The updates to last year’s special ruling from the state division of alcoholic beverage control were issued as a matter of competitive balance, the agency director says.
By Matt Skoufalos | May 28, 2019
Last fall, the New Jersey Division of Alcohol and Beverage Control (ABC) caused a minor uproar in its fledgling microbrewery community by issuing a special ruling limiting its activities.
Very shortly after those restrictions were implemented, the agency reversed course, citing a need to re-evaluate its position amid negative public reaction.
Portions of the new guidance don’t take effect until 2020, but some will have a significant and immediate impact on brewery operations.
ABC Acting Director James B. Graziano described the changes as correcting for a perceived competitive imbalance in the craft beer landscape.
The 2012 New Jersey laws that established breweries with tasting rooms were made “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,” Graziano wrote in the ruling.
“The Legislature clearly did not intend for the 2012 amendments to establish a new consumption venue at a brewery, with the same privileges as a sports bar or restaurant,” he continued.
ABC must “balance the concerns of the growing limited brewery sector comprised of 100 licensees against the issues and concerns facing the bars and restaurants that collectively hold approximately 6,000 retail consumption licenses in the State,” Graziano wrote.
Codifying the rules assures that breweries “will be able to compete with each other on a level playing field,” he wrote.
Food, advertising, and special events
Among its biggest changes, the ruling caps each brewery at 25 special events and 52 private parties onsite annually.
In exchange, it grants breweries the right to hold 12 offsite special events (permits are $200 each).
At these, brewers may serve their beer to be consumed onsite and sell unrefrigerated package goods: 72 ounces, about one six-pack per person, to be consumed offsite.
But the regulation also defines as “on-premises special events” many things the smallest breweries in the industry had done previously with no limitations: paint-and-take pottery, yoga, karaoke, animal adoptions, trivia nights, and more.
Without the size and means to distribute their product, nanobreweries are exclusively dependent upon the revenues their tasting rooms generate, and special events can draw an audience.
Now, all breweries must notify the ABC 10 days ahead of an onsite special event, except if they only advertise them within their own walls. Live music at a brewery now always requires notifying ABC, the municipal clerk, and local police chief, regardless of whether it’s advertised. Special events may only take place during a brewery’s normal operating hours.
The ruling also makes some changes to the handling of food at breweries. They can’t form exclusive relationships with any restaurant, but now are allowed to offer snacks, freely or for sale. Guests can bring in their own food, browse a selection of menus onsite—a revision contemplated in an earlier ruling—or have meals delivered.
But there’s no longer allowed to be any food trucks or pop-up eateries on the premises, eliminating a natural economic symmetry that had arisen at many tasting rooms.
The ruling also allows breweries to host a maximum of 52 private parties onsite. Now guests may bring in outside wine, beer, and food, provided that they take them away afterwards. Breweries aren’t allowed to coordinate with any third party to plan, host, or manage their onsite events or parties, however.
Entertainment, tours, and takeaway
Other of the regulations are specifically proscriptive.
Breweries can have televisions—provided they’re smaller than 65 inches corner to corner, and there’s no more than two of them.
Any additional screens may only show video tours of the facility or the brewing process.
Breweries can show TV broadcasts, including regular-season sports, but not playoff or championship matches; those count against the 25-event cap, as does any live music.
Finally, the new rules define a tour as “a material interaction between a patron and brewery staff” before every beer sold or sampled, at least once annually per patron. It also obligates breweries to track which patrons have received an annual tour, keep such records for three years, and provide them to the ABC upon demand.
Other spare provisions of the ruling include defining a crowler as a maximum 32-ounce vessel and a growler as a 128-ounce vessel, numbers that the state hadn’t weighed in on before.
‘A broken process’
“The second round [of revisions] has been a little bit better, but we need to communicate with our legislators and fix these small things that are permissible activities.”
Queli believes the state liquor industry must be overhauled completely. She described it as “a broken process,” and described the new ruling as “overly restrictive” in carving out food trucks and pop-ups.
“We have a fundamental disagreement with limiting events and limiting coordinated events with other business owners,” she said. “We are hoping that other business owners will see that those restrictions don’t only negatively impact the brewery, but also the ancillary businesses that those breweries support.”
Double Nickel brewer Drew Perry said his Pennsauken-based operation will surely lose business by having to limit its number of special events. The charities that have relied upon its sizable tasting room also will lose out, he said.
“Everyone knows that we do a lot of special events and private events,” Perry said. “I’m sure we already have more than 52 [private parties] on the calendar.
“If charity events and fundraisers are going to constitute one of our 25 [annual events], breweries are going to be more reluctant to book those,” he said. “We have to think about it.”
He acknowledged that allowing guests at private events to bring in wine, cider, or gluten-free beverages is an accommodation that benefits customers, but that “bringing in outside beer would just be bad for branding.”
Perry also said that while the changes afford brewers some clarity on their legal status, “it’s hard to continue to change your business model as the rules constantly change.”
‘What balance are they striking?’
One of the most obscure changes in the special ruling—brewing or selling coffee is now “impermissible”—will have the biggest impact on one business in specific: Death of the Fox Brewing Company.
In 2017, brewer-owner Chuck Garrity established Death of the Fox as the first brewery-coffeehouse in the state, a detail noted in his license application.
“We very directly explained in our business intent that was sent to the ABC before we opened that we were not only going to be a coffee house, but that we had the intent of being a coffee roastery,” Garrity said.
“The permits are through; we’ve already paid $20,000 for construction,” he said. “I don’t know what we’re going to do now. I’m completely blindsided by this.”
Garrity said it’s hard to not feel targeted specifically by that provision in the special ruling, and described it as “a perfect example of how the state doesn’t get it.
“They don’t understand the innovation in brewery culture, what’s happening all over the country; breweries creating these hubs and these third spaces, our collaboration with other businesses,” he said.
“What interest does the state have that I have the United Way here?” Garrity said. “What does the state care if I sell coffee, or have karaoke? We’re losing the basic rights that we have as businesses.”
Even explained as striking a balance, Garrity doesn’t see that the ruling was undertaken in response to any deficit of competition in the New Jersey alcohol landscape. He wants to see some numbers.
“What balance are they striking other than catering to the bars and restaurants?” he said. “They haven’t proven the harm, even on the brewery side.
“There’s an assumption that our type of license takes business away from [the bar and restaurant industry],” Garrity said.
“That’s pure perception.
“That’s the baseline assumption of all of this regulation, and nobody’s done a study.”
Garrity also thinks the special ruling limits on advertising special events might butt up against an established First Amendment case.
He cited as precedent the 1996 Supreme Court case 44 Liquormart, Inc. v. Rhode Island, which ruled that the state can’t inhibit advertising language as a form of alcohol control.
“What they’re saying about the way we advertise our events is clearly unconstitutional,” Garrity said.
“The most harmful thing is it shapes people’s opinions,” he said. “At Death of the Fox, we really depend on having events. If I don’t even get that call anymore, because there’s a perception that breweries can’t do events anymore… this is something that the state does not understand.”
A spokesperson for the ABC declined to comment on the ruling.
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