E-Malt.com News article: USA, MI: Hearings begin on legislation to boost microbreweries output

Michigan’s burgeoning craft beer industry is backing a bipartisan package of bills to loosen the state’s complex array of brewery regulations and allow further expansion, The Detroit News reported on September 10.

While lawmakers and craft beer industry officials agree the reforms are needed, some microbrewery owners argue the steps may not be enough to jolt the industry into much higher growth.

Hearings began this week on legislation boosting the number of barrels microbreweries are allowed to produce each year, broaden limits on the ownership of brew pubs and let small brewers serve up their stouts, ales and porters in two drinking rooms apiece.

New Holland Brewing Co. president Brett VanderKamp said it’s about “allowing more market access for (Michigan) brewers.” VanderKamp heads the Michigan Brewers Guild’s government affairs committee.

“We want to provide a little more flexibility for our craft brewers,” added state Rep. Andy Schor, D-Lansing, chief sponsor of one bill. “I’m looking forward to the testimony because there are a lot of intricacies in our regulations.”

Frankenmuth Brewery manager Haithem Sarafa said those “intricacies” are outdated and costly for small businesses. Sarafa “loves” the proposals but says they’re small steps toward cutting red tape he believes still makes it difficult for many fledgling breweries to thrive.

“New microbreweries have no chance of getting any traction, no matter how good their beer is,” said Sarafa, who partners with his brother, Anmar, in a revival of the 150-year-old brewery in the German-themed town.

In 2009, the Sarafas acquired the brewery, which had closed for a second time in 2006. It now produces about 8,000 barrels annually, far below the 30,000 barrels at its height before a 1996 tornado caused millions of dollars in damage and resulted in its first closure.

“What other business do you know of that has a perishable product and has to sell to a distributor that has to sell to a retailer that has to sell to consumers?” Sarafa said regarding longtime mandates that, with few exceptions, demand two layers of separation between producers and drinkers.

Gov. Rick Snyder has said he wants to streamline outmoded alcoholic beverage rules in Michigan, which last year had the fifth highest number of microbreweries and brew pubs in the nation, according to the national Brewers Association.

The 15-year-old Michigan Brewers Guild says the industry annually pays $24 million in wages and pours $133 million into the economy.

Even without reforms, the state added 17 breweries in 2011, a 20 percent increase, the Demeter Group Investment Bank of San Francisco, a merger and acquisition advisory firm, reported.

Snyder’s Office of Regulatory Reinvention has recommended 72 changes in the state’s alcoholic beverage laws to foster added growth.

Earlier this year, the governor signed a bill allowing bars and restaurants to sell their beer off-premises under special licenses that cost $100 a year. It broadens the market for smaller breweries that previously were restricted to selling only in their own facilities.

Under the pending House bills:

■Breweries could double their output to 60,000 barrels a year and remain in the microbrewery category, under which they also can sell their beers for on-premises consumption without the expense of an additional state license.

■Smaller brew pubs, which only can sell directly to customers for on-premises consumption or take-out, could own interests in five other brew pubs and produce up to 18,000 barrels of beer a year. Current rules limit brew pub owners to two facilities and production of 5,000 barrels.

■A brewer could sell the beer it makes for on-premises consumption at two locations it owns. Current rules limit such sales to a single location.

The bills are supported by the Michigan Beer and Wine Wholesalers Association, which represents alcoholic beverage distributors in Lansing.

“Michigan distributors continue to work closely with Michigan craft brewers to find real reforms for a 21st century economy,” the association’s vice president Spencer Nevins said in a statement.

The legislation is especially important to Short’s Brewing Co., which in nine years has grown from a startup to a robust firm concocting as many as 150 beer varieties a year for its tap room and 37 varieties for retail outlets exclusively in Michigan.

Short’s has a brewery in Elk Rapids, a pub and restaurant in Bellaire, business offices in Wixom and is the state’s third-largest beer maker. It brewed more than 20,000 barrels last year.

The company expects to reach the 30,000-barrel mark next year and needs the rule changes so it can continue growing, said Scott Newman-Bale, a partner in the firm.

“We have a number of projects in northern Michigan we’d like to pursue and would need another outlet,” Newman-Bale said.

Frankenmuth Brewery’s Sarafa said he wants to unshackle microbreweries from requirements to go through distributors to get their products on store shelves, as Illinois has done.

He said current regulations require him to sell his beer to a distributor and buy it back at a higher price to offer it to customers at the bar and restaurant he also operates.

VanderKamp and Nevins said brewers and distributors are negotiating additional legislation that would let brewers self-distribute a certain number of barrels per year.


17 September, 2013