Md. Craft Brewers Hope to Press for Revamping Laws Next Year

Part of the brewing operations at Denizens Brewing Co. in Silver Spring. (Photo: Timmy Chong)
Part of the brewing operations at Denizens Brewing Co. in Silver Spring. (Photo: Timmy Chong)

ANNAPOLIS (April 01, 2018)—The state's craft brewing community and its allies failed to convince the legislature this year to ease restrictions on the production and distribution of craft beer, but the industry expects to try again next session.

"The battle has really just begun," said Alan Brody, spokesman for Comptroller Peter Franchot, who championed the brewers' efforts to overhaul state laws this year. "This is an issue that is extraordinarily important, not just from a beer aspect, but from a small business aspect, and the comptroller has no intention of ceding any ground."

The Brewers Association of Maryland intends to continue building stronger relationships with state lawmakers and emphasizing the positive economic benefits of craft breweries, Julie Verratti, co-founder of Denizens Brewing Co. of Silver Spring, told Capital News Service.

"Government should be excited and grateful that people are putting their life's work on the line to open businesses, create jobs, community spaces, products that people want," said Verratti, who is the running mate of Democratic gubernatorial candidate Alec Ross. "Why is the state not working toward making that easier to people?"

In spite of a strong public showing by brewers advocating for sweeping reform, the House Economic Matters Committee killed the bill widely favored by the craft beer industry.

The Reform on Tap Act (HB 518) was piloted by Franchot and supported by over more than 90 county executives and local government officials, the Brewer's Association of Maryland and virtually every craft brewery in the state.

Franchot's bill aimed to revamp state craft brewing regulations to make Maryland's landscape competitive with neighboring jurisdictions by removing limits on brewery taproom sales, take-home sales, production, and self-distribution.

The bill also proposed eliminating two provisions which brewers have expressed are especially crippling: franchise law, which they claim unreasonably handcuffs their operations to wholesale distributors, and the buyback provision, which forces them to purchase their own product from wholesalers at retail price after surpassing the taproom sale limit.

Maryland has a three-tier system for craft brewing that includes manufacturers (brewers), distributors (wholesalers) and retailers (stores). As the craft industry in Maryland continues to grow, Verratti said that franchise law has proven to have unintended consequences, as distributor consolidation is making it difficult for small operations to effectively sell their products.

But at a Feb. 23 committee hearing, some state legislators charged that Franchot has been soft on enforcing alcohol regulations and that the Reform on Tap Task Force behind his bill failed to consider public safety and welfare in its research.

"What I found particularly alarming was that the chief regulator and enforcer of our state's great alcohol laws has made a crusade of passing this legislation that will create an unprecedented expansion of alcohol availability on our state," Del. Ben Kramer, D-Montgomery County, said at the hearing.

Del. Warren Miller, R-Carroll and Howard Counties, said, "the impression that we're somehow harming brewers— we created the industry in Maryland."

"And every year we give more and more, but it's a balancing act," he said. "You're taking away from retailers, from bars, we have to balance that."

Brody defended Franchot's measure, saying that "public health is an issue when it comes to alcohol as a whole, but that this issue has just drawn the interest of lawmakers now, that craft beer has become an issue, I think shows the true colors."

Verrati agreed.

"If you're actually concerned with the amount of alcohol consumers are drinking, you should be limiting how much distributors and retailers can sell… and how much out-of-state and big beer brands can come in," she said. Verratti is also a board member of both the national and state craft brewing trade associations.

"Small breweries need to have the opportunity to build their brand and make sure their beer is going to sell. And nobody is going to work harder to sell your beer than you are," Verratti said. "Distributors have a plethora of brands, they have no incentive to sell your beer over someone else's beer."

Bipartisan craft beer legislation passed by the legislature in 2017 featured incremental improvement for craft brewers. But multiple small brewery representatives explained at the February hearing that the measure was an insufficient and ill-received compromise.

Before the hearing, the Reform on Tap Act had been heavily promoted in web articles and social media. Supporters flooded the hearing to laud the ability of craft breweries to revitalize communities and urge legislators to revamp what they feel are stifling regulations.

Annapolis-based Seawolf Brewery CFO Alan Beal told legislators that the state's craft brewing laws are still some of the most "restrictive and unwelcoming" in the country, and "breeds uncertainty for startups like us to invest and do business in Maryland." He, along with many others, noted that Maryland risks forfeiting business opportunities to surrounding states.

Jeff Kelly, the comptroller's Field Enforcement Division director, also provided a comparative analysis of Maryland craft beer laws relative to those of surrounding jurisdictions including Virginia, Delaware, Pennsylvania and the District of Columbia. Across the board, the Reform on Tap Task Force found that Maryland's craft brewing landscape is generally more restrictive.

"We have the opportunity to send a different message, that when we say Maryland is open for business, that's not a perk reserved only for certain members of the alcohol industry," said Liz Murphy, publisher of the Annapolis-based beer blog Naptown Pint.

Before the February hearing, Franchot had taken several shots at state legislators. In addition to calling competing legislation "immature, petty, and vindictive," the comptroller had previously referred to the lawmakers as "ham-handed," and labelled a bill proposed by Kramer as "idiocy" on social media.

Kramer and Miller sponsored a bill (HB 1316) implementing a task force that would review alcohol laws in the context of public health and examine whether the comptroller's office should continue to enforce state alcohol regulations.

In addition to voting 17-4 against the Reform on Tap Act, the House Economic Matters Committee unanimously voted in favor of the Kramer-Miller bill, which garnered support from the National Liquor Law Enforcement Association, Maryland Public Health Association, Greater Towson Council of Community Associations and Mothers Against Drunk Drivers. The bill passed both houses and is now on Gov. Larry Hogan's desk awaiting his signature.

Verratti said Kramer's bill is just a personal attack directed at the comptroller.

"It's unfortunate that there's personal animosity going on between legislators in Annapolis and Comptroller Franchot, and breweries end up bearing the brunt of that. I just think it's very shortsighted," she said. "I think voters are paying attention to this, people care about this."

In 2016, Maryland's craft brewing industry employed more than 6,500 people and had an overall economic impact of more than $630 million (which ranks Maryland 47th in the nation in the craft beer industry), according to a 2017 report by the Bureau of Revenue Estimates. The report also states that Marylanders consume about 275,000 barrels of craft beer annually, but the state's breweries only produce about 245,000 barrels.

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