Why The ABCC Got It Right About Farmer-Brewers In Massachusetts…

It’s been a busy week in the world of Massachusetts beer. In case you’ve been living in a cave (or were just out of town like myself), the controversy started with the Idle Hands Craft Ales company announcing that the Massachusetts Alcoholic Beverages Control Commission (ABCC) had denied its application for a so-called farmer-brewery license. Beyond impacting this single nano-in-development, the ABCC’s decision included a section purporting to be an advisory opinion, which held that in order to qualify for a Farmer-Brewery license, a farmer-brewer must “grow at least 50-percent, in the aggregate, of the quantity of cereal grains and hops needed to produce the anticipated volume of malt beverages.” The ABCC explicitly stated in its decision that “the industry is put on notice that the Commission will be applying this ruling prospectively and, specifically, during the next annual renewal cycle to ensure that every applicant for a farmer-brewer license meets the state law definition of farmer-brewer by growing at least 50 percent…”

This statement no doubt scared the hell out of dozens of brewers around the state that continue to operate under such a license, even if their renewal period was still a few months away. Read as an advisory opinion, the agency’s decision sought to redefine a long-standing license that a large number of production breweries in the state use for their operations.

The response to the ABCC’s decision and advisory opinion was fast, furious, and devastating. Everyone from newbie nanos to United States Senator Scott Brown piled on the vitriol against the ABCC, calling the decision everything from a “job killer” to a “devastating financial opinion.” Speaking at a well-timed annual meeting of the Beer Institute in Boston, Senator Brown lit into the decision. From the start it appeared clear that it was only a matter of time before either the legislature or other state politicians acted to quell concerns. On the state level, Senator Robert Hedlund filed legislation to allow for a new manufacturer’s permit for craft brewers. On the federal level, Senator Brown announced his support for the long-pending bill to roll back the taxes brewers pay to pre-1991 levels, which would cut the per barrel tax to $9 under legislation. Under the bill, the taxes paid by small breweries on their first 60,000 barrels produced would also be cut from $7 to $3.50. A few days later, State Treasurer Steve Grossman, who oversees the ABCC, announced that the agency’s decision would be rescinded and that public hearings on the rule would be held.

The funny thing about all of the controversy, however, is just how uncontroversial the ABCC’s decision should have been. Little is generally known by the public of the farmer-brewer designation and craft brewers themselves seem to also lack knowledge about its history. This fundamental lack of understanding, combined with the ABCC’s admittedly clumsy handling of the situation, has allowed what is otherwise a seemingly proper decision to go up in flames, squelching a broader and necessary discussion.

Long before the Harpoon Brewery sought the state’s first brewing permit in 1986, the Massachusetts alcohol licensing law contained but a single type of permit allowing for the manufacture of malt beverages in the state. In 1982, at a time when no breweries existed in the state, the state legislature tried to encourage brewing by adding a “farmer-brewer” or “farmer-brewery” license. Little changed since its passage, the farmer-brewer law was intended to encourage “the development of domestic farms.” Under the license, individuals and corporations can brew and sell their own beer on the site of the brewery. The measure passed with little fanfare and went unused until small, upstart craft breweries saw the benefits of its less restrictive terms and much less expensive licensing fees.

But from the beginning, applying the farmer-brewer designation to small brewers was complicated and fraught with problems. In the beginning, the ABCC enforced the spirit of the regulation and required brewers to cultivate at least one ingredient used in the brewing process, be it hops or barley. This, of course, caused problems for local brewers. As the Boston Business Journal put it more than twenty years ago, “[s]ince the climate here is not appropriate for growing barley adequate for brewing beer, to get the license [brewery] owners must lease farmland to grow a crop they will never use.”

“I don’t know of any other business that is required to farm in the state in order to do business,” Jonathan Tremblay, the then manager of the Cambridge Brewing Company, told the Journal. To qualify for the farmer brewer license, the brewpub grew 10 acres of useless barley that it leased from a farmer. At the same time in Northampton, one of the state’s only other brewpub proprietors, Janet Egelston, wanted to open new locations of the popular Northampton Brewery in Worcester and Salem but the state’s laws caused them to open in Portsmouth, New Hampshire instead. The nature of the farmer brewer license also caused her to postpone for five years her marriage to a business partner, until a state senator filed special legislation exempting from the state law prohibiting joint ownership of both brewery and restaurant.

In response, the ABCC filed legislation in 1990 attempting to scrap the farmer brewery license and replace it with a new brewpub license. After long being stuck in a legislative committee, and while no other brewpub licenses were granted, the legislature finally passed the law in 1998, adding licenses for pub brewers and pub brewers. While the new license allowed pub brewers to operate without the farming requirements, the legislature did not remove the language for non-pub based farmer brewers.

The ABCC itself acknowledged the farcical nature of the license. “The farmer brewery license is not working out well at all. It is making hypocrites and dishonest people out of legitimate business people by claiming they are growing the commodities that go into the product when in fact they are not,” George McCarthy, former ABCC chairman, told the Boston Business Journal in 1990. Somewhere thereafter, the ABCC changed its application of the ingredient growing requirement, allowing new craft brewers to enjoy the benefits of a license never intended to govern their operations. Craft breweries favored the farmer brewer license and continued to open and operate under its designation.

Fast forward to today and craft breweries are suddenly up in arms over something that should have been addressed by their lobbyists and the legislature decades ago. Until recently, Massachusetts brewers have been a largely disorganized bunch, preferring to go it alone in their operations and eschewing a larger, statewide group effort. The resurrection of a statewide brewers guild has helped this situation but the group has not taken steps to alter the state of the farmer brewery designation before the legislature.

The ABCC decision certainly frightened business owners who have worked hard to develop their operations or spent time in the planning stages. The Idle Hands press release on the denial of its license best captures this feeling.

Though this decision helps clarify a license that has been on the book for years, it sets a precedent that creates far-reaching effects on breweries, bars, restaurants, retailers and ultimately consumers. There are cost implications and more important issues relate to economic growth, industry innovation, and consumer access to a greater variety of local beers. These effects are further amplified as the brewing industry is one of a few growing industries in an otherwise struggling economy. Existing breweries of all sizes will have to adapt to the 50 percent requirements or apply for alternate licensing, and local entrepreneurs will have to determine whether they can invest in an industry that no longer supports growth and innovation.

While the ABCC’s unexpected change in course sent craft brewers scurrying in response, and with good reason, the agency’s decision was neither unforeseeable nor out of line. State law allows the ABCC to make rules governing brewing licenses, with comment periods usually given to the public and those affected. The ABCC even has the power to issue emergency regulations, as it did earlier this year when it prohibited the sale of caffeinated alcoholic beverages in the Commonwealth.

The odd thing, however, is that craft brewers are either ignoring the spirit and language of the farmer-brewer law or want to continue to operate in ignorance of it. For its part, Idle Hands conceded that it was not going to produce any significant portion of its own ingredients in line with the farmer brewer’s licensing guidelines and most craft brewers grow very little or none of their brewing ingredients.

While the ABCC’s abrupt announcement in the Idle Hands decision and its later advisory opinion was far from the best way to handle the shift of how it will apply state law, craft breweries operating in Massachusetts have to take some responsibility for their failure to address a glaring and long-standing problem. State Senator John Olver, the one who assisted Egelston in navigating the brewpub law in 1990, telegraphed the situation to the Journal in 1990. “The farmers brewery license was set up for another time and was never successful.”

It’s time for the Commonwealth (and its brewers and legislators) to address these long-standing issues in a responsible and public manner.

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More BrewDog Ridiculousness…

This Thanksgiving morning here in the United States brings news of more extreme beer ridiculousness from across the Atlantic. Usually a level-headed place that only gets its knickers in a bunch when discussing gravity taps, cask breathers, and other real ale intricacies, the British beer scene is dealing with news that the BrewDog Brewery of Scotland has brewed what it claims to be the world’s strongest beer. I caught the story from beer writer Pete Brown’s website, and while I agree with the first line, I can’t say as much about the second.

Slag ’em or praise ’em, you just can’t stop talking about ’em.

But it’s nice to be able to talk about Brew Dog for the right reasons again. Today, the brewery announces the launch of Tactical Nuclear Penguin – at 32%, the strongest beer on the planet, beating previous record holder Sam Adams Utopias by 7%.

BrewDog certainly has a knack for public relations and marketing, born in large part out of its close following of the Stone Brewing Company’s playbook. Of the brewery’s beers I have previously written:

The irony here is, for all of the bravado and boastfulness, BrewDog actually makes very simple, approachable and traditional beers that do not push the envelope of taste or flavor.

So with news of a 32-percent alcohol beer, piggybacking upon the controversy caused by its Tokyo, a 12-percent imperial stout, and its low-alcohol Nanny State, co-founder and lead spinmeister James Watt is beginning to sound a little like the comedian Lenny Bruce, who late in his career spent all of his time on stage railing against censorship instead of telling jokes. Watt himself has invited much of the controversy, including the inexplicable filing of a complaint against its own beer (the aforementioned Tokyo) with the Portman Group, a trade organization representing beverage alcohol producers and brewers in Britain. This act of self-immolation led to the banning of the product from public sale.

While these efforts inevitably raise the brewery’s profile and public awareness of the brand, and perhaps it is even what is required to awaken a staid and conservative British marketplace, it certainly detracts from the brewery’s products and comes across as a manufactured marketing ploy.

So with this mini-jeremiad aside, I imagine the folks at the Boston Beer Company, maker of Utopias, the reigning holder of the world’s strongest beer crown, may have something to say about BrewDog’s claims to that title. Lab analysis and reports will follow and I imagine that the claimed 32-percent ABV TNP will reveal itself to be either a lesser fraction of that amount or mainly comprised of alcohol gained from whisky cask aging, on top of the freeze and water removal process .

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Discussing the Discussion Over the Brewers Association’s Recent Craft Beer Sales Numbers…

As I trudge my way through the book (and a pile of legal work frankly), I occasionally lift my head to read what others are writing about beer-related topics. As a testament to my limited world view, the few topics I inevitably pop into tend on occasion to reference things I have written. So was the case with the recent press release from the Brewers Association touting the craft beer industry’s recent sales numbers, which was then discussed by Beernews and Tom over at Yours for Good Fermentables. Both discuss my recent BeerAdvocate column in which I question whether it’s such a good thing to have every craft beer available on your local store shelves and use it to parallel the Brewers Association’s announcement of the following numbers:

Dollar growth from craft brewers during the first half of 2009 increased 9%, down from 11% growth during the same period in 2008. Volume of craft brewed beer sold grew 5% for the first six months in 2009, compared to 6.5% growth in the first half of 2008. Barrels sold by craft brewers for the first half of the year is an estimated 4.2 million, compared to 4 million barrels sold in the first half of 2008.

The folks at Beernews see this announcement as sort of a bad omen for craft brewers. While acknowledging that craft beer continues to grow, especially compared to the losses suffered by many larger brewers. In truth, I haven’t really digested or even thought about the numbers with my present schedule and that probably won’t happen until closer to the Great American Beer Festival next month but at first glance I can’t say I think the numbers are anything to really worry about. 9-percent dollar growth is pretty impressive in a down economy, especially considering that consumers, by most retail accounts, took the first two or three months of the year off from buying everything, including beer. Boston Beer, which comprises as much as a quarter of the craft beer industry’s sales numbers, took an especially hard hit in the first quarter of the year. I wouldn’t be surprised to see these numbers edge up a point or two by the end of the year. On the other hand, Coors Light has apparently raised its sales 6-percent so far this year by volume, so who knows.

I do agree with Beernews that the Brewers Association’s simultaneous announcement regarding the number of craft brewers was a little bit odd or even sleight of hand.

The U.S. now boasts 1,525 breweries, the highest number in 100 years when consolidation and the run up to Prohibition reduced the number of breweries to 1,498 in 1910. “The U.S. has more breweries than any other nation and produces a greater diversity of beer styles than anywhere else, thanks to craft brewer innovation,” Gatza added.

I suppose it’s just reassuring the media about the success of craft beer, which is certainly understandable in a world where decreased sales can be seen as a sign of weakness, even in a crap economy.

I won’t spend any time rehashing what I’ve said in previous columns about the serious issues facing the craft beer industry, including its selected method of achieving these levels of growth and whether they are sustainable except to say the following. While in Bar Harbor, Maine, this past weekend, I had a great dinner at a restaurant in Southwest Harbor, the Fiddler’s Green, which had a fantastic and detail beer menu. While that was a pleasant an unexpected surprise, it paled in comparison to my shock at being able to buy, on-premise, several of Stone Brewing Company’s 22 ounce bottles, including its Old Guardian Barleywine and Smoked Porter, for ridiculously cheap prices ($7 and $6 respectively). By way of reference, these prices are equal to or cheaper than what these beers cost at a liquor store in Boston. Now I think that this particular restaurant may very well have been the furthest possible place you could enjoy Stone’s beers away from the brewery while still in the continental United States (approximately 3320 miles). And while it was nice to have the option, I can’t help but wondering about the wisdom of sending beers so far from home and whether anyone is making any money on these sales. (For the record, we opted instead for the 750 of Val Dieu Grand Cru for $12, which went great with the Pot du Creme)…

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The Washington Post Sends A Shot Across The Brewers Association’s Bow…

In an article in today’s Washington Post, author Greg Kitsock writes a lengthy column on the long-running dispute over the Brewers Association’s restrictive and political definition of craft beer. Loyal and unloyal readers alike will recall that the definitional debate is something we have covered here on a number of occasions, and here, here, and here. [Ed: Maybe I need a new subject].

Make no mistake, a week before craft brewers and the Brewers Association head to the nation’s capital for their keynote event, one intended to impress the national media and the nation’s legislators, the article is a political shot of a different stripe. It’s an issue the association has preferred to address in private despite the very public misgivings of prominent brewers, including members of the association’s own board.

One thing that the Post article overlooks, however, is the Brewers Association’s recent statements, including at the recent Craft Brewers Conference, that the two million barrel mark does not include non-beer products, such as so-called flavored malt beverages. While it is not completely clear, it appears that some portion of the Boston Beer Company’s present production is related to its Twisted Tea products, which do not count towards the two million barrel mark. If the association doesn’t move to change its definition or create some sort of legacy exception for Boston Beer, we may soon learn the exact production numbers for the Samuel Adams brands versus the FMB’s the company produces.

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A Brief Beer Wars Post-Gaming and My Final Words On The Subject…

It’s been a long day, what with the Beer Wars pre-gaming with the folks from Cambridge Common, the film, and then the Lucero concert. Nonetheless, I thought I’d end with a few thoughts on the film.

All told, I think the film fell surprisingly flat. The odd thing is that with all of my critical comments before its release, most turned out to be irrelevant. Not because Beer Wars answered them, but because, frankly, there wasn’t much substance to the film. That surprised me. For a film that was just shy of an hour and a half in length, Beer Wars took a long time to wind up to its point. And it took a really long time building up to the introduction of its main characters, Sam Calagione and Rhonda Kallman. Twenty minutes in fact. So long that I had forgotten they were central to the film. At the heart of the problem was that Anat Baron, the filmmaker, really had no place in Beer Wars at all and ten minutes of the film were probably wasted focusing on herself, including several of the crucial opening minutes. Selling malternatives doesn’t mean you’re in the beer industry. And even if it did, Baron’s placement in the film was either due to a mild case of narcissism or more likely a director’s cloudy vision of the overall project. It needed an editor or producer to step in and tell the director, “Listen, I get what you’re trying to do here, but it’s not working.” Unfortunately, that didn’t happen.

I could talk about the film’s choppy editing, pacing, and scene juxtapositions but really what struck me most was not the irrelevance of the chosen topic, as I once thought, but the missed opportunities in the storytelling. The film is wildly misnamed as it had little to do with the big guys, despite Baron’s repeated cheap pot shots at them and A-B in particular (kudos to the levelheaded analysis of panelist Maureen Ogle, on whom I believe the miscast moderator Ben Stein might have a little economist crush). Beer Wars also did not have much to do with the three tier system. At its core, the film was really about the little guys and their struggles against the greater economic system, which includes both the three tier system and the big guys. And this was such an obvious and advantageous narrative device that it was a bit painful to watch Baron fumble it.

Without question, the strongest parts of the film involved Rhonda Kallman, co-founder of the Boston Beer Company and the New Century Brewing Company. The scenes with her family were worth the price of admission and watching her personal struggles on screen provided the basis for a strong documentary voice. Watching her get politely turned down by a revolving door of individuals, from all three big brewers to a venture capital committee embarrassingly comprised of two kids half her age, was painful. But it was difficult if not impossible to reconcile Kallman’s strident willingness to align her company and products with the country’s biggest brewers (from A-B, Coors, and Miller, to a particularly bittersweet and cut-short pitch meeting with Jim Koch) with Baron’s slagging of big brewers. The filmmaker’s narrative voice or direction were clearly lacking in this pivotal part.

There are lots of little nitpicking points and questions that can be raised as well, such as why Beer Wars focused so much on Kallman’s Moonshot product to the near complete exclusion of the company’s flagship Edison Light beer, the confused poke at neo-prohibitionism (was she making fun of the NBWA, CSPI, or both?), and why Ben Stein was hired to host a panel without some prior rehearsals (didn’t even give my poor buddy Todd Alstrom a chance to discuss the clip in which he absolutely slammed Kallman’s beers, a shot he knew was coming). It seemed a long way to travel for such a short panel filled with Stein’s bumbling presentation and jeremiads in the form of questions.

In the end, it’s not that Beer Wars was irrelevant or dated, as I had worried. It’s that it just wasn’t much of anything but a series of lost opportunities. And frankly, that’s disappointing on several levels, none the least of which is that the available story material turned out to be so rich. The amateurish, Michael Moore-light antics distracted from what could have been a very interesting and personal story of what it’s like to compete in the world of big beer.

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