THE GIST
On July 1, licensing conditions went into effect for New Jersey breweries that limit the number of events a taproom can host annually, restrict third-party food available on-site, require that breweries provide a tour to taproom guests, and more. New Jersey’s 141 breweries say they now risk fines or the loss of their licensing if they’re found in violation of these 18 conditions. Some fear it will have a chilling effect on the state’s nascent taproom culture which aims to build community, create repeat customers, and provide a stable bottom line for the businesses.
But more broadly, these licensing conditions are part of a deeper, years-long struggle over the role of—and permissions granted to—brewery taprooms.
The opposing sides are breweries themselves and businesses like bars and restaurants that hold liquor licensees in New Jersey, many of whom believe that the popularity of brewery taprooms dilutes the value of bars’ and restaurants’ liquor licenses.
Breweries say they’re community gathering places that help strengthen neighborhoods, but a special ruling by the state’s Division of Alcoholic Beverage Control (ABC) makes clear that the Division only intended for taprooms to be a tool for driving consumer interest in beers that they would later purchase at a bar or restaurant, not a consumption venue in its own right.
The special ruling states: “… Because limited breweries were explicitly prohibited from selling food or operating a restaurant on the licensed premises of the brewery, the Legislature clearly did not intend … to establish a new consumption venue at a brewery with the same privileges as a sports bar or restaurant.”
Some of these regulations—such as the prohibition on food trucks and the requirement to give tours—had been in place since 2012, but were loosely enforced and had few consequences. Additional changes, including limitations on events, had been announced by the state’s ABC as part of a special ruling in May 2019, but had been largely suspended after the outset of the COVID-19 pandemic.
For the past few years, breweries and state regulators have existed in a kind of stalemate, allowing beer makers to grow and build a local industry while recovering from the effects of the pandemic. It seems that uneasy peace is now over.
The problem, brewing industry professionals say, is that newly enacted licensing conditions are highly specific to the point of being potentially detrimental to long-term planning and sales. For example, breweries are asked to permit on-site events such as an open mic night or trivia night through the ABC’s online portal at least 10 days in advance, with the number of such events not to exceed 25 per year. They say this hinders their ability to host fundraisers, private parties, and festivals that are critical to both sales and community relations. Some have already had to cancel events planned for later this summer or fall so as not to reach the events cap.
WHY IT MATTERS
New Jersey breweries say the new restrictions further hamper an industry still reeling from yo-yoing closures of the state’s bars, restaurants, and taprooms during COVID-19.
“What they’re saying is: You can’t make money doing the business of a tasting room in a tasting room anymore. Coming off a global pandemic, that’s a bad approach if you really do care about small businesses growing,” says Augie Carton, founder of Carton Brewing in Atlantic Highlands, New Jersey.
Carton and his peers say they were kept in the dark about the exact conditions of the new licenses, with many breweries only hearing the final details on June 27, right before the July 4 holiday weekend and the beginning of the state legislature’s summer recess. Lawmakers are off until September 6, making it nearly impossible to use the legislature to respond to the ABC ruling going into effect. After the recess, State Senator Michael Testa has pledged to introduce legislation to give breweries more permissions. He says allowing more events will be a component of that legislation; beyond that, the specifics of the bill are still being drafted. As a co-chair of the Manufacturing Caucus, Testa says he’s already heard from legislators of both parties who want to see this legislation advance.
“I think it’s going to have to get a lot of legs because it’s a very real issue,” Testa says. “Our small businesses, in particular breweries, many of them are on the brink of closing because of the restrictions based upon them during the COVID era.”
For now, conditions that breweries must abide by under the licensing structure include:
A cap of 25 on-premise “special events” (open mic nights, trivia nights, amplified or DJ music performances, etc.) per brewery per year.
Televising “championship sporting events” such as the Olympics, college bowl games, Major League Baseball playoffs and World Series, the Kentucky Derby, etc., are considered “special events” and count toward this quota.
A cap of 52 on-premise “private parties” per brewery per year.
A cap of 12 off-premise events (beer festivals, county fairs, 5K races, etc.) per brewery per year.
The advanced entry of all on- and off-premise events with the ABC via its online portal; a brewery must submit an on-premise event at least 10 days in advance, and at least 21 days in advance for an off-premise event.
A requirement that breweries provide a tour to every patron at least once per year and maintain a record of which repeat customers have taken the tour.
A prohibition against selling coffee at taprooms.
A prohibition against offering food to patrons at taprooms, including a prohibition of food trucks parked on-site. A brewery also may not “collaborate or coordinate” with a food truck to offer food to its patrons, regardless of where it is parked; breweries have taken this to mean that they may not promote a food truck’s location on social media or recommend a specific food truck for a private party.
Carton says he’s “never felt safe” hosting events at the taproom for fear that the ABC could improperly cite him for a violation. He’s had to turn down so many private parties that he’s created a form email to respond to those requests.“The downside to not trusting the system is I lose money in the tasting room,” he says.
But for Roger Apollon Jr., co-founder of Four City Brewing in Orange, New Jersey, events are “our business plan, our philosophy.” Between monthly trivia nights and music performances, the brewery also hosts corporate events, fundraisers, and birthday parties. Apollon estimates there’s some event taking place at the brewery once or twice weekly.“These are all opportunities for us to sell beer. These are all opportunities for us to give back by doing fundraisers. These are all opportunities for us to support other small businesses and food vendors,” Apollon says. “A brewery without community is nothing.”
Apollon says if these restrictions are being enforced, Four City will comply. “What choice do we have?” he says.
Critics say the ABC’s restrictions are burdensome and discourage customers from visiting taprooms. As many breweries struggle to return to pre-pandemic sales levels, taproom business is critical. The Brewers Association (BA) has cited taprooms as essential to many breweries’ recovery from COVID: Taproom-focused brewery growth (+21%) outpaced the overall growth of BA-defined craft breweries (+8%) last year. The BA’s chief economist Bart Watson estimates that nationally, 12% of all sales for BA-defined craft breweries occurred at taprooms.
Carton says that though his brewery distributes much of its beer—selling 60% of it in kegs to bars pre-pandemic—sales still haven’t returned to what they were before COVID. Those distributed kegs today make up 35% of sales. Just days before the Fourth of July weekend, Carton had to double the number of taproom employees working during each shift from four to eight in order to have enough staff to offer informal brewery tours, as required by the new licensing. The four employees, at $15 an hour for 33 hours per week, cost Carton an additional $1,980 weekly.
Other breweries are much more dependent than Carton is on taproom events like corporate gatherings or off-site fairs and festivals. Of the 127 New Jersey breweries who reported production to the BA last year, 90% make less than 1,000 barrels of beer per year. This means the vast majority of the state’s breweries are likely the kind of small, taproom-focused businesses who rely on on-site sales. Such events not only bring in revenue but double as marketing to new customers. That’s especially important to small breweries who don’t have wide distribution, and new breweries still looking to build their consumer base and reputation.
In a statement, the New Jersey ABC said the rules are “intended to provide a simplified ‘blueprint’ to help ensure full knowledge of what is legally required on the part of licensees and a fair marketplace.” The agency notes that there are no new conditions put in place since the 2019 special ruling.
“The Division believes the activities permitted under the 2019 Special Ruling strike a fair and appropriate balance between the interests of full retail license holders, such as restaurants and bars, and the craft brewing industry,” the statement says.
But many in the state’s beer industry say the criteria are anything but fair, arguing instead that they’re going to reduce taproom traffic and sales.
“The ABC is saying that an extension of your business where you make a good portion of your money is being cut off at the knees while they’re asking you to survive,” says Jon Miller, vice president of New Jersey Craft Beer (a website for Garden State beer enthusiasts) and a brand ambassador for Weyerbacher Brewing in Easton, Pennsylvania.
Miller says the restrictions on on-site programming, food, and beer festivals will hamper the state’s developing brewery culture. In 2012, just a dozen small breweries existed in New Jersey; that’s grown by more than a 100 in the decade since. In 2019, there were approximately 6,000 retail alcohol licensees in the state, making breweries roughly 2.3% of all licensees.
The ABC, in its special order, implies that the greater number of retail alcohol licensees in the state means their needs should take precedence: “… the Division must balance the concerns of the growing limited brewery sector comprised of 100 licensees against the issues and concerns facing the bars and restaurants that collectively hold approximately 6,000 retail consumption licenses in the State.”
“I think you’ll see some breweries that don’t offer a great taproom experience because there are more limitations,” Miller says. “Do breweries-in-planning say, ‘My taproom’s going to have six seats and two tables’? That doesn’t help the community at large. It’s not the gathering place anymore.”
New Jersey breweries already had to find ways to sell their packaged beer during the pandemic, either increasing sales in distribution, launching home delivery, or both. Further taproom restrictions would make sales in distribution even more necessary. However, breweries’ profit margins are lower for beer sold in a grocery store or bar than they are for draft beer a brewery sells at its own taproom. A bill to permanently legalize home delivery of beer is still pending in the state legislature.
Critics of the taproom restrictions believe the influence of New Jersey’s restaurant, bar, and liquor store owners is behind the ABC’s ruling. No type of alcohol can be sold at the state’s grocery stores, making those three types of licenses the only places to buy beer, wine, or liquor.
And since Prohibition, the state has capped the number of liquor licenses by municipality based on population, but has allowed them to be sold and transferred by private owners. This has made some licenses valuable, selling for between $350,000 and $1.2 million. A limited brewery license, by contrast, costs $1,250 annually for a brewery producing up to 50,000 BBLs.
Eric Orlando, executive director of the Brewers Guild of New Jersey, says many of these license holders believe taprooms dilute the value of their liquor licenses. (The New Jersey Restaurant & Hospitality Association did not respond to a request for comment.)
“The interesting thing is that seemingly state regulators have put themselves in the position of citing winners and losers in all of that and leaning toward the side of regulations that preserve that monopoly,” Orlando says. “It’s seemingly regulators preserving the status quo system as much as possible.”
Efforts to present a united front among New Jersey’s brewers are hindered by the fact that the state’s breweries divided into two guilds in 2018, a schism partially instigated by varying responses to a draft taproom licensing requirement proposed that year. Miller believes a single guild representing all breweries would be more effective in advocating for the repeal of these licensing requirements.
“Unity in the guild is a starting point. Having one goal, one direction. That’s the only chance we have,” he says.
While the legislators are on break, an executive action by New Jersey Governor Phil Murphy could also reverse or postpone the ABC’s ruling.
“I don't see any path for the ABC to say they’ll back off, and the legislature is off for two and half months,” says Scott Wells, owner of Bolero Snort Brewery in Carlstadt, New Jersey, and a board member of the Brewers Guild of New Jersey. “The only thing that can happen right now to make any difference… is coming out of the governor’s office.”
Words by Kate Bernot