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Calvert Recorder: Franchot's alcohol task force makes a stop at Calvert Brewing

Calvert Recorder

Franchot's alcohol task force makes a stop at Calvert Brewing

June 13, 2017

By Tamara Ward

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 make’s 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 its 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 restaurant.

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.

Mortiz 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 Mortiz.

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 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 Maryland, 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-you-go 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 industry.

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.

Twitter: @CalRecTamara

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