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N.H. law gives nanobreweries a larger standing

As the first state to license nanobrewery operations, New Hampshire has given the small industry a lot of room to grow

Thomas Neel, owner of Candia Road Brewing Co., said demand for his craft product has been unexpectedly high.

Jonathan Wiggs/Globe Staff

Thomas Neel, owner of Candia Road Brewing Co., said demand for his craft product has been unexpectedly high.

MANCHESTER, N.H. — A warm, grainy smell greets you when you walk through the door and lay eyes on a 23-year-old man in a worn Redhook Brewing T-shirt and woolen beanie. You’re looking at the proprietor of New Hampshire’s first licensed “nanobrewery.”

Step inside and turn your head left, then right. You’ve just taken the tour of Thomas Neel’s Candia Road Brewing Co. & Nepenthe Ale House. His establishment is one of seven super-small commercial breweries that have opened in New Hampshire since it became the first state to recognize nanobreweries with a law differentiating them from larger-scale beverage manufacturers.

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The number of breweries in New Hampshire has surged to 23 since the law took effect in July 2011 — lowering or eliminating some barriers to entry for very small brewers. More of the tiny breweries are being planned.

“As far as I can tell, there’s never been a period in New Hampshire history where you’ve had that many breweries open in that amount of time,” said Kevin Bloom, an industry advocate who lobbied for an overhaul of state regulations after his own small brewery failed in 2010.

The term “nanobrewery” arose in recent years as an informal term for an operation even smaller than the typical microbrewery that produces no more than 15,000 barrels a year. The New Hampshire law describes a nanobrewery as a producer of less than 2,000 barrels, or 63,000 gallons of beer, a year.

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Hobbyists and others who want to test a product concept find it increasingly possible to tap the market for popular craft beers with those low-budget nanobreweries.

“Essentially, it’s just a scaled-up home-brew system,” Neel said recently, while measuring out the dextrose used to prime his beer for bottling at the Candia Road Brewing Co.

Sacks of barley line a wall, bottled cases fill a corner, and hops stay chilled in a Coca-Cola mini-fridge next to a grain mill in the 1,800-square-foot brewery that doubles as a retail shop for home-brewing equipment.

A bank of 10 small fermenters leads the way to Neel’s brewing system, cordoned off by plastic sheeting so the heat and steam it gives off won’t interfere with the nearby fermentation system. The two-barrel system produces about 60 gallons per batch.

On the opposite side of the fermenters, a half-inch hose transports fermented beer to a bottle filling and capping machine manned by Neel’s friend, Brian Ross, who also spends several hours a week in a Honda Accord, delivering beer to about 50 restaurants and stores statewide.

Neel said demand for Candia Road beer has been so strong he’s already making a profit after sinking $25,000 to $35,000 into the business that opened in November 2011. Sometimes that demand outruns his capacity to brew more.

“We really weren’t prepared for the response,” said Neel. “We have a four- to five-week process per batch. Once we’re sold out of something, we’re sold out for a few weeks.”

A pack of nanobrewers quickly followed Neel’s lead once the New Hampshire law went into effect. Other recently opened nanobreweries include Blue Lobster Brewing Co. in Hampton, Earth Eagle Brewing in Portsmouth, and Squam Brewing Co. in Holderness.

That nanobrewing boomlet has been fueled by growing demand for craft beers, the small-scale economics of tiny breweries, and the practical advantages of the new state law.

“The craft beer industry has been exploding,” said Representative Mark Warden, a Manchester Republican who sponsored the nanobrewery law. “We’re just trying to support it.”

The larger microbreweries typically require a six-figure investment to get off the ground. But nanobreweries can start producing barrels of beer for just a fraction of that cost.

The New Hampshire law also offers other money-saving advantages. Nanobrewers can apply for a separate brewery license that costs just $240 a year, rather than $1,200, and can serve beer without the usual requirement that the brewery function as a “brew pub” by also selling hot food.

Neel said the nanobrewery license has been helpful in getting his new business off the ground, but distribution headaches may lead him to exchange it for a full-blown beverage manufacturer license after just over a year in operation.

Nanobrewery licensees are required to self-distribute their product. That frustrates Neel, who would like to take advantage of the transportation network and sales force of a distributor.

Bill Herlicka, founder of White Birch Brewing Co. in Hooksett, said that nanobreweries are inefficient and won’t make much money, but do allow for proof of concept and can serve as a stepping­stone to expanded operations.

That’s how his brewery evolved after opening on a nano-scale in 2009. Herlicka now has a 10,000-square-foot building and a system that can brew seven to eight barrels at a time, but he still uses his old nanobrewing system to test experimental brews — such as a blueberry maple syrup and honey Belgian imperial stout recently — at a scale that won’t break the bank if they flop.

But the limitations on distribution that frustrate Neel are one reason Herlicka says he wouldn’t have gone for a nanobrewery license even if it had been available when he founded White Birch. He also worries that reducing the barriers to entry could have unintended consequences. “If you can’t afford a $1,200 license, you shouldn’t be in business. Can you afford your liability insurance? The last thing we need is people operating without insurance,” said Herlicka.

New Hampshire went out of its way to support nanobrewers, but neighboring states also welcome very small breweries. Industry representatives in Vermont and Maine said laws in their states are already accommodating to nanobreweries. Kristen Sykes, executive director of the Massachusetts Brewers Guild, said a nanobrewery law also is unnecessary in the Bay State as long as its farmer-brewer license, which involves tiered costs and allows self-distribution and brewery sales to the public, remains available.

Back in New Hampshire, the nanobrewery law has created an ideal opportunity for Neel. He has a dream job brewing beer with family and friends, running a fledgling business at 23 years old. Now he hopes to replicate the success of Herlicka, or maybe even Delaware-based Dogfish Head, a nationally known craft brewer that started even smaller than Candia Road Brewing Co.

“I’d love this place to really just grow and flourish and then I’d be playing with beer for the rest of my life,” he said. “How awesome would that be? Then I could live somewhere quiet in New Hampshire and play with my dog.”

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