To make good beer you need a few basic things: high-quality ingredients, a skilled brewmaster and the proper equipment. Likewise, to make a good brewery you must have a few essentials: good product, a savvy business owner and a regulatory climate that’s conducive to success. While Maryland has an abundance of most of these prerequisites, our state is sadly failing to deliver on the last metric.
This is unfortunate, because the state is home to many great brewers and entrepreneurs. In recent years, Maryland such as like Flying Dog in Frederick, Jailbreak in Laurel and Union in Baltimore have received prestigious national awards for their beers. If these companies — and dozens of others fantastic in-state breweries — are going to continue to produce great brews, contribute to the local economy and expand their operations, it’s essential for the General Assembly to modernize our state’s laws and regulations.
Thankfully, the General Assembly has a golden opportunity to do so. The House Economic Matters Committee held a somewhat contentious hearing on the “Reform on Tap Act of 2018.” This bill was drafted by Comptroller Peter Franchot after months of reviewing current laws and speaking with brewers, retailers, wholesalers and other stakeholders. At its core, the bill is quite simple: It would allow Maryland breweries to sell more beer directly to consumers from their tasting rooms. Having more direct-to-consumer exposure is absolutely critical, especially for smaller, newer breweries that often have a tough time getting their products into liquor stores, bars and restaurants.
The bill would also help larger breweries that are expanding operations, such as the new Guinness facility in Relay. Once completed, this tasting room will be a huge draw for beer lovers from all over the nation and world. It will create new jobs and help establish Maryland as a true beer destination, especially when a trip there can be easily paired with a visit to Heavy Seas brewery, just a couple miles down the road. Both breweries would greatly benefit from better beer laws.
That’s why, in addition to removing the cap on tasting room sales, Franchot’s bill would eliminate the ridiculous “buy-back” provision that serves as nothing more than a handout to big businesses and special interests. This provision kicks in when a brewery reaches 2,000 barrels in taproom sales. At that point, it can sell an additional 1,000 barrels to consumers, but only after first selling their own beer to a distributor. The distributor must then load the beer onto a truck, drive it from the brewery to a warehouse and then bring the beer straight back to the brewery. The brewery then is forced to buy its own beer back from the distributor at a substantial mark-up. It’s understandable if that sounds confusing. It is a nonsensical process that benefits distributors at the expense of breweries, consumers and basic sanity. Unfortunately, this is yet another example where large businesses known as wholesalers or distributors have been able to manipulate the system to their own benefit.
There’s little doubt that the current legal and regulatory framework is broken. Franchot’s bill wouldn’t solve every problem, but it would certainly fix some of the most egregious issues and allow Maryland breweries to better compete with national and international businesses. While defenders of the status quo claim the system is fine as it is, it’s easy to look at nearby states to see the truth. According to data from the Brewers’ Association, Maryland has just 1.5 craft breweries per 100,000 adult residents. That puts our state at 36th in the nation — far below neighboring Virginia, Delaware, Pennsylvania and the District. This relative lack of craft brewers results in a corresponding lack of economic output and jobs. The per capita economic impact we get from the industry ranks at a dismal 47th in the nation. In terms of economic impact from craft brewing, we get less than half of the benefits of the District or Delaware and less than a third of what Pennsylvania’s economy receives, on a per capita basis.
Our craft breweries are succeeding despite the unnecessary limitations placed on them by outdated, unfair laws. They could do so much better if our elected officials in Annapolis would simply modernize the system and allow our entrepreneurs to focus on brewing great beer, hiring more staff and contributing to our state’s economy. It’s time to truly untap our potential.
Brandon Arnold is executive vice president of the National Taxpayers Union, a nonprofit citizen group whose members work for lower taxes and smaller government.