Focus, Food Service & Agriculture, and Government

Regulations come to a head for small craft brewers

Senate bill would ease some Prohibition-era restrictions on the industry.

March 1, 2013
| By Pat Evans |
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The Michigan craft beer industry could be poised to grow larger, thanks to a bill from State Sen. Howard Walker.

Walker, R-Traverse City, introduced a bill Feb. 20 that could ease regulations on the state beer, wine and spirits industries. Senate Bill 216 includes many of the recommendations made by the state’s Office of Regulatory Reinvention last June to help modernize the state’s liquor control system.

Gov. Rick Snyder created the ORR to help identify areas where business regulations could be trimmed or updated. The recommendations come from a 21-member group made up of business owners including distributors and a brewery, as well as wine makers and gas stations.

Walker said the 150-page bill could help bars, restaurants, wholesalers, breweries, wineries, retailers and consumers.

“This bill provides new, important economic opportunities for the industry and removes barriers that prevent access to the marketplace,” Walker said. “From eliminating archaic regulations dating back to Prohibition, to improving state licensing processes, to allowing for more festivals, we have focused on ways to encourage business growth and job creation while maintaining health and safety.”

The bill would combine the microbrewers license and brewpub license into one license for small brewers making fewer than 30,000 barrels a year. This combination also would allow for breweries to distribute through the three-tier system that requires a distributor. Not only would this allow the brewpubs to distribute, it would allow small breweries to hold a liquor and small wine-making and distilling license.

Microbrewers comprising less than 3 percent of a wholesaler’s volume could distribute straight to retailers.

The three-tier system would still be required for most breweries, especially those seeking distribution outside local markets.

Breweries making fewer than 2,000 barrels a year are the ones to benefit from such a move, while larger breweries need the logistics help from distributors, said Brad Stevenson, Founders Brewing Co. vice president of operations.

“Distributor margins are healthy,” Stevenson said in a previous interview with the Business Journal. “On the other hand, we know how to make beer. We don’t know how to distribute.”

Also included in the recommendations are increased licenses for beer, wine and spirits festivals, while eliminating the current need for volunteers to pour at the festivals.

Although the bill proposes it would help all alcohol industries in the state, Michigan Brewers Guild director Scott Graham said in an interview about the recommendations last summer the beer industry is several years behind the wine industry.

“Many of (the recommendations) are procedural and would streamline the licensing, and there are a few that would be pretty significant,” he said. “We don’t want to do it without regulation but to be able to do things wineries can do. It’s more access to consumers and market. It’s logical for growth.”

The wine industry is subsidized by the state and run by the Michigan Grape & Wine Council, and even has its own state-funded Wine Country magazine.

Graham said many of the regulations were implemented when the craft industry wasn’t a factor. Breweries in the United States recently surpassed pre-Prohibition numbers of more than 2,000; those numbers had dipped below 100 in 1979.

For the past several years, the state legislature has recognized the industry by naming July Craft Beer Month in Michigan.

Although most breweries and many regulators like the recommendations, a group of more than two dozen organizations, including the Michigan Association of Chiefs of Police, Michigan Sheriffs’ Association and Michigan Beer & Wine Wholesalers Association, released a statement against the ORR recommendations.

“Taken together, many of the LCARC and ORR recommendations undermine Michigan’s effective, pro-growth and responsible system of alcohol laws, regulations and safeguards, and have the potential of putting Michigan citizens’ health and well-being at risk,” read a statement from “Putting Public Health First!”

Larry Bell, founder of Bell’s Brewery, the state’s largest brewery, has spoken against the recommendations.

The statement cited that the state already ranks in the nation’s top 10 for liquor retailers, and that the ease in regulations could result in criminals obtaining liquor licenses.

The pieces in the legislation the groups most worry about include shipping directly to consumers, the increase in resort liquor licenses, permitting wine samples at farmers markets, and removing fingerprint and financial verification for license applications. Also cited was the liquor license eligibility of gas stations with $50,000 inventories instead of the current $250,000.

“For many years, Michigan’s alcohol laws have served to promote public health, moderation and safety, while balancing the needs of businesses to pursue new opportunities and growth in the beer, wine and liquor sector,” said Mike Tobias, director of Michigan Policy Promoting Health & Safety in the original 2011 response to the recommendations.

“Unfortunately, these effective, common-sense laws are under assault like never before.”

Still, many of the updates are to clear regulations that date back to the end of Prohibition to help boost an already increasing brewing industry with more than 120 breweries that generated more than $133 million in 2011.

“I hope this bill receives the fair hearing it deserves to help improve the business climate for Michigan’s small breweries, wineries and distilleries,” Walker said. “I look forward to working with my colleagues to provide an environment in which these Pure Michigan businesses can thrive.”

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