Thursday, May 26, 2011

SB 1224, the "High Alcohol Beer" bill - before and after

OK, so we have been getting a lot of emails, tweets, calls, etc, asking what we think about the new bill, waiting to be signed by the Governor into law, that will create a new ABC license to brew high-alcohol beers. Well, maybe the best thing to do is to compare the situation before and after the bill becomes law:

BEFORE:

1. Breweries could get a "distiller's license" to brew high-alc beers. Yes, they already could! For some reason, none of the reporting has mentioned that we have been brewing high-alc beer for a year now, which is how we are able to legally brew our "Sue", a 9% abv smoked imperial porter, which won a silver medal at the 2010 Great American Beer Festival.

2. Breweries could get a "liquor-by-the-drink" restaurant license to serve beer, high-alc beer, wine, and spirits. However, the ABC ruled that breweries could not sell growlers to-go of normal strength beer if they held a restaurant liquor license. That's why if you buy a growler at Blackstone's brewpub, you have to do the transaction in the brewery part of the building, which is not covered by their ABC restaurant license.

3. Manufacturers who hold a TN distiller's license could get an ABC retail liquor license to sell their products to-go. However, those products had to be sold in special 750 ml commemorative bottles only, not in their normal packaging.

4. Breweries that received local beer board approval for off-premise sales could sell their regular-strength beer to-go, in any size package they wanted. Growlers, cases of bottles, 1/6 bbls, 1/2 bbls, no problem. Heck, we'd sell you a 40 bbl tank of beer if you brought the tank back the next day.


AFTER

1. Instead of a "distiller's license", the legislature created a new definition of "high alcohol content beer" as beer between 5% and 20% abw. It also ratified any actions the ABC made in giving a manufacturer of high alc beer a license prior the effective date of the law (i.e. they covered the ABC for giving us a distiller's license before ). From what I hear, getting this license will be just about the same procedure for getting a distiller's license, which was $1000 per year and an annual inspection of the brewery.

2. The legislature authorized licensed high-alc brewers to offer free"tastings" during tours.

3. The legislature authorized the ABC to grant high-alc brewers a restaurant license to sell high-alc beers in their attached restaurants. As I noted above, this is not a change in law, breweries could already get a restaurant license to serve high-alc beer, wine, and spirits. With recent changes to the law to allow for limited-service restaurants (i.e. "bars"), allowing restaurants to serve as little as 15% of their revenues in food sales, this license could cost as high as $4000 per year, and as little as $1000 per year if the restaurant got 50% or more of its revenue from food sales.

4. OK, pay attention. Here is where it gets complicated. The legislature authorized the ABC to grant high-alc brewers a retail liquor license. Remember, if you had a distiller's license, you could already apply for a retail liquor license, but could only sell in 750 ml commemorative bottles.

If a high-alc brewer gets a retail liquor license, then the following applies:

a. as far as the state cares, the brewer can sell both high-alc and regular-strength beer at the
same location. But the local governing body (in Nashville, the beer board) can decide if THEY will allow both types of sales on the same premises, and what hours and days that can take place, if at all.

b. the brewer with a retail license could only sell a combined total of 5 gallons or 1/6 bbl to any individual per visit. That's including both regular-strength beer and high-alc beer.

c. for high-alc beer sales, there would be a 15% "inspection fee" paid to the local governing body, based on the wholesale prices of the high-alc beer. Most people would call that a tax, instead of an "inspection fee", but what the hey.


Ok, so you can see how much has changed. A TN brewer can now get a "high alcohol content beer" manufacturing license. Before, they could get a "distiller's license". I have not heard from any other TN brewer saying that they were denied or were having problems getting a distiller's license, so I can only assume that no other brewery tried in the past year.

Before, we could get a restaurant license to serve pints of high-alc, but would not have been able to sell ANY kegs or growlers to go, of either regular or high-alc beer, unless we set up a separate part of the building that was not covered by our liquor license. We decided for the time being that having a separate area with separate entrances, dispense systems, etc., wasn't feasible. Now, nothing on that front has changed (it was an ABC ruling that said you couldn't sell anything to go if you had a restaurant liquor license, and they have not changed their stance as of now). So if we got a license to allow us to serve pints of high-alc beer, we would not be able to sell growlers to-go, of anything - regular or high-alc.

Before, a manufacturer holding a distiller license could apply for a retail liquor license, but they could only sell in 750 ml commemorative bottles. To get a retail liquor license, the ABC requires the local county or metro government to give them a "certificate of compliance", which can be difficult in Davidson county. For instance, the store has to be on a "major thoroughfare", and the cash register has to be visible from the street. You can't make this stuff up.

Now, we could get a retail liquor license, if we could get the certificate of compliance from the city, and sell high-alc beers in whatever package we normally sell them in at wholesale. But we would be limited to 5 gallons per person or 1/6 bbl, combined of both beer and high-alc beer. And the high-alc beer would be subject to a 15% wholesale tax. We sell dozens of kegs every weekend, many of them the full 1/2 bbl size. So that is not an attractive option for us.

So if you have read this far, congratulations! Get yourself a cold Sue from the fridge, and stop duct-taping your head. It won't explode!


What does this mean for Yazoo? Maybe if we were focused on high-alc beers exclusively, it would make sense to jump through all the hoops to get a restaurant license or a retail license. For us, it probably won't mean any changes at all in the near future. We will go on making Sue, and hopefully another high-alc beer in the fall, if we can ever get caught up with sales of our regular lineup. We may apply for a restaurant license, but for a brewery that chooses to only open to the public for 14 hours a week, the $4000 license, plus increased liquor liability insurance, ABC cards for all of our staff, etc., may not be worth it.

I don't see us getting a retail liquor license anytime soon. If our friends at Corsair are still fighting to be able to open their liquor store side, after over a year in business at Marathon, I can only imagine how hard it would be for us to get the metro council to change Division St to a major thoroughfare. At least our cash register is visible from the street.

I'm probably going to get some comments, asking how I can't see the whole deal as a victory for TN brewers. But again, I don't know of any TN brewer that was denied the same license we got to start brewing high-alc a year ago. Getting the "pilot project" language thrown out of the bill WAS a victory for craft brewers in TN. All the folks who contacted their lawmakers changed the language of the bill for the better. However, I hope that, after reading through all of this, and comparing before and after, and after you unwind the duct tape from your head, you will agree with me. Not a whole lot has changed for TN craft brewers.

Cheers,

Linus

16 comments:

Anonymous said...

OK...COOL?

Chewieez said...

Thanks for taking the time to explain all of that to us Linus!

I read about the "no kegs bigger than 1/6th" and got scared but it sounds like business as usual will remain for Yazoo. Which is good! I like your current business. ;o)

Looking forward to a new high alc option come Fall!

Thanks for all you guys do! We love our Yazoo and the Yazoo team!

Anonymous said...

Imagine the economic growth we could be experiencing if these moronic lawmakers could actually apply a tiny bit of common sense and rewrite most of these antiquated laws to promote business and development.

Anonymous said...

i drink beer everyday

Mary said...

Thanks...that was very helpful.

Is the new *definition* of a high alcohol beer a problem? Are the other Yazoo brews all under 5%?

Chewieez said...

Mary,

As I understand it, 5% is already the ceiling for beer to be sold in grocery stores and not liquor stores. Beers over 5% are already required to be sold in liquor stores.

But, it's not the same measurement as the % you see on the side of the bottle/can. It's 5% by WEIGHT which is different than 5% by VOLUME (abv). When you see a bottle of beer sold in say Whole Foods that reads 6.2% abv on the side, that beer is still below the 5% alcohol by weigh standard for TN, which is why Whole Foods is allowed to sell it.

As far as I know, all the Yazoo beers that are bottled (other than the Sue) are under 5% by weight.



(Hopefully I got this all correct...I'm sure a Yazoo expert/employee will correct what I messed up.)

Anonymous said...

Interesting Linus knew of the bill before all other TN breweries and didnt bother to let any of them know. Why? Because the pilot program would have locked up high alcohol beer production for Yazoo only in middle tennessee. It was in their best interest to let all the other brewers in the state get suprised.

The Wildcard said...

What a mess.

Johnny Q said...

Sorry, but I still think creating a legitimized, official route for these other breweries to go is good. And I think the state recognizing that these are high alcohol brewers, and NOT distillers, and should be designated as such, is good in the long run. Regardless of the fact that you had the license, all it took was one well-placed legal challenge from a high-up neo-prohibitionist to throw some doubt on the legitimacy of the previous route. And since I personally don't buy anything bigger than 5g kegs, that doesn't affect me in the least either.

Nothing has changed for Yazoo, but the fact that every other brewer in the state now has an officially recognized, legit route that isn't the through-the-back-door-held-together-by-duct-tape method that you guys had to take is still a victory, maybe just not for you.

I have 40+ Yazoo pack holders waiting to to be turned back in to you guys from the last 8 or 9 months, and that doesn't even count the Pleasure Packs and growlers I've bought, but sadly, I'll probably be reaching for a Sierra Nevada instead of a Sue after the way this has been handled, at least for a while.

Linus said...

Let me address the last couple of comments:

1. We found out about the proposed amendment on May 5th. At that time it was written to allow only the brewer in Alcoa to get a high-alc license. Our distributor here in Nashville made some calls to try to get the pilot project idea extended to all TN brewers. I wrote Sen. Haynes, on the SN F,W,& Means committee where the bill was being heard, asking him to oppose the pilot project idea and to extend it to all TN brewers. It's true that we were not coordinating our efforts with other TN brewers. One good thing that will come out of all this is TN brewers banding together to form a brewers guild.

2. Johnny Q,

I don't know what you mean by "how this was handled". We were not consulted and had no input into the bill. The bill was crafted by 20+ lobbyists behind the scenes, according to Sen. Oversby, the bill's main sponsor. His comments make it clear that he had no idea that there were other brewers in TN that would be affected.

You deride our "through-the-back-door-held-together-by-duct-tape" method of getting a distiller's license, implying that we did something wrong or illegal. Small breweries like us don't have a $200 million project as motivation to get the laws changed. We consulted with the director of the ABC to get that license. And I don't think it is such a victory to give up as much as the bill does (5 gallon limit, 15% tax, etc) just to get a definition changed.

But that is just my opinion. You are entitled to yours as well. It doesn't sound like you have much skin in the game though.

Johnny Q said...

I'm sorry if it sounded like I was deriding you for the route you took to get a distiller's license - that wasn't my intention at all. Rather, I was indicating that the route you guys were forced to take - and I still applaud you for doing it, which also wasn't clear - was far from what I would consider to be a clear, easy route. Kudos to you guys for doing, seriously - but it's nice to have a slightly more direct route that doesn't require you to have to be labeled a distillery when what you want to do is brew high gravity beer.

If it was deriding anything, it was the hoops you were forced to jump through, not you for having to jump through them.

The snarky comment at the end was rather ill-advised, and I would retract it if I could - it was a heat-of-the-moment illogical reaction that shouldn't have ended up in the comment. I still disagree that this didn't gain Tennessee brewers (and by proxy, beer drinkers - which is what little skin I have in all of this) anything, but I'm also speaking from the perspective of someone who never buys kegs at all. Besides, couldn't those 15g kegs just be sold through the normal distribution channels instead, or are beer/liquor stores also forbidden from selling 15g kegs? The sales wouldn't be lost then, just otherwise directed.

Again, sorry for the hasty-bad-mojo snark. I'll open a Dos Perros and raise it to you guys after all, even if we do still disagree about the long term impact of the beer on Tennessee beer culture. Cheers!

Anonymous said...

Linus,

You write and explain these technical details about laws and politics as good as you and your crew brew beer.

=Jersey Mike

Anonymous said...

Now, when will we see high gravity beer in grocery and convenience stores? Tennessee liquor/beer laws are absolutely unbelievable. I now live in South Carolina (where sadly there is no Yazoo) and you can buy wine in grocery stores, as well as, ANY beer, regardless of alc. content. They even have high alc beers at gas stations! How does freakin' South Carolina have better beer laws than TN?

Anonymous said...

Breakin The Law....Breakin The Law....

Drew said...

Linus, you gave an excellent explanation of the bill and I especially appreciate your explanation of how the bill has affected your planning.

All the alcohol licensing in Tennessee is truly a quagmire and you do an excellent job of navigating it, putting out an excellent product. Many kudos.

I would LOVE to see you guys be able to see a greater benefit from this bill though, and would like to point out that it would be not too difficult to organize a more "restaurant"-like operation. A five year server permit is 55$, and is typically responsibility of the employee. Two bartenders on staff making 2.13 per hour isn't a huge labor % increase, and a good bartender will do well in a place like Yazoo. A good bartender could grow your business, providing an additional revenue stream.

Lynn said...

Hey Linus, thanks for explaining things in detail. It seems Yazoo did not apply for restaurant license or retail liquor license; is it because you will not able to sell kegs of regular beer if you obtain either license?

When you said you sell dozens of kegs every weekend, did you mean you sell kegs of regular beer or high alc beer?

Under what license you are selling high alc beer like "Sue"? (I think distiller's license is only to allow you brew but not sell.)

I am not questioning your operation, just curious. Thanks.