Microbrew laws rewritten as demand for craft beer grows
PHOENIX — Four Peaks Brewing Co. has grown over the last two decades from a historic red-brick microbrewery and restaurant into an Arizona staple that served nearly 1 million gallons of beer last year, including its popular Kilt Lifter ale.
The company has also become a mainstay in the corridors of the Arizona Legislature. Three times in the past 10 years, it has helped persuade lawmakers to change state law to increase a cap on beer production for microbreweries.
The increasing popularity of craft beer around the country has legislatures nationwide rewriting laws to accommodate microbreweries as they exceed production limits.
Arizona Republican Governor Doug Ducey went to Four Peaks’ original location in Tempe on Tuesday to sign a law that expands the caps, touting it as a business-friendly measure to assist the state’s burgeoning craft beer industry.
‘‘Arizona has a booming craft beer industry and it’s growing every day. I want to ensure that it continues to thrive, unimpeded by overly burdensome regulations,’’ Ducey said.
Americans’ enthusiasm for microbrews reached new heights last year as craft brewers accounted for 11 percent of the US beer market, according to the Brewers Association.
But the popularity has craft breweries bumping up against the country’s longstanding three-tier system that governs the beer industry. It was designed to prevent mega breweries such as Anheuser-Busch from controlling beer production, distribution and retail sales at restaurants and stores. The three tiers consist of large breweries, distributors and microbreweries.
In many states, microbreweries can serve their beer at their locations and brewpubs, but lose that ability when they exceed production caps.
Several states including Arizona, North Dakota and Wyoming passed legislation allowing craft breweries to brew more beer, while Montana lawmakers defeated a similar measure. Other states have been revising laws to help the craft brewery business by removing restrictions on ‘‘growlers’’ — 72-ounce beer containers that people can refill and take home.
The laws are being rewritten because the craft brew business has grown so much that it is quickly exceeding the production caps.
The bill Ducey signed Tuesday strikes a compromise between producers and distributors: Microbreweries can keep up to seven retail locations and brew up to 6.2 million gallons of beer per year. After that, they’ll have to give up their restaurants and apply for a producer license.
Distributors and producers agreed the compromise allows small breweries to flourish without taking power away from distributors.
‘‘I think the state has been responsive to the growth of the micro-sector, whether it’s beer, wine or distilleries and at the same time being careful to not eliminate the benefits of the three-tier system,’’ said Don Isaacson, a lobbyist for wholesale wine and liquor distributors.
As craft breweries continue to grow around the country, Isaacson expects Arizona’s new law will become model legislation for other states.
Rob Fullmer, executive director of the Arizona Craft Brewer’s Guild, said the compromise will help bring more local and out-of-state breweries to the state.
‘‘This was a win across the board not just for brewers but for Arizona. These are places where communities meet, these are jobs, these are bellwethers of how well the state and the neighborhoods are doing,’’ Fullmer said.
Four Peaks is the only local brewery nearing the old limit of 1.2 million gallons.
‘‘It basically raises the limit to an amount that we all agree on. We won’t come back to the table and ask for more,’’ said Jim Scussel, co-owner of Four Peaks.
Scussel said existing Arizona law prevented craft breweries such as Four Peaks from reaching their full potential. New breweries rely on restaurants to build their brand, gain exposure and sell beer at a rate that’s profitable for the small amounts they’re producing. If they go over the production cap, they can’t keep their restaurants.
‘‘At a restaurant you sell $4 or $5 pints. To make the numbers work, you need a restaurant,’’ Scussel said. ‘‘That’s why restaurants are vital to small breweries, just for that marketing and that revenue period.’’
Scussel said Four Peaks plans to use the new law to increase production and distribution within the state and then expand regionally.
‘‘We want Arizona to be on the map for craft brewers,’’ he said.
A state by state summary of recent changes to beer laws:
Gov. Doug Ducey signed a bill Tuesday that allows microbreweries to make up to 6.2 million gallons of beer per year, removing the old limit of 1.2 million gallons. Under the previous rules, companies exceeding the limit were forbidden from operating restaurants. That is an issue for Arizona-based Four Peaks Brewing Company, a growing player in the industry.
Wyoming lawmakers passed legislation in February allowing microbreweries to expand annual production from 15,000 to 50,000 barrels. It allows craft beer makers exceeding that 15,000-barrel limit to continue selling on site and distribute their product themselves. Larger brewers cannot distribute their products in-state.
North Dakota recently passed a law in March allowing microbreweries to have multiple taproom licenses, instead of just one. Microbreweries may produce no more than 25,000 barrels of malt beverages a year combined at all locations. That’s about 50,000 kegs, or 775,000 gallons, of beer.
Montana lawmakers in February defeated a proposal to allow craft brewers with a tasting room to raise production from 10,000 to 60,000 barrels annually. They defeated another bill that would have allowed brewers to own up to three retail licenses.
The Legislature two years ago authorized craft and small breweries to sell beer that visitors could drink on site. A new bill would further bolster the business by letting customers visiting the brewery buy beer to take home. However, a separate bill this session would cut the number of barrels microbrewers are allowed to self-distribute to restaurants, grocery stores and other retailers from 40,000 barrels per year to 5,000. That effort comes after lawmakers lowered cap from 75,000 annual barrels to 40,000 per year last session.
The Florida Legislature appears poised to pass a bill that would legalize 64-ounce refillable beer jugs or ‘‘growlers,’’ which are legal in most states. Florida already allows quart and gallon growlers, but the popular half-gallon became a pawn in a battle over the complex laws regulating brewing and the sale of beer.
Lawmakers are poised to pass a bill that’s designed to help small craft breweries grow by allowing them to team up with bigger companies to keep their operating costs down. Under the bill, large breweries would be able to lend their manufacturing space and equipment to as many as nine small companies. Currently, a large brewery can only host one small company.
California, home to Sierra Nevada, has long been friendly to craft breweries, leaving brewers with smaller legislative goals. Gov. Jerry Brown signed a bill last year allowing vendors to sell packaged beer at farmers markets, and a follow-up bill this year would also allow beer tasting. In 2013, Brown signed a bill allowing craft brewers to refill customers’ jugs, known as growlers, while enjoying his own drink at the Track 7 taproom in Sacramento.
A bill to expand the availability of growlers is moving through the Missouri Legislature. The measure would allow convenience and grocery stores to sell growlers, which currently are only found at breweries or specialty bars.
Gov. Earl Ray Tomblin signed a bill that allows brewers to give out samples at their breweries. When the law takes effect in June, it will allow many businesses to be able to sell up to four growlers of beer per person per day, including brewers, brewpubs, retailers and bars. Currently, only brewpubs are allowed to sell growlers.
The Georgia House and Senate have passed different versions of a law expanding the state’s tight restrictions on craft beer sales but lawmakers seem unlikely to grant brewers’ request for direct sales. The latest bill, approved by the House and subject to Senate approval, would allow breweries to provide up to 36 ounces in ‘‘souvenir’’ tastings of beer on site or up to 72 ounces to take home but eliminated brewpubs that serve food. The bill also allows liquor distilleries to give take-home bottles as a tour souvenir.