Brewers say new bill will hurt craft beer industry

A new bill passed through the Maryland House has craft brewers on their toes.

House Bill 1283, a bill adopted by the board of economic matters on Wednesday, March 22 with unanimous House approval, will increase the cap on how much Maryland class 5 breweries will be able to produce annually for on-site consumption — from 500 barrels to 2,000 barrels. However, the restrictions on the bill, from mandatory closing hours at 9 p.m. to halting collaborations between breweries, are said to outweigh the positives.

A class 5 brewery functions primarily as a manufacturing house.

For brewers across the state, the bill is seen as detrimental to a growing economic powerhouse of small businesses based around a tight-knit culture and community involvement.

While brewers say the bill will drastically reduce the liberties of brewers, including being cultural hubs past 9 p.m., the House unanimously agreed the bill's passage would force class 5 breweries to exist solely as manufacturing hubs.

The situation is described by Kevin Atticks, executive director of the Maryland Brewer's Association, as a step forward and several steps back.

"This will have a tremendously negative impact on the industry," Atticks said. "This will allow them to sell a little bit more of their beer to their customers. That sounds like a great deal, but if you have to put it in context that there's no other state in the Mid-Atlantic that has any cap."

The change in hours, Atticks said, is a cause of concern for breweries who may have their best business in the times being cut out in the new bill.

"We have breweries telling us that this changing of the ground rules after they invested a lot of money can cause them to leave, to close or to lay off a lot of staff," Atticks said.

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In the economic matters session, Del. Talmadge Branch, D-45-Baltimore City, one of 12 sponsors of the bill, described its purpose as putting breweries back in their place in the manufacturing system, prohibiting them from functioning as bars.

"Currently some of these are open at times of bars, which I think is quite improper," Branch said.

In his time serving on the committee, Branch said he has met with several brewers, and was displeased with how brewpubs presented themselves and operated.

"What I've found is they did actually operate as a bar," Branch said. "What I found was a very active bar, people eating all kinds of food, and of course, drinking a lot of beer. Nobody was taking tours."

Delegate Chris Adams, a sponsor of the bill who represents Caroline, Talbot, Dorchester and Wicomico counties, said the bill reaffirms class 5 breweries' place in the Maryland economic tier system.

The three-tier system divides the alcohol distribution process into categories of brewers, distributors and retailers. Class 5 breweries fall into the first category.

"This was a compromise, and it's important to note it is only class 5 breweries who will be affected," Adams said. "And even then, they can still apply for a class 7 or class 8 license."

While the bill has moved up to the Maryland Senate, Adams noted unanimous support of the committee in adopting the bill in the House.

"It's up to the Senate now to have those conversations and compromise more," Adams said.

Pint glass economics

For Bryan Brushmiller, founder of Burley Oak in Berlin, the restrictions seem to be purposeless, and are only going to have a negative impact on an industry that has proven its worth as a powerful economic driver.

"This will only hurt small businesses," Brushmiller said. "These are businesses that provide jobs for the community, that provide tourism dollars. The economic impact on a town when a brewery is opened is much more reaching than whatever it is this bill is trying to take away."

According to the Brewer's Association, the craft beer industry had  $652 million worth of economic impact in 2014.

While Burley Oak is not a Class 5 brewery, and therefore won't feel the impact of the bill, Brushmiller noted there will be an impact on the beer community. Even one of the Shore's biggest breweries, Evolution Brewing Company, isn't a class 5, according to Atticks.

"For some towns, a brewery opening up has become a major economic driver," Brushmiller said. "Why make it more difficult for them to survive?"

Collaboration beers, beers either made by a brewer using another brewery's excess space or a melding of brewer minds, play a key part in the craft-beer community, Brushmiller said.

READ MORE: Has growler demand fallen flat on the Shore?

"That's a part that is really only going to hurt the culture," Brushmiller said. "The question that needs to be asked is why this bill is being pushed through."

According to the fiscal note on the bill, dated Friday, Feb. 17, the bill has been found to have no material fiscal impact on state or local governments. Additionally, the bills was determined to have "minimal" small business impact.

Both Brushmiller and Atticks agreed that certainly won't be the case.

"Cutting the hours where they may do their best business is only going to make it harder for smaller breweries to survive," Atticks said.

Guinness comes in

The bill's adoption comes in the wake of Guinness announcing a $50 million Class 5 brewery that will open in Relay, Maryland.

While applauding the decision to expand the sales cap, Dwayne Kratt, senior director of government relations for Guinness, referred to some of the language in the bill as "problematic."

"This is a legislative process; it's passed in the House, this is the vehicle we have to work with, and we're going to do what we can to improve it in the Senate," Kratt said.

While not affecting all breweries across the state, there are 30 class 5 breweries in Maryland.

The bill's passing opens up the possibility for more legislation that could further impact the craft brewing community, Brushmiller said.

Kratt, while accepting that as a possibility, said the impact initially won't be as sweeping as some believe.

"We've heard from some brewers that this sets a precedent for further regulation," Kratt said. "And maybe it does, but right now, this will only effect class 5 breweries."

However, the outcry from breweries is a recent revelation, with no vocal concerns made during the bills drafting, Adams said.

"We didn't really hear anything the entire time we were presenting the bill," Adams said. "Now, breweries have spoken out, and it's up to the Senate to meet their concerns, but we were always open to compromise."

READ MORE: $2M brewery coming to Cape Charles

As the bill works its way out of the House and into the Senate, with the next hearing scheduled for Wednesday, March 29, Kratt said he will continue to push forward for better compromises. Ultimately, Kratt said he hopes for legislation that not only benefits Guinness, but also benefits small breweries across the state.

"What we hope is for Guinness to be a force that lifts up the craft beer industry in Maryland," Kratt said. "We want to be the tide that lifts everyone up. We really want to be a part of and benefit to the Maryland brewery community, and I believe there is an avenue where we can get this done if we all just work together to come up with an agreement."