from 15% to 21%, which would have implications for selling higher ABV beer and wine at retailers that aren’t licensed to sell spirits. The Guild is still combing through the omnibus bill and will have a conversation with DC’s Alcoholic Beverage Regulatory Administration on it later this month.
On the federal level, the national Brewers Association has a legislative priority for 2021 to create a federal standard for direct-to-consumer beer shipping, perhaps modeled on the Wine Institute law. The BA is also looking into possibly changing the ability to ship alcohol via the USPS.
Thanks to Leah and Justin for their time. Look for part two of this legislative round up tomorrow.
