New Jersey craft breweries are “disheartened” after the state Division of Alcoholic Beverage Control (NJABC) moved forward on July 1 with special conditions for brewery license holders that limit brewers’ ability to host food trucks and events or sell beverages not produced on site, among other privileges.
The conditions – which the Brewers Guild of New Jersey (BGNJ) described as “discouraging” and their enforcement as “extremely problematic” – went into effect in 2019, but were largely unenforced during the COVID-19 pandemic. In the interim, the BGNJ attempted to negotiate revisions to the special ruling, but to no avail, executive director Eric Orlando wrote in a statement.
“Our organization offered several proposed changes in the last two years to regulators with the hopes that they would become part of these conditions in the interim and become the foundation of more permanent industry regulations moving forward,” he said.
“Instead, breweries in the state, still struggling from the economic impacts of the COVID-19 pandemic, and now also impacted by record inflation and ongoing supply chain issues, will be limited in their ability this summer and the foreseeable future to serve their customers and provide the types of local, community-centric hospitality options many in our state have become accustomed to and thoroughly enjoy,” Orlando continued.
Many Garden State craft breweries operate under the state’s limited brewery license, which allows them to brew, sell and distribute up to 300,000 barrels annually, as well as sell beer directly to the public on the brewery premises. However, brewery patrons are required by law to to take a tour of the brewery in order to drink on-site. To-go sales are capped at 15.5 gallons per person. Limited license breweries cannot operate a restaurant or sell food.
Limited licensees pay a graduated annual fee based on production:
- $1,250 per year for volume up to 50,000 barrels;
- $2,500 per year for volume between 50,001-100,000 barrels;
- $5,000 per year for volume between 100,001-200,000 barrels;
- $7,500 per year for volume between 200,001-300,000 barrels.
The limited brewery license took its current shape in 2012, before the taproom business model boom transformed craft breweries into destinations for on-premise consumption. NJABC observed that “the activities and practice of the limited breweries vary across the state and, in some instances, exceed the privileges of the limited brewery license.” In an attempt to balance the concerns of breweries and other licensed on- and off-premise retailers, NJABC issued special considerations on brewery licenses in the fall of 2018, but walked them back after what it called “a media controversy.”
NJABC took the next few months to consult with the state’s two brewers guilds (the BGNJ and the New Jersey Brewers Association), the New Jersey Licensed Beverage Association, the New Jersey Restaurant Association, the New Jersey Liquor Store Alliance and state legislators. That “informal fact finding” led to the creation of the 2019 conditions, which NJABC credited to “the plain language” of the statute that created limited brewery licenses and a “review of its legislative history.”
“The division cannot escape its original interpretation that the 2012 amendments to the limited brewery statute were enacted for the purpose of promoting the manufacture of craft beers and creating a demand for these products through limited consumption privileges on the brewery premises,” NJABC wrote.
Rather, NJABC envisioned that consumption in taprooms with limited brewery licenses would lead to a beer-enthusiastic public that would seek out beers from local breweries at on-premise retailers. It developed the 2019 conditions to create a taproom culture that would serve as a stepping stone instead of a final destination.
“The division believes the activities permitted under the 2019 special ruling strike a fair and appropriate balance between the interests of full retail license holders, such as restaurants and bars, and the craft brewing industry,” an NJABC spokesperson told Brewbound, adding that the division seeks to “work with all licensees to promote a fair and robust alcoholic beverage industry in New Jersey.”
However, the discrepancy between the nature of the licenses that breweries can obtain and those that on- and off-premise retailers need has created tension between the two groups.
“We have a very restrictive liquor license system and our liquor laws were created basically in the Prohibition era,” Scott Wells, director of sales at Carlstadt-based Bolero Snort and BGNJ board member, told Brewbound. “The availability of liquor licenses is tied back to the population of each municipality. Municipalities choose to not issue the full amount of licenses that they’re entitled to. Most of the licenses have been in families for generations, and the resale value on them at this point has reached $1 million to $2 million.”
By comparison, limited brewery licenses are manufacturing licenses given by the state and are not limited by population.
Bolero Snort sells about 95% of its volume through the three-tier distribution system. The brewery self-distributes within New Jersey and also ships to New York City (SKI), Massachusetts (Craft Collective), Pennsylvania (31st and Wharton) and Georgia (Modern Hops), according to its website. But, unlike Bolero Snort, some Garden State breweries do nearly all of their business over their own bars. A perception persists among retailers that most craft breweries with taprooms are competition instead of suppliers, which “creates an us versus them mentality,” Wells said.
“In other parts of the state, the bar owners aren’t buying beer the customers want,” he said. “They complain about ‘Oh, the brewery down the road stole my customers.’ Yeah, but you’re not offering your customers any local craft beer options. You’ve got the same distribution stuff on that you’ve had for the past 100 years and you won’t even take a meeting with the local guys. What do you expect the customers to do?”
So as not to funnel business away from restaurants and into taprooms, limited brewery license holders are “explicitly prohibited from selling food or operating a restaurant,” according to the 2019 conditions. This prohibition extends to inviting food trucks or pop-up vendors to set up on brewery grounds, which is particularly vexing to Wells.
“It’s really the most insulting thing on the list of conditions,” he said, adding that servers are required to become certified through TIPS (Training for Intervention ProcedureS) or a similar program, the training process for which is “three-and-a-half hours of ‘feed them, feed them, feed them, feed them, feed them.’”
Under their licenses, breweries are limited to 25 “on-premises special events” – roughly two per month – which NJABC defines as:
- “Trivia/quizzo/game night;
- Arts and crafts/paint and sip;
- Live music/DJs/open microphone;
- Games of skill;
- Educational events and seminars;
- Political fundraisers that are not organized by a not-for-profit, as defined in N.J.A.C. 12:2-5.1(a);
- Movie or theatrical events;
- Animal adoption events, to the extent permitted by local ordinance; or
- Yoga or other similar types of classes.”
To host an event, breweries must notify NJABC 10 days in advance and must include:
- “Description of special event to occur on licensed premises;
- Date and time of event;
- Estimated number of people in attendance;
- Cover charge for event, if any;
- Security for event to ensure no consumption by individuals under the legal age and no pass-offs; and
- Name, address, and other contact information for outside vendor providing entertainment if any; and
- Statement indicated that this is the [number] on-premises special event held on the licensed premises in the present calendar year.”
If breweries are selling event tickets, the “cover charge shall not include any free or discounted alcoholic beverages, and participants shall not be required to purchase any number of alcoholic beverages as a condition entry,” the conditions read.
“The new conditions have severely limited what we can do in our spectacular brewery with no true rhyme or reason to what is actually trying to be accomplished,” Jeremy Lees, president of Flounder Brewing in Hillsborough, told Brewbound.
Flounder, which moved into its current location – a 250-year-old repurposed Dutch barn – last summer, has found success with yoga classes and a meet-the-brewer session, but has decided to abandon both event series in light of the conditions.
“We can no longer host a small yoga start-up on a Sunday morning at 11 a.m., who found our venue perfect for her yoga class, as these count against our 25 ‘live events’ per year and yoga isn’t at the top of the list for us to utilize the 25,” Lees said. “We can no longer conduct our Brewer’s Hour, which was an hour on a Sunday where customers could pay to receive two beers and hear our brewer talk about the intent behind the beers and provide beer education.
“The conditions do not allow us to sell a ticket that includes beer and an event such as this would also count against our 25,” he continued. “We just don’t have enough live events available.”
The conditions also cap the number of private events breweries can host to 52, which translates to one per week, something that has been particularly limiting for Flounder since the opening of its new space.
“Many people want to host private parties or weddings at [our] beautiful setting, but we can only host 52 private events per year so these conditions even limit the amount of private functions we can use our space for,” Lees said. “Our brewery has become a tourist attraction in our county and brings visitors from hours away and we work together with our local and county tourism boards to work on ways to bring those visitors to other places in the area once they are with us.
“Everything about the special ruling and conditions is counteractive to what craft beer has proven all across the country — a valuable asset to tourism, economic development and positive impacts on all types of local establishments,” he continued.
For a state with more than 9 million residents, New Jersey’s craft beer industry lags behind states of similar size in several metrics tracked by the Brewers Association (BA), the trade group representing the country’s small and independent craft brewers. New Jersey’s 141 craft breweries amount to two breweries per capita (per 100,000 legal-drinking-age adults), ranking 45th nationwide. Last year, those breweries produced 213,656 barrels of beer, about one gallon per LDA adult, ranking 46th nationwide.
The BGNJ, which Wells estimated represents about one-third of the state’s breweries, has called on Gov. Phil Murphy’s administration to “recognize the need for reform in the wake of the pandemic to keep our local beer industry growing.”
“We hope forthcoming regulations issued by NJABC later this year utilize our recommendations for the good of the dozens of small businesses which make up the state’s craft beer industry,” Orlando wrote on behalf of the guild. “While we understand the NJABC is only empowered to enforce the laws as written, our guild believes the imposition of these broad conditions at this juncture by the division is extremely problematic and need[s] to be remedied.”