Massachusetts Small Breweries in Trouble?

They have to buy domestic or grow their own now:

http://www.msnbc.msn.com/id/44017396/ns/local_news-boston_ma/

Ray

I don't know that much about it, but if you aren't growing much of your own hops or malt...why would you call yourself a farmer-brewer in the first place? Why wouldn't you just be a regular brewery?

So wait - MA defined rules that would make breweries using a "farmer brewery" license, you know, actually have to farm? The horror!

Seriously though... That article doesn't make this sound like a bad thing. It sounds like it's only breweries using this specific type of license, and it also sounds like that type of license should carry some kind of qualifying criteria.

I don't see why these folks are saying they'd need to close - shouldn't they just be looking at alternative licensing that's more in line with the business they're actually doing?

"The law is designed to promote farming in Massachusetts."

Seems pretty clear to me if you're claiming to be a farmer in order to get a particular license, you should actually. . erm. . FARM.

This is like a church applying for tax-exemption but not holding services or promoting religion, but operating a skating rink instead.

This has devastating and far reaching consequences on existing and start-up breweries in the Bay State.

Under current law, many of the state's small and large breweries are operating under a Farmer-Brewer license - Including Boston Beer Company and Harpoon. This allows for on-site tasting, retail sales, and self distribution. The law, as it's written, does not implicitly lay out the percentages by which one must farm their own ingredients - the ABCC decided to abuse their power and apply and arbitrary statute to the law and it is so short-sited and uninformed that it hurts my brain.

The infrastructure and farm land simply does not exist to support the new rules - Growing grain is one thing - malting it is an entirely different animal. Something has to give or there will be about three breweries left in the state.

The key issue everyone has is this - For many, many years breweries have been operating wonderful, fruitful operations under the Farmer-Brewer license. They have never enforced a % of local ingredients to qualify. Hell, it's not even on the application! This move completely blindsides existing businesses and it's a damn shame.

JetSmooth said:

"The law is designed to promote farming in Massachusetts."

Seems pretty clear to me if you're claiming to be a farmer in order to get a particular license, you should actually. . erm. . FARM.

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I agree with this. The law was initially set up to promote local farming. That is why it exists. It sounds like, over the years, the initial impetus has been lost. But it's unfortunate for those who are being made the first example of rerouting to the original spirit of the law.

I bet that getting a more traditional license in MA is both more expensive and more difficult to get.

stratslinger said:

So wait - MA defined rules that would make breweries using a "farmer brewery" license, you know, actually have to farm? The horror!

Seriously though... That article doesn't make this sound like a bad thing. It sounds like it's only breweries using this specific type of license, and it also sounds like that type of license should carry some kind of qualifying criteria.

I don't see why these folks are saying they'd need to close - shouldn't they just be looking at alternative licensing that's more in line with the business they're actually doing?

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The only other option is a manufacturer's license, which is $4500 a year and forces a small, slim margin brewer to compete with AB for distributor truck space. In other words - they can't.

It also eliminates half of what makes such a business so appealing to both customers and owners - on-site tastings and retail sales.

treehousebrewco said:

This has devastating and far reaching consequences on existing and start-up breweries in the Bay State.

Under current law, many of the state's small and large breweries are operating under a Farmer-Brewer license - Including Boston Beer Company and Harpoon. This allows for on-site tasting, retail sales, and self distribution. The law, as it's written, does not implicitly lay out the percentages by which one must farm their own ingredients - the ABCC decided to abuse their power and apply and arbitrary statute to the law and it is so short-sited and uninformed that it hurts my brain.

The infrastructure and farm land simply does not exist to support the new rules - Growing grain is one thing - malting it is an entirely different animal. Something has to give or there will be about three breweries left in the state.

The key issue everyone has is this - For many, many years breweries have been operating wonderful, fruitful operations under the Farmer-Brewer license. They have never enforced a % of local ingredients to qualify. Hell, it's not even on the application! This move completely blindsides existing businesses and it's a damn shame.

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It sounds like what is necessary is the institution of a new category. Farmer-Brewer should not be applied when there is no farming involved. But I agree that if a new category to cover breweries is not initiated, there will be problems.

ayoungrad said:

It sounds like what is necessary is the institution of a new category. Farmer-Brewer should not be applied when there is no farming involved. But I agree that if a new category to cover breweries is not initiated, there will be problems.

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The idea of a farmer brewer is outrageous in any context. The malting process is highly specialized and requires a significant capital investment. Not only that, but the state is non-fertile ground for barley. 99.9% of it comes from west of the Mississippi.

The law is antiquated desperately needed to be modernized. The term "farmer-brewer" is and always has been a misnomer.

It's all about revenue and employment. There's no secret BMC conspiracy. The state wants the tax revenue for sales of grains/hops from within the state and increased employment opportunities in farming.

ReverseApacheMaster said:

It's all about revenue and employment. There's no secret BMC conspiracy. The state wants the tax revenue for sales of grains/hops from within the state and increased employment opportunities in farming.

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With all due respect, the point here is that regardless of their intentions jobs will disappear and farms will be hurt. Tax revenue will drop as well. It's insane.

I've talked to ABC about the farmer brewery license. Here is the info in a nut shell, but I'll lead with my opinion:

I think this is GREAT for somewhat established nano/micro breweries that have used the farmer brewery license to get started. Because this adds a significant barrier to entry for a lot of future people that want to start with a nano-brewery to keep their initial risk down. Now costs go up, scale has to start larger since the margins are small anyway on a small scale, and it just became much more difficult to sell on a commercial license.

I would bet money you will see a few of the middle of the road small craft breweries just scraping by start to merge. Partner up, still use all recipes and distribution, gain some economies of scale, have a more complex business agreement, but pay 1 license fee.

This is obviously a major setback to all of those people that wanted to invest in a 1 BBL setup, pay the $250 farmers license, another $200 for a license to self distribute, and have a small scale brewery to start with at a low risk/reward scenario.

I had talked to ABC previously, and questioned about setting up as a Farmer Brewery. The response was (at the time) yeah no problem. If you are under "X" amount of barrels per year, you can fall under that. I've read the rules. In one spot, it just mentions a distribution limit. In another, it does actually reference farming, but clearly they weren't enforcing that when handing out licenses.

There has been a lot of press recently about new local nano breweries popping up. I think there was one 1 or 2 weeks ago on Boston.com. Now...hmm...all of a sudden they are re-evaluating how they enforce this? Welcome to Taxachussetts! If you were the state, would you rather get $250 for each of these licenses, or $4,500?

I'm not sure what the rules are for setting up in NH, ME, or VT. But I would think you'll see even more nano breweries pop up there. But I'm not sure of the cost implication of then distributing in MA. I believe you'd need to use a distributor, which is tough to get picked up on (although there are a couple that do really well with micro-brews, like Atlantic Importing) and obviously eats at the margin.

treehousebrewco said:

The idea of a farmer brewer is outrageous in any context. The malting process is highly specialized and requires a significant capital investment. Not only that, but the state is non-fertile ground for barley. 99.9% of it comes from west of the Mississippi.

The law is antiquated desperately needed to be modernized. The term "farmer-brewer" is and always has been a misnomer.

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You are dead on. They need a Nano/Micro license. There is no reason Buzzards Bay, Harpoon, Sam, etc should be paying the same license fees as someone with the money to only do a 1 to 3 BBL system (or contract it and make no margin). MA was starting to catch up with the west coast since we are 10 years behind the curve on good craft beer. Looks like it is going to take a while longer. The only way I see this happening, is if Koch at Sam Adams takes a step forward and lobbies for a license change. He's the only one with the pull around here to make something change quickly with licensing within this state.

luke2080 said:

I think this is GREAT for somewhat established nano/micro breweries that have used the farmer brewery license to get started.

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Nope - No one is grandfathered, hence the outrage.

treehousebrewco said:

With all due respect, the point here is that regardless of their intentions jobs will disappear and farms will be hurt. Tax revenue will drop as well. It's insane.

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Umm...what farms are being hurt? No one that was using the farmers brewery license were actually doing much more then growing a few hops, that I know of anyway. I could be wrong.

Maybe a 1% tick on the grand scale of midwestern barley sales, but I'd still doubt that.

Impact on jobs is there, but probably minimal. (Although in this economy in stifling of new business is stupid)

Tax revenue will not be hurt. Licenses now cost more (tax revenue going up) and beer consumption will not falter - which is why I think this actually benefits those like Pretty Things, who had a chance to establish themselves the past couple of years.

And let the onslaught of posting covering this article begin. There was a thread on this yesterday as I'm sure there will be many more about it in the next few days.

treehousebrewco said:

Nope - No one is grandfathered, hence the outrage.

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I realize no one is grandfathered.

If you setup a store 3 years ago for a $200 per year fee, and lots of other stores were starting to pop up all over the place, would you mind paying $4k per year if it meant a huge reduction in new competition?

For those nano-breweries that have been around more then 3 years that the increase of $4k is a game changer for them, then they weren't seeing the growth anyway and should merge with another in their same boat.

Trust me, I think this is a jerk move by the state, and since the beer is taxed anyway I think they are going overboard. I also think they should redefine their definitions of breweries. But in my business opinion, there are certainly a few small breweries that took advantage of the low cost to license initially, and if they ran their business well, shouldn't be minding how this limits new competition.

IrregularPulse said:

And let the onslaught of posting covering this article begin. There was a thread on this yesterday as I'm sure there will be many more about it in the next few days.

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Missed the thread yesterday. Maybe a mod can merge them? I'd rather discuss something like this then other general discussions and ramblings like "why is my SWMBO so annoying"? (Because their is nothing to discuss, they are a necessary evil to do our laundry (just kidding lady brewers here on the forum - but no seriously I wish my girlfriend did my laundry more often, I hate folding))

This is what happens when people in power know nothing of the businesses their laws try to dictate.

I for one see that there should be a needed change in the laws themselves. There should be a law specifically for small bbl brewers and one for brewer-farmer (because, you know, you should "farm" if you have this license). It's a misnomer that barley won't grow in Massachusetts it's just not widely done. I agree that large establishments like Sams and Harpoon shouldn't be paying for a farmers-brewers license but should pony up. Their probably the tickler of the issue to be honest.

I didn't read the new law yet but have a general idea of what it states. I guess it comes down to what the definition of "farmer" or "farm" is. Is a 2'x2' plot that has some barley grain trying to grow considered a "farm"? Do you need cows, sheep, etc.? Are you suppose to have a "farmers" license as well? Is there such a thing? Do you need land sanctioned for agriculture specifically or can you do this in your backyard? Could you have been a professional farmer but don't do it anymore, but still consider yourself a farmer? Etc question after question?

I see it as that all the politicians are doing is trying to line the wallets of their most devoted supporters. If you don't like it get your congressman to oppose it, that's their job.

here's the law btw (maybe this is old??)

http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXX/Chapter138/Section19C

Interestingly "(f) A farmer-brewer may import malt, cereal grains fermentable, sugars and hops, but may not import malt beverages or alcohol into the commonwealth. " and the law stipulates nothing about the act of farming or being a farmer, which is odd.

Geez a malt importers license...

Next we'll have a yeast importers license.. Regulation and taxation every step of the way. We voted down a beer tax last year here, looks like they're gonna get their money anyway they can.