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Craft beer boom challenges Maine's antiquated alcohol laws

Maine Review/ craft beer and laws

Craft beer has been a bright spot in the Maine economy. Breweries across the state employ about 1,500 people, source hops and grains locally and attract beer tourists to the state, according to a 2013 study conducted by the University of Maine School of Economics. The state in 2014 ranked sixth in the nation for breweries per capita and seventh for their per-capita economic impact, with $430 million pumped into the local economy, according to the Brewers Association, a national trade group.

Yet lawmakers passed on the chance this month to eliminate a regulation that requires Maine's 27 brewpubs a restaurant plus brewery to build separate rooms with separate entrances to sell six-packs or larger cases of their own beer to go. Brewpubs, however, can fill growlers of their own beer to go without that same restriction.

With people tipping back more glasses of locally brewed beer than ever, legislators in Maine and across the country increasingly are revisiting alcohol regulations, many of which have sat on the books since just after Prohibition, limiting the growth of the lucrative craft beer industry.

"The whole legislative rubric under which we operate envisions a much different world," Heather Sanborn, president of the Maine Brewers Guild and co-owner of Rising Tide Brewing Co. in Portland, said. "It envisions very large breweries, which was all there were in the 1970s, not a world where there is beer tourism or where there are 70 fast-growing, local Maine businesses making great beer."

Antiquated laws

For example, an obscure Maine law passed in 1937 four years after the end of Prohibition prohibited bars from "advertising" the alcohol content of beers on draft menus out of concern it would encourage people to drink stronger beer. It wasn't until 2014, when a state liquor inspector informed a Belfast bar owner that posting alcohol content on his menu violated state law, that this law came to legislators' attention.

The craft beer industry has flooded draft menus with a variety of beer styles that often exceed the average 5 percent alcohol content of Budweiser, Coors and other beers produced by megabrewers. With an ever-changing rotation of craft beers, bar owners argued that patrons rely on the alcohol content printed on their menus to make informed decisions about what beer to drink.

"It promotes responsible consumption of alcohol by giving the customers a gauge by which they can make informed choices," Eugene Beck, owner of Nocturnem Draft Haus in Bangor, told the Veterans and Affairs Committee in 2014. "A customer has the right to know how strong the product is that they will be consuming."

Lawmakers in 2014 pushed through a law change that resolved the problem for breweries and bars.

While lawmakers chose not to ease restrictions on brewpubs this year, they passed a bill earlier this month to allow sales representatives from breweries that produce more than 50,000 gallons of beer per year, such as Shipyard, Geary's, Baxter and Rising Tide, to give samples to retailers who are considering stocking their product.

Sales representatives from Geary's and Rising Tide could give a presentation to retailers about new beer varieties hitting the production line but could not provide samples on request from the retailer. A wholesaler would need to distribute samples, which depending on the frequency of sales visits could take a week or longer. In a growing and competitive industry, any delay could result in potentially lost sales, Sanborn said.

Drink it where it's made

The explosive growth of Maine's craft beer industry came about as a result of a 2011 reform in the state's alcohol laws that allowed brewers to sell "samples" in their breweries, a change that gave rise to the tasting room.

Before the reform, brewers could only offer samples of their beer as part of a brewery tour. But many small brewers operating on thin margins chose to forgo the tours because it was not financially feasible to divert employees to guide visitors and give away the product for free, Sanborn said. Now, almost every brewery in the state operates a tasting room, with beer tourists flocking to breweries to sample the drafts and see how they're made.

When Maine first allowed tasting rooms in 2011, there were 34 breweries in the state. Now, an estimated 70 are churning out barrels of beer, according to the Maine Brewers Guild. Over that same period, the number of craft breweries nationwide has grown from 2,033 to 4,144 as of December 2015, topping the historic high of 4,131 set in 1873, according to the Brewers Association.

While business models vary from one brewery to another, a tasting room can account for 20 percent to 30 percent of a brewery's sales, with a profit margin three to four times higher than sales to wholesalers or self-distribution.

About a third of craft breweries in the U.S. forgo distribution and just operate tasting rooms, according to Paul Gatza, director of the Brewers Association.

As states have relaxed laws to give craft beer room to grow, brewers have at times fought bitterly with bar owners and distributors over just how much slack they should be given.

Montana, unlike Maine, only allows breweries that produce fewer than 10,000 barrels per year to charge for samples, and even then breweries with tasting rooms can sell no more than 3 pints apiece to patrons.

Last winter, Montana legislators debated a measure that would have raised the production limit to operate a tasting room to 60,000 barrels and allow breweries to acquire liquor licenses to bypass tasting room restrictions. But that measure failed to garner enough support.

License to pour

Some brewers even partner with local food trucks or caterers to offer food prepared off-site and hire live bands to entertain patrons, much like a brewpub but without the additional licensing requirement and expense.

As the distinction blurs between bars and breweries with a tasting room, bar and restaurant owners in Portland question whether this is a fair model with which to compete. In response, the Portland City Council is considering the first licensing requirement in the state for brewers who wish to operate a tasting room.

Portland bars and restaurants need to be licensed with the city to offer food and alcohol, but a brewery only needs a manufacturing license from the state Bureau of Alcoholic Beverages and Lottery Operations to operate a tasting room, Portland City Clerk Katherine Jones wrote in a memo to the City Council. A new restaurant or bar is subject to the City Council's review and approval as well as a inspections from city departments.

"Breweries, wineries and distilleries are now destinations for patrons to drink at their leisure, consume food from food vendors and listen to bands," Jones wrote. "This business model closely resembles traditional restaurants and bars, which are required to obtain city licenses for alcohol and food service as well as entertainment and dancing."

Under the proposed requirement, breweries with tasting rooms will be subject to a similar licensing process as other Portland bars, for which the city will charge a $500 fee.

If approved at the council's March 21 meeting, it will be the first regulation passed in response to the state's booming craft beer industry. But Jones said the focus of the licensing requirement is safety, not restricting brewers' operations.

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