Critical Drinking

Unwrapping Red Tape — Laws Leave Breweries Stuck in Own-Premise Revolution

For 20 minutes, I had been on the phone with Sean Mossman, listening to him talk defeatedly about the status of beer laws in Oklahoma, where brewery taprooms could only sell beer up to 3.2% ABV. The restriction had held back growth of the industry in The Sooner State, he said, because revenue streams enjoyed by so many businesses across the country couldn’t be accessed for Oklahoma brewers.

He explained how Oklahoma’s best-selling craft beer, their F5 IPA, a 6.8% West Coast-style IPA, helped fuel growth from outside his taproom, where COOP Ale Works and every other brewery in the state could never serve more than 12 ounces worth of samples of “full strength beer.” It constantly led to confused visitors and lost profits.

Oklahoma was set to change that law in August after state legislators and the governor passed SB 424, which would have lifted restrictions on breweries to sell all their beer directly to customers. But the state’s alcohol board stepped in days before SB 424 was to become law, saying their own interpretation wouldn’t allow for on-premise consumption, a practice that is helping plenty of breweries thrive in today’s competitive marketplace.

“What really concerns us is there are a lot of smaller breweries in the early stages of their development that intended to derive significant revenue from their taproom and incurred debt to prepare for this,” said Mossman, director of sales and marketing for COOP.

But in that moment, something changed. From the other side of the phone call, I heard someone talking to Mossman. The voice was excited. I may have heard a clap or holler. At 4:29 p.m. on Aug. 23, Attorney General Scott Pruitt announced the law was going forward. On Aug. 25, COOP would finally be able to sell F5 directly to customers.

“This is pretty awesome,” Mossman said, his tone changed, now upbeat and excited. “It’s a big win for all of us, but a bigger win for small guys that needed to be put on a level playing field to compete and grow.”

Our exchange was a perfect example of the fine line many breweries have to walk. Across the country, there are more examples of breweries and taprooms thriving thanks to “own-premise” sales of beer directly on-site at a taproom. But as states crawl toward ending Prohibition-era laws, there are plenty of businesses who are still working within somewhat archaic governmental restrictions.

If we’re celebrating the arrival of “own-premise,” these breweries are momentarily left behind, waiting for their invitation to the party.

Things changed quickly for COOP. Before the updated law, their taproom was open about six hours a week between Friday and Saturday, welcoming about 100 visitors a week. Those hours have doubled with the potential to welcome more than that visitor count on a daily basis alone. The “small beer” that once exclusively made up taproom sales but only accounted for about 5% of total sales, will still be available in packages and occasionally on draft. But taproom sales of Spare Rib Pale Ale, Briefcase Brown, and Negative Split Belgian Table Ale—all 3.2%—are now replaced by orders for F5 IPA and DNR, a 10% Belgian Dark Ale.

In the three months since taproom sales were allowed, Mossman said the brewery has seen a 300% increase in overall on-site sales. Half of that has been F5, with a variety of beers rounding out the portfolio, including Native Amber (8.6% of sales), seasonals (8.6% of sales) and Horny Toad Blonde (8.5% of sales). Of the small beers, Spare Rib Pale Ale (7.3% of sales) is the only one for which drinkers still show strong interest. COOP’s other two small beers count for less than 3% of sales each.

Flexibility in alcohol content now means COOP has the ability to create a variety of beers to further spur those taproom sales—new laws don’t set an ABV cap—and COOP brewers can get inventive.

“If we want to try something new, now we have a testing ground beyond friends and family,” Mossman says. “We can make a Brett Saison and pour as much as people ask for, get real feedback, and find out if we’ve got a commercially viable recipe.”

Of course, not everyone is so lucky.

In Mississippi, 2016 was the third time since 2012 a state bill died in committee that would have updated the state’s laws to allow on-site sales at breweries. For a state that ranks last in number of Brewers Association-defined craft breweries (8) and 45th for its overall economic impact ($224 million in 2014), the simple exercise of being able to sell up to 1,500 barrels or 10% of production for own-premise or off-premise consumption becomes as much of a business development issue as a beer-related one. Instead of selling a barrel equivalent to a wholesaler for around $275, that figure could potentially net a brewery at least three times that much on-site, noted Lucas Simmons, co-founder and brewmaster at Jackson, Mississippi’s Lucky Town Brewing.

But at least Mississippians weren’t threatened with being asked to hand over their personal information in order to buy a six-pack. That was the case in Alabama, where a change in law on June 1 also altered how comfortable some people might have been to walk into a taproom and ask for packaged beer to-go. “You can’t do one good thing without somebody taking two steps back to implement another aspect,” a resigned Carie Partain told me when the proposal was first made in August.

Partain is vice president of Free the Hops, a grassroots group that has worked for years to bring Alabama beer laws into the 21st century, so far helping to raise the state’s ABV cap from 6% to 13.9%, allow for the sale of 750 milliliter bottles, and more. This summer, she’s focused her attention on a proposed rule that at first would have required breweries and brewpubs to record the name, address, telephone number and date of birth of anyone buying beer at a brewery for off-premise consumption. It was later updated to focus solely on name and address. That information would then be retained in case of a state board audit. State Senator Bill Holtzclaw has said he’ll try to amend the law asking for personal information next year.

“There’s no way I’d be giving that level of detailed information out to anybody unless I know a brewery has a firewall or some kind of security to keep it safe,” Partain says.

Not only could the proposal create uncomfortable customers, but keeping those shopping for beer away from taprooms only hurts the bottom line for breweries, who would continue to sell their beer through a wholesaler instead, not benefiting from better margins on-site.

The change stems from a law that went into effect in June that allows a person to buy up to 288 ounces of beer per day from Alabama production breweries to be taken off-premise. By Partain’s estimation, the Alcoholic Beverage Control Board was weary of people going to one brewery, buying up their allotment to take away, then going to another of the state’s 31 breweries that same day to get more.

It’s worth noting no such law is on the books for the purchase of cigarettes, for example, should minors try to make a purchase.

The Alabama Brewers Guild has decided to remain publicly mum—aside from a statement posted on their website—on the topic as they work with the state board on a law that could drastically impact finances for breweries. In May, executive director Dan Roberts told the Montgomery Advertiser the law was necessary to finally showcase the state as a place for beer. "We're going to catch up faster to the rest of the country," he told the paper.

For the most part, the Atlanta tasting room of Eventide Brewing is as innocuous as the next. There are a couple dart boards in one corner, a giant Jenga set up in another with shelves of glasses bookending the bar. But on one wall, customers can get a lesson in government and geography: there’s an oversized state map showing political districts and the legislator for each, including their contact information.

It’s the brewery’s way of asking for residents to do their part to better update the state’s laws. “Every day we are open, [with] as many as 10 people but always at least one, we have to go over the details of what we can do,” says Nathan Cowan, Eventide’s CEO. “You can’t buy a beer, but you can buy a tour.”

In a strange twist of lawmaking, Georgia allows brewers to sell tours of their space, but can only serve beer as a free “souvenir” that comes along with it. It’s illegal for breweries to literally sell beer to customers at their taproom. If a beer lover wants to have something to drink on-site or buy a growler to take home, they’re actually buying a tour, whether they take it or not. To make it easy, the tasting room—bar and all—is technically considered part of the tour area.

At the end of every month, even though any beer provided to tour takers was technically free, Eventide is responsible for paying 8% tax on each barrel as a “use fee” for their charity. That’s on top of the 8% from tour purchases.

Instead of ordering a pint, drinkers can spend $5 for a tour and 12-ounce pour, or get a $15 tour and a tasting of six-ounce samplings. After buying a glass growler for $5, customers can get it filled from $9 to $15—with a tour, of course.

Of the roughly 2,500 barrels Eventide is projected to produce in 2016, 8% will be “given away” as part of tours. Cowan estimated that number may be higher—and on-site margins better—if there wasn’t confusion about what beer drinkers can and can’t do, let alone provide him the ability to sell his beer the way breweries do so many other places in the country.

“Luckily, the laws haven’t affected the number of people that we have walking through the door as much as it affects the quality of their experience,” Cowan says. “They say they want us to give a tour and educate people about beer, but what we’re really doing is selling something we’re not actually selling and everyone knows it. Let’s just call a spade a spade and not make it convoluted and confusing. How can we educate people about alcohol when we technically can’t sell them what we’re supposed to be educating them about?”

As part of an Oktoberfest event, Eventide partnered with a local food truck to serve sausages to go with a newly released Hefeweizen. To enjoy the pairing, a customer needed to buy a tour that comes with a free beer sample, then receive a separate voucher to get a sausage.

“Even if the laws don’t make sense, they’re still the laws,” Cowan says. “We’re always catering. People come here and they’re just baffled.”

Of all the issues some states may create, one thing is for certain: updating state laws for modern business practices comes with big economic benefits. At Portland, Maine’s Rising Tide Brewing, a state law that took effect in 2012 that allowed breweries to begin on-site sales of samples resulted in big gains. Co-owner Heather Sanborn said sales in her tasting room alone went up 50% last year and are set to do the same in 2016. When the brewery first opened in a different location, Rising Tide didn’t advertise tours or sampling and welcomed fewer than 20 visitors a month. Now they get hundreds of thirsty folks every day, adding up to 3,000-4,000 a month.

Since the state law changed, the number of breweries in Maine has more than doubled to almost 90. “Maine became a destination for beer, which couldn’t have happened without a change to the law,” Sanborn says. “Allowing for sales allowed us to foster a relationship with customers because now we’re able to tell our own story in our own taproom.”

For Holy City Brewing’s Chris Brown, that story has been all about growth. Since South Carolina started updating its taproom laws three years ago, Charleston’s Holy City has seen its overall revenue jump about 10-fold, opened a kitchen, gone from six to 26 employees, and upgraded to a $300,000 canning line. The money made from on-site sales alone takes care of the brewery’s payroll, Brown says.

“It’s been everything to this business,” elaborates the Holy City founder. “The business model has totally changed.”

In 2013, South Carolina passed the “Pint Law,” which allowed own-premise sales for the first time, restricting total in-house consumption to 48 ounces per person and up to 288 ounces to take off-premise. A year later, while trying to woo Stone Brewing to set up its East Coast facility in the state, South Carolina passed its “Stone Law,” allowing for bottles and cans to be sold at a brewery—it was previously only bottles—and removed the cap on pints served to customers so long as a brewery had a certified kitchen, too.

Brown noted that those changes made it possible for breweries to start up at just about any size and expanded geographical potential. All of a sudden, businesses could rely on the margin-friendly sales of a taproom. The number of breweries in the state has more than doubled since the 2013 Pint Law.

Once Holy City was able to start selling its Chucktown Follicle Brown or Pluff Mud Porter in pints and cans, production took off. What once started as four taps and limits of beer samples has turned into 25 taps with 17 dedicated to core and one-off Holy City beers. The brewery will produce 6,200 barrels in 2016, more than four times what it made in 2011.

“The more cash flow we all have, the more tanks we can buy, the more we grow our businesses and add jobs,” Brown says. “We’ve proved that if we can take advantage of what the laws give us, it’s nothing but positives.”

It’s the kind of stories heard from breweries in Maine and South Carolina that should be inspiring to all the rest who still have an uphill battle looming. Those states and their breweries are a small example of what modern beer laws can allow—and not just for businesses, but for communities and states, as well. Changes in law represents opportunities for business growth and valuable tax dollars. It should be an easy win-win.

But red tape isn’t as easy to cut across all 50 states. Maybe it’s tradition, politics, religion, or a little bit of all three. Each little victory has the potential for big changes, especially as own-premise sales increase and become a normal way of life for breweries who want to have full control over how their stories are told and connections with beer lovers are made.

Sean Mossman of Oklahoma’s COOP says allowing breweries to sell beer from their taproom above 3.2% was important, but now breweries are on to the next fight. This November, a ballot measure will impact distribution rights, including the ability to self-distribute. It’s another step at a time to prove that Oklahomans are serious about their beer.

“Public sentiment is on the side of these kinds of changes,” he says. “These revenue streams make it easier for everyone to keep their doors open and that’s good for craft beer culture.”

Words by Bryan Roth
Graphics by Luke Gregulak

Bryan Roth

Bryan Roth is a writer living in Durham, North Carolina, who's been recognized by the North American Guild of Beer Writers with a "best blog" award for his site, This is Why I'm Drunk.

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