Fran­chot’s al­co­hol task force makes stop at Calvert Brew­ing

Comptroller, own­ers want to mod­ern­ize laws

Maryland Independent - - News - By TA­MARA WARD tward@somd­news.com Twit­ter: @CalRecTa­mara

Mary­land State Comptroller Peter Fran­chot (D) as­sem­bled beer in­dus­try pro­fes­sion­als for a sec­ond meet­ing of the Re­form on Tap Task Force, on June 7 in Up­per Marl­boro.

Di­rected by the comptroller, lo­cal brew­ers shared their per­spec­tive on man­u­fac­tur­ing laws, con­tract brew­ing and the chal­lenges they face within the in­dus­try.

“I hope at the end of the day we can take a cock­tail nap­kin and write the state’s beer laws on that so they are sim­ple, clear, sup­port­ive and makes Mary­land the num­ber one state in the coun­try for beer,” said Fran­chot in an in­ter­view with The Calvert Recorder.

Fran­chot started the task force, which is com­prised of key stake­holder groups within the beer in­dus­try, con­sumers and lo­cal lead­ers, to re­view and re­vise laws that gov­ern the man­u­fac­tur­ing, dis­tri­bu­tion and sale of craft beer in Mary­land. Those in the in­dus­try and those look­ing to get in the in­dus­try of­ten re­fer to the state’s laws as an­ti­quated.

Last Wed­nes­day’s meet­ing was held at the Calvert Brew­ing Com­pany, a 28,000-square-foot pro­duc­tion fa­cil­ity and tap room, owned by task force mem­ber Michael Scar­bor­ough of Prince Frederick, who also owns Run­ning Hare Vine­yard in Calvert County.

“This is not a par­ti­san is­sue. This is a demo­cratic is­sue. This is a repub­li­can is­sue. It’s a beer is­sue and prob­a­bly more im­por­tantly it’s a tourist is­sue,” said Scar­bor­ough, ad­dress­ing nearly 100 peo­ple in at­ten­dance. “To the ex­tent that we change what’s go­ing on in this in­dus­try, it could have some very dire con­se­quences for a lot of peo­ple that are here.”

The cre­ation of the task force comes on the heels of the pas­sage of House Bill 1283 dur­ing the 2017 leg­isla­tive ses­sion in the Mary­land Gen­eral Assem­bly. The bill has been la­beled as a pro­hibitor of growth for the craft beer in­dus­try.

Jeff Kel­ley, of the comptroller’s of­fice, pro­vided a re­view of the cur­rent beer man­u­fac­tur­ing laws in the state. He iden­ti­fied the four dif­fer­ent li­cense classes of beer in Mary­land and drew com­par­isons to neigh­bor­ing ju­ris­dic­tions.

Class 5 is for a brew­ery and has no limit for bar­rel pro­duc­tion. Class 6 is a pub-brew­ery, the most re­stric­tive, which is limited to 2,000 bar­rels per year. Class 7 for mi­cro-brew­eries, a large seg­ment of brew­ers in the state, can­not pro­duce more than 22,500 bar­rels per year and must have an af­fil­i­ated restau­rant first.

Last is Class 8 for a farm-brew­ery which can­not pro­duce more than 15,000 bar­rels per year and must be lo­cated on a farm.

“Gen­er­ally speak­ing, the other states im­me­di­ately sur­round­ing us are with­out lim­its in pro­duc­tion,” said Kel­ley. “Penn­syl­va­nia, oddly, doesn’t limit how much any of their brew­ery li­censes pro­duce, but they set a floor. If you don’t make more than 250 [bar­rels] you don’t get a li­cense.”

Julie Ver­ratti of Denizen’s Brew­ing Com­pany in Mont­gomery County would like the state to in­crease the limit of what a brew­ery can self-dis­trib­ute, a mea­sure that would be fis­cally ben­e­fi­cial to Class 7 brew­eries, tap­rooms and restau­rants.

Un­like Mary­land, Wash­ing­ton, D.C., Vir­ginia and Penn­syl­va­nia do not limit what a con­sumer can pur­chase for off premise con­sump­tion. Mary­land lim­its off-premise sales to one case per visit, but in or­der to pur­chase, a con­sumer has to go through a tour or at­tend a spe­cial event, ac­cord­ing to Len Foxwell, chief of staff for the Comptroller’s Of­fice.

Mary­land is also the most re­stric­tive for on-premise con­sump­tion, where Delaware, Wash­ing­ton, D.C., Penn­syl­va­nia and Vir­ginia have no lim­its. Cur­rently, Mary­land’s on-premise con­sump­tion is limited to 500 bar­rels per year, but ef­fec­tive July 1, when HB1283 takes ef­fect, the limit will in­crease to 2,000 bar­rels for Class 5 brew­ers, which in­dus­try pro­fes­sion­als say is one of the few pos­i­tives of the leg­is­la­tion. Of the neg­a­tives, coun­ties now have the au­thor­ity to re­strict on-premise con­sump­tion.

Mary­land also has the most re­stric­tive hours of op­er­a­tions, lim­it­ing Class 5 brew­eries to op­er­ate from 10 a.m. to 10 p.m., as well as lim­it­ing hours for Class 8 li­cense hold­ers.

“We do about 30 per­cent of our busi­ness on a Satur­day after 9 p.m. We close at mid­night on Satur­days, if the busi­ness is there. To tie our hands and say you are not al­lowed to sell what you make be­tween these hours is insane,” said pan­elist Adrian Moritz of the Eastern Shore Brew­ing Com­pany in St. Michaels.

Moritz said he pro­duces 1,000 bar­rels a year and sells pre-packed snacks but makes clear it is not a restau­rant, nor does he de­sire it to be. He said two-thirds of Eastern Shore’s prod­uct goes out to mar­ket, the rest is con­sumed in the tast­ing room. The lat­ter ac­counts for two-thirds of its rev­enue.

Moritz and other brew­ers said lo­cal restau­rants rely on lo­cal brew­ers bring­ing in a new de­mo­graphic that will go to the restau­rants after vis­it­ing tap rooms, in­stead of be­ing a neg­a­tive force.

“They look at us as a concierge to send them to these restau­rants to ex­pe­ri­ence their food in our town,” said Moritz.

Ver­ratti said the num­ber one pack­age store cus­tomer for Denizen’s is less than a block from her brew­ery and pur­chase 10 cases a week.

“To say it’s a sym­bi­otic re­la­tion­ship is an un­der­state­ment,” said pan­elist Justin Divorkin of Oliver Brew­ing in Bal­ti­more.

New­com­ers re­ceiv­ing brewer’s no­tice for a Class li­cense be­fore April 1 will have a tap­room; those who don’t will have to work with lo­cal li­cens­ing boards.

Ac­cord­ing to Kevin Atticks, ex­ec­u­tive di­rec­tor of the Brew­ers As­so­ci­a­tion of Mary­land, Vir­ginia is tak­ing full ad­van­tage of Mary­land’s short­com­ings by heav­ily court­ing lo­cal brew­ers.

Scar­bor­ough said of­fi­cials in Vir­ginia con­tacted him within a week of build­ing Calvert Brew­ery, in­quir­ing about when his lease ex­pires and of­fered “to put up what money nec­es­sary” to move it to the com­mon­wealth.

Ver­ratti agrees that Vir­ginia has a bet­ter frame­work and laws than Mar yland, but never con­sid­ered Vir­ginia for po­lit­i­cal rea­sons.

“They had some of the most an­ti­quated anti-gay laws in the coun­try at the time we were open­ing our busi­ness,” said Ver­ratti, who owns Denizen’s with her wife and brother-in-law. “We did not want to give them any of our tax dol­lars be­cause of it. Mary­land has been a lot more friend­lier on those types of is­sues.”

Un­like other ju­ris­dic­tions, Mont­gomery County does not re­quire a Class 7 li­cense holder to have a restau­rant. That flex­i­bil­ity helped brew­ers like Denizen’s get started through part­ner­ing with food trucks, al­low­ing them to fo­cus on the man­u­fac­tur­ing and sell­ing of beer in the first year.

“If my tap­room closed, I would have to shut my doors as a busi­ness,” said Ver­ratti.

Dick O’Keefe of Pe­abody Brew­ing Com­pany in Bal­ti­more gave a his­tory les­son on how beer had strong ori­gins in Bal­ti­more, and con­trary to its rich legacy, it is fall­ing be­hind due to ge­og­ra­phy.

Ac­cord­ing to O’Keefe, who is con­sid­ered a beer icon in the state, the U.S. is made up of 46 states, four com­mon­wealths and a dis­trict, and how Mary­land, sand­wiched be­tween two com­mon­wealths, is at a dis­ad­van­tage com­pounded by neigh­bor­ing Delaware which does not tax liquor.

“A com­mon­wealth by their very na­ture are pro-busi­ness friendly just be­cause it’s a pay-as-yougo sys­tem,” ex­plained O’Keefe. “They can’t tax us and go build schools.”

O’Keefe said the beer in­dus­try has pro­vided hun­dreds of jobs in the state and that there is a need to im­prove leg­is­la­tion to get Mary­land even with the other states.

“The state of Mary­land keeps ty­ing our hands — just give us an equal place to work with and we’ll be fine,” said O’Keefe.

“If the state of Mary­land wants us to em­ploy peo­ple, they want us to man­u­fac­ture prod­ucts, get rev­enue for the state of Mary­land — they just got to help us,” said O’Keefe. “Just please stop get­ting in our way.”

This year, O’Keefe will be dis­tribut­ing beer in eight states, after bring­ing dis­trib­u­tors to Pe­abody Heights Brew­ing or hand-car­ry­ing the beer to var­i­ous dis­trib­u­tors.

In ad­di­tion to brew­ing its own prod­ucts, Pe­abody Heights con­tracts brews for sev­eral brew­eries in Mary­land as well as in Chicago and Bos­ton.

“Sell­ing beer and mak­ing beer are two sep­a­rate things,” said O’Keefe. “[Some] peo­ple come to us be­cause they want to have their own brand.”

Over the next sev­eral months, the task force will re­view beer laws in neigh­bor­ing states, re­ceive feed­back from the pub­lic and in­dus­try pro­fes­sion­als to of­fer ideas on how Mary­land’s laws can be changed to en­cour­age the growth of the brew­ing in­dustr y.

Fran­chot said the task force will start dig­ging in and de­vel­op­ing leg­isla­tive rec­om­men­da­tions to go for­ward in the early fall and have them ready for the leg­is­la­ture in Novem­ber.

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