Saturday, March 30, 2013

Craft Brewers Face Regulatory Challenges

Craft Brewers Face Regulatory Challenges:
This week I attended the annual Craft Brewers
Conference
. This year’s conference, held in Washington, DC,
occupied much of the District's Convention Center, a massive space
that reflects the continued
growth
of the craft beer movement in America.
In addition to sampling many excellent beers from around the
country over several days, I sat in on a few educational sessions
and spoke with several well-known brewers from around the country
to gauge the state of the industry.
While demand for craft beer is growing across the country, it
appears many small brewers are also bumping up against outdated
federal and state regulations.
State laws regulating breweries vary greatly. The trend, as I’ve

noted previously
, appears largely—though
not universally
—to be toward deregulation.
I spoke with Garrett Marrero, founder of Maui Brewing Company in Hawaii, the
largest craft brewer in the state.
Demand for craft beer has helped Maui Brewing and other brewers
in the state push to expand limits on production six-fold over the
past few years—from 5,000 barrels to the current 30,000-barrel
limit.
“It’s nice when there are issues where you can be aligned with
your competition, and I think that was an obvious one,” says
Marrero.
Federal regulations also vary. They’re in flux in large part
because of the explosion of beer choices over the past couple
decades.
“You reach a tipping point,” Daniel Kopman, co-founder of
Schlafly Brewery in St. Louis,
tells me. “The consumer’s demanding more variety.”
“Before, you had Anheuser-Busch and you had Miller and Coors,
separately,” says Kopman, “and maybe a few years ago you had a few
other players that all operated under the same basic playbook. And
the rules were very well written and they had significant control
over the flow of beer essentially from the brewery—and the raw
materials behind it, and all of the packaging materials, and
everything that went into the supply side. They had control of the
process all the way through to the consumer. And essentially the
consumer was in step with them.”
“So now, all of a sudden,” Kopman says, “the consumer steps to
the side—and another side and another side. It’s now moved such
that [large brewers] can no longer control everything that’s going
on. And so that also puts pressure on the regulatory framework,
because the regulatory framework was built along the previous
paradigm of a few… major brewers.”
Craft brewers expressed a variety of regulatory concerns at the
federal level.
I spoke with Bill Sysak, Craft Beer Ambassador for Stone Brewing Company in Escondido,
California, who’s known as “Dr. Bill” in the craft beer
community.
Sysak tells me that two of the main concerns of those who took
part in a craft beer lobbying day on Capitol Hill that coincided
with this year’s Craft Beer Conference were barrel taxation and
threats that regulations meant to crack down on so-called
“alcopops” might unintentionally ensnare craft beer producers.
Perhaps the most interesting part of the conference I witnessed
took part during a question-and-answer session that followed a talk
by Art DeCelle, an attorney with the firm
of McDermott Will & Emery who previously served as general
counsel with the Beer Institute, an industry lobby group.
DeCelle’s talk focused on FDA regulation of brewers—which has
ramped up steadily in the past decade and will only increase under
the Food Safety Modernization Act. Still, while FDA regulators are
increasingly coming into contact with brewers, it appears—judging
from comments and questions posed by brewers after DeCelle’s
talk—these regulators often have little idea what craft beer is and
how it’s produced.
One craft brewer, for example, told DeCelle that an FDA
regulator who inspected his brewery had suggested that the new FSMA
required the brewery to refrigerate its grain—something that flies
in the face of beermaking and industry standards.
"It doesn't take much to understand that you don't keep grain
cold," he said.
Another brewer described FDA inspectors who have visited his
brewery as "clueless." Yet another pointed to the growing problem
in the industry of "the FDA not really knowing our practices."
When the FDA "send[s] in an inspector,” he told DeCelle and the
audience, “they should know what they're talking about."
The challenge regulators must face up to is that artisanal
production often doesn’t resemble the sterile laboratory
environment that the FDA sometimes expects.
Smaller isn’t inherently any better or worse than bigger. But it
is different. Even within the craft beer industry, the size of
market participants shows great variety.
There are craft beer giants like Stone Brewing, big fish in
small ponds like Maui Brewing, and nanobreweries that could fit
into a small apartment. But some are even smaller.
I learned about what appears to be a new trend in beer—gypsy
brewing. Brooklyn's Lauren Carter and her husband are launching
Grimm Artisanal Ales, which
builds on principles of the shareable economy, in Brooklyn, New
York.
"In order to relieve much of the debt burden associated with
starting a brewery," Carter tells me, "gypsy brewers do not invest
in space and equipment, which can be prohibitively expensive.
Instead, we are brewers without a home traveling to existing
breweries and making beer by renting time using the equipment
there."
Regardless of size, the craft brewers I spoke with appear to
want much the same thing—good beer, happy customers, and fair
rules.
Industry insiders appear optimistic about their shared
future.
“Craft beer’s only going to continue to grow,” says Stone
Brewing’s Sysak.
If state and federal regulators will allow it, craft brewers and
beer drinkers alike can expect a bright and hoppy future.