April 3, 2014

Proposed Florida law would turn small brewers’ profits to froth

Under a bill now moving through the Florida legislature, craft brewers would be required to sell bottled and canned beer through distributors — even when telling it in their own taprooms.

Beer fans line up every winter at Intuition Ale Works in north Florida for the annual release of Underdark, a world-class stout aged for a year in bourbon barrels that sells out quickly even at $15 a bottle.

Ben Davis, who owns the 4-year-old local craft brewery in Jacksonville, counts on Underdark’s two-day spike in revenue to grow his small business.

But a bill moving through the Florida Senate that would cut into Underdark's profit has craft brewers crying foul.

The law would force craft brewers to sell their bottled and canned beer directly to a distributor. If they want to sell it in their own tap rooms, they would then have to buy it back at what is typically a 30 to 40 percent markup without the bottles or cans ever leaving the brewery, according to Joshua Aubuchon, a lawyer and lobbyist for the Florida Brewers Guild.

The rule would not apply to draft beer.

“That to me looks like racketeering,” Aubuchon said.

While other states nurture craft breweries, the smaller craft brewers say politically influential national distributors have drawn a line in the sand in Florida to slow the growing popularity of independents who offer an alternative to the standard American light lager fare.

U.S. craft brew sales grew 18 percent by volume in 2013, while overall beer sales dropped about 2 percent, according to the national Brewers Association, which defines craft breweries as those producing fewer than 6 million barrels annually that use traditional ingredients and are independently owned.

Still, the craft industry remains small, accounting for about 8 percent of all beer sold nationally but as high as 20 percent in craft brew-friendly Oregon and in the double digits in states like Colorado, California and Washington, said Brewers Association director Paul Gatza.

In Florida, where craft brewers say their market share remains under 6 percent and most breweries produce under 3,000 barrels a year, the small beer makers are outgunned in the legislature. Influential politicians have vowed loyalty to the national distributors, who make the bulk of their money from major brands like Budweiser, Miller and Coors.

The bill’s economic impact in South Florida would be particularly noticeable because of the growing number of startup breweries in the region and ones about to open, said Luis G. Brignoni, founder of Wynwood Brewing Co. in Miami.

“We don’t have a marketing budget like the big guys, so the tap room is the place for us to communicate our message, talk with people one-on-one about our beers, and grow our business one customer at a time,” said Brignoni, who recently tripled the brewing capacity of his brewery. “A lot of the money we put back into our business comes from the tap room. If this bill passes, we would not be able to expand or grow as quickly as we’d like to.”

Mitch Rubin, lobbyist for the distributors' Florida Beer Wholesalers Association, said his group’s goal is to re-write the state's rules governing the craft brewing industry to create strict lines between manufacturers, distributors and retailers, which he said would preserve competition.

Craft brewers say the distributors' clout has resulted in odd regulation in Florida, including a ban on the use of 64-ounce (half gallon) “growlers,” which are reusable jugs that can be filled directly from a beer tap and sealed for sales to-go.

Florida allows the use of quart and gallon growlers, but the 64-ounce size is the most popular in 47 other states where it is legal. Craft brewers are trying for a fourth straight year to overturn the ban.

“It's not going to be that big of a deal (to distributors),” said Joe Redner, owner of Tampa's Cigar City Brewing. “But their response is always to come over the top with a nuclear option.”

The result was a Senate bill filed without a named sponsor that permits 64-ounce growlers but forces direct sales of all bottles and cans to a distributor, Aubuchon said.

The bill passed its first committee hurdle last week by 10-0 vote.

By contrast, the Brewers Association counts 37 craft brew-friendly states — Texas and Michigan most recently — that permit beer makers to distribute their own beer under various limitations.

“What it's doing is it's allowing all these new breweries to pop up. We're seeing more than a brewery opening per day,” Gatza said.

Miami Herald staff writer Evan S. Benn contributed to this report.

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