Maryland’s small, independent breweries are battling a piece of legislation currently before the Maryland State Senate that would curtail tap room hours, limit collaborations and contract brewing, and leave breweries’ tap rooms at the mercy of mercurial county governments. A growing chorus of craft beer fans has joined these breweries in pushing back on the legislation and calling for its amendment.
Maryland HB 1283 (2017) passed the House on Saturday by a vote of 139-0. It remarkably went from having one sponsor in committee (Majority Whip Delegate Talmadge Branch, D-Baltimore City) to a full mark-up and unanimous passage in a matter of three days. This happened during the rapid fire legislative period before the “crossover” day, which is the pivotal date for a bill to clear one chamber of the legislature in order to have time for consideration and passage before the end of the year’s legislative calendar. The bill is now under consideration in the Senate Committee on Education, Health, and Environmental Affairs. It is set for a hearing next Wednesday.
HB 1283 changes some of the ways in which Maryland’s Class 5 breweries are regulated. Paul Josuns has already done an extensive review of Maryland brewery regulations, so we won’t repeat that information here. The most significant revisions are:
- removing the current requirement that counties grant an on-site consumption permit to a Class 5 brewery
- limiting those breweries to only being able to sell beer that is fermented and brewed entirely on location AND only under the trade name of class 5 permit holder
- limiting on-premises sales (regardless of county provisions) to 10AM-9PM on Sunday to Thursday, and 10AM-10PM on Friday to Saturday (per the Brewers Association of Maryland, “Class 5 breweries that hold a local Class D or on-premise consumption permit are currently permitted to operate until 12am or 2am, depending on their jurisdiction”)
- expanding the current on-premises consumption limit from 500 barrels per year to 2,000 barrels per year, or up to 3,000 with special permission from the State Comptroller. However, any beer sold beyond the 2,000 barrel limit must be bought from a wholesaler (i.e. after reaching the cap, a brewery would be required to buy back its own beer from a wholesaler, at a markup, in order to sell it in its tasting room)
This legislation is being promoted by the Maryland State Licensed Beverage Association, which represents the interests of retail alcohol establishments in the state. (DCBeer reached out to the MLSBA but did not receive comment in time for publication. We will update this post should that change.) It pits them against the Brewers Association of Maryland, which has been pushing simultaneously to defeat HB 1283 and pass HB 1420. That latter bill did not make it out of the House in time for crossover day, and so is dead until the next legislative session.
So what could these changes mean for Maryland breweries and the beer drinkers who patron them? Here’s a sampling:
The obvious one is the cap on tap room hours outside of specially permitted promotional events. This will severely limit the ability of breweries to compete with other local establishments and reduce their ability to put on weekly activities that make them a destination for loyal patrons by shutting doors as early as 9:00 PM.
Any contracting breweries that produce at a Class 5 brewery would no longer be able to sell their beer through that brewery’s tap room.
In particular, patrons might be cut off from tap room sales at an establishment like Peabody Heights Brewery and any of the incubated breweries there. The same is true of any Maryland production brewery that is contracting out excess capacity.
The legislation’s three requirements of brewing, fermentation, and trade name for direct consumer sales could also stifle cross-brewery collaborations. Imagine Brewery A and B collaborate on a beer that is brewed and fermented at Brewery A. Each take some kegs to sell via their respective tap rooms. HB 1283 makes it so that Brewery B cannot sell this beer out of its tap room because it was neither brewed nor fermented at its brewery location.
By ending the requirement that each county grant an on-premises consumption permit to a Class 5 brewery, HB 1283 complicates the already disparate regulation of breweries in Maryland. A brewery could suddenly be unable to sell beer through their taproom due to a particularly temperate spirit coming into force in their county. Since breweries can make a much higher margin for direct sales through their taproom than through wholesalers, this could significantly harm their finances.
Even some breweries that are not designated as Class 5 have been wary of this legislation. Julie Verratti, of Denizens Brewing (a class 7 micro-brewery in Silver Spring), views HB 1283 as setting a particularly bad precedent which could harm other types of breweries in future. Beyond that, she says “This is a principle thing. If you hurt one of us, you hurt all of us…In the past few years there has been a marked increase in growth of new breweries. The State government should be encouraging this industry growth, not hurting it.”
For his part, the House’s bill sponsor, Delegate Branch noted over the phone, “When you drink beer, or if you’re a beer drinker, and there’s a tavern nearby, unless you still want to drink more, the only reason you would go to the tavern is if you wanted something harder. You’re not going to go to the tavern to drink beer with a beer facility nearby. If you’re [the brewery] open the exact same hours that I’m [the tavern] open, that’s not helping your local business…[Breweries are] supposed to show tours, give tastings, and then they can sell beer. Where I went to visit, there were no tours, but there was a lot of tasting and selling beers and music and food. It was like a bar, not like what they were representing. It was like a real bar. They are certainly competition for local taverns.”
Delegate Branch believes that the increase in barrel limit for tap room sales (a limit, he notes, no brewery exceeds under the current 500 BBL cap) is a fair offer in exchange for the other restrictions that the bill imposes. [Editor’s Note: Delegate Branch’s quotes have been updated since this post’s original publication.]
These limits on tap room sales come at a particularly bad time for craft breweries. According to the Brewers Association, in 2016 there was a significant slowdown in the increase of craft beer sales. That does not mean that there was no growth, just that the rate of growth (even as significantly more new breweries have been added) is slowing. The one exception to this was on-premises tap room sales, which saw a larger increase in incremental sales than those through off-premises channels. Assuming these national trends are true in Maryland, HB 1283 would be limiting tap room sales at the same time as that revenue stream is becoming the main source of financial growth for craft breweries in the state.
If you oppose these changes, there is still something that you can do about it. HB 1283 must still clear the Maryland Senate. Please call (which is far more effective than emailing, Tweeting, or Facebook posting) your State Senator’s office and explain your concerns about this legislation. This is a list of current members on the Senate Education, Health, and Environmental Affairs Committee. If you are unsure who your State Senator is, this handy government site can help you out: http://mdelect.net/. Unsure of what to say once you actually get someone on the line? Feel free to use our script below.
Editor’s Note: Greg Parnas, in addition to being a contributing writer for DC Beer, is an attorney for several breweries in Maryland who may be impacted by this legislation. All the statements in this article are factual, and have been verified by other DCBeer staff members.