Proposed regs on tasting rooms tighten tensions in alcohol industry

  • Jake Wade, the owner and operator of Bearpaw River Brewing Co., is seen with a six-pack of Valley Trash ale on June 14 at his business in Wasilla. State craft brewers are furious over proposed regulations that would further restrict activities allowed in tasting rooms such as Wade’s, including fundraisers, art shows and brewery tours and classes. (Photo/Mark Thiessen/AP)

A new set of proposed regulations has split the state’s alcohol industry: breweries, wineries and distilleries that make it versus bars, hotels and restaurants that serve it.

The regulations themselves don’t have anything to do with alcohol production, service or distribution. Instead, the regulations proposed by the Alcoholic Beverage Control Board published on Aug. 26 are a revision to what’s allowed on site at taprooms and tasting rooms; the new regulations clarify the definition of “other recreational and gaming opportunities.”

Breweries, wineries and distilleries are allowed to sell alcohol to consumers directly in their taprooms and tasting rooms, but with a number of restrictions: no more than 36 ounces of beer or 3 ounces of liquor per person per day, no serving after 8 p.m., no seats at the bar and no games, entertainment or televisions, among other restrictions.

The regulations proposed would more closely define some of the activities prohibited, including festivals, games and competitions, classes, parties (except for private parties limited to specific invited guests), presentations or performances and “other types of organized social gatherings that are advertised to the general public.”

The Brewers Guild of Alaska, which represents craft beer breweries all over the state, opposes the language of the regulations as proposed for numerous reasons, said Lee Ellis, the president of the organization and the director of operations at Midnight Sun Brewing Co.

For one, the guild doesn’t agree that this regulation would be the intent of the Legislature in authorizing taprooms in the first place and would disrupt a number of operations for breweries, he said.

“This would make giving brewery tours not available,” he said. “(Midnight Sun Brewing) has a first Friday art event … If we promote any sort of beer release at our brewery, that would not be allowed. That would ban other sorts of marketing.”

Taprooms and tasting rooms are a relatively new phenomenon in Alaska. They were not allowed in the state until 2006, when the Legislature passed a bill to authorize them with a number of regulations like the limitations on gaming. Since then, the craft brewing industry in the state has exploded.

Before 2001, only a handful of breweries existed. Today, there are dozens all over the state, many with taprooms and tasting rooms of their own. Some distribute to package stores and bars, like Juneau’s Alaskan Brewing Co., while others simply sell growlers at their manufacturing location or glasses in a restaurant, like Soldotna’s St. Elias Brewing Co.

Even as overall beer consumption has decreased in the U.S., craft beer consumption has increased. In 2018, craft brewer sales by volume increased 4 percent, reaching 13.2 percent of the national beer market according to the National Brewers Association. Craft “micro” beer is also more valuable than large, “macro” beer; though it’s only 13.2 percent of the total beer sales by volume, it made up more than 24 percent of the total dollar value nationally.

Some of the conflict is over whether bars and taprooms draw the same customers. The Brewers Guild of Alaska says that’s not a full picture of why bars may have seen business decline since taprooms and tasting rooms began operating, as there are a number of complicated factors in the state such as an ongoing recession, Ellis said.

“I would say that our customers are driven to come to our facilities for a specific reason,” he said. “I don’t know if we didn’t exist that a bar would fill that niche for them. The way that we see it is that we are drawing out a customer that might not be going out to get a beer otherwise.”

Another aspect of the conflict dates back to Alaska’s regulation structure post-Prohibition. Traditionally, there are three tiers of alcohol distribution: manufacturer, distributor and retailer. With the advent of taprooms, manufacturers have been able to bypass the other two tiers and sell directly to consumers.

Glenn Brady, who owns Fairbanks-area brewery Silver Gulch Brewing Co. and serves on the Alcoholic Beverage Control Board, said the three-tier system was originally intended to keep one tier from gaining too much power over another. While the regulations seem onerous, he says they may have helped set the stage for the boom in craft breweries happening all over the country.

“It’s fabulous to see the resurgence since Prohibition of local manufacturers,” he said. “A lot of people are doing interesting and unique things …. That’s the good part. The difficult part of it is that some see it as the erosion (of the three-tier system, and) some see it as a zero-sum game.”

The craft beer, wine and spirits stakeholder group has grown significantly since 2006, both on the manufacturer side and the consumer side, Brady said. There were compromises made then to get the bill through, including the restrictions on activities in taprooms and tasting rooms, he said.

There has been a lot of discussion since the proposal was announced, but Brady emphasized that these are just proposed regulations that are out for public comment and still have to be approved by the Alcoholic Beverage Control Board before going into effect. The public comment period runs until Oct. 4, at which point staff from the Alcohol and Marijuana Control Office will compile comments for the board members to review.

The proposed regulations are a revision to an existing regulation, so the Legislature does not have to be involved to deal with it; the Alcoholic Beverage Control Board could pass a revision on its own after debate. However, the last time a controversial revision to alcoholic beverage regulation came before the board in 2017, when the board debated banning distilleries from serving cocktails in their tasting rooms, the Legislature stepped in.

However, the Legislature plays a key role in another large issue facing the alcohol industry in the future: a rewrite of the Title 4 statutes regulating alcohol businesses. Legislators have been debating different versions of bills to rewrite the statute for the last three years, but disagreements among legislators and in the industry have held the bills up.

The rewrite was on track to pass in 2018, but a last-minute amendment by former bar owners Reps. Adam Wool, D-Fairbanks, and Louise Stutes, R-Kodiak, that would have cut the allowable amount of drinks at tasting rooms by a third (from three to two) killed the bill before the session expired.

Ellis said the BGA and the Cabaret, Hotel, Restaurant and Retailers Association, or CHARR, have been meeting this summer to discuss language for the Title 4 rewrite, working toward an agreement on revisions.

“We’ve had certain legislators that very much side with bars, they’re very much concerned about them,” he said. “We’ve tried for three years in a row to get this thing through. We decided we’re going to sit down this summer and decided on language we need to change.”

The proposed regulations have thrown some additional difficulty into the task of resolving the conflicts in the industry, wrote Sarah Oates, the executive director of CHARR, in an email.

“While I sincerely believe that setting clear and consistent expectations and requirements certainly helps prevent confusion and frustration on all sides, Alaska CHARR has not yet taken a position on whether the proposed changes are appropriate or reasonable,” she said.

Elizabeth Earl can be reaced at [email protected].

09/04/2019 - 8:47am