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The Aftermath of Maryland HB 1283

As DCBeer covered last month, this year's Maryland legislative session saw the introduction of several bills that would significantly change brewery regulations in the state. Unfortunately for the craft beer industry, the bill that wound up unanimously passing the House was HB 1283. In its original format, the bill would have limited tap room hours, harmed the practice of contract brewing, made collaborations more difficult, and allowed counties to have far more control in determining whether a brewery would be allowed to conduct on-premise sales at all. After its surprise passage in the House, the bill moved to the Senate, where the Brewers Association of Maryland (BAM) was able to rally its members and alter some of the more objectionable parts of HB 1283. For a good play-by-play breakdown of the legislative fight, take a look at Naptown Pint's coverage.

Thanks to the large number of phone calls from constituents like you, the lobbying efforts of BAM, and pushback from Comptroller Peter Franchot and Governor Larry Hogan; the Senate passed amendments that altered the original House bill considerably. Kevin Atticks, executive director of BAM, made it clear that the breweries were not happy with the bill, but "we realized that the legislation was going to pass in some form because it was the vehicle to bring Guinness into Maryland, so we moved forward to attempt to amend it." After the upheaval in the Maryland Senate hearing on March 22, Atticks arranged for a sit down with the chief lobbyists for the Maryland State Licensed Beverage Association (MSBLA), and together they negotiated a series of compromise amendments to offer the Senate committee.

In the final version that passed the Maryland legislature, HB 1283 explicitly recognizes the right of Class 5 breweries (breweries that are allowed to produce more than 22,500 bbl/year, e.g., Flying Dog or Jailbreak) to engage in contract production and further permits them to:

  1. Provide up to 18 oz. of samples during brewery tours or other promotional events;

  2. Sell beer “to-go”, but only if the individual has participated in a “guided tour…promotional event or other organized activity at the brewery;”

  3. Sell beer produced under contract through that Class 5 brewery’s taproom and retail space;

  4. Under a somewhat complex formula and set of conditions, sell beer at that Class 5 brewery’s taproom that was not manufactured on-premises (i.e., collaboration beers or contracted out production);

HB 1283 also protects existing taproom hours for Class 5 breweries and startups that filed notice with the TTB before April 1, 2017 and expands the barrel limit for on-premises sales to 2,000 barrels/year.

That is the good. Unfortunately, the final version of the bill also retained some of the negative elements of the original HB 1283. Namely;

  1. It gives county authorities a new power to prohibit all on-premises consumption;

  2. Requires large breweries, those with more than 1,000,000 barrels of annual production, that want to sell beer at their tap room which made off-premises, to purchase that beer from a wholesaler first (essentially that requires Guinness to buy their own beer at wholesale in order to sell through the taproom);

  3. Requires any Class 5 brewery that wants to sell between 2,000 and 3,000 barrels a year through their taproom, to pay a wholesaler for the last 1,000 barrels of that beer;

  4. Prohibits any Class 5 brewery that has filed notice after April 1, 2017 from operating tap room hours outside of 10AM-10PM, Monday through Sunday.

Asked what BAM thought of the final version, Atticks replied, “It is fine to sustain the [craft beer] industry until next year. It is a stop gap measure for the next period.” So the question now is: what comes next?

The answer to that question came on April 11th, when Comptroller Franchot announced that his office would be forming a task force to review the entirety of Maryland’s beer laws. Len Foxwell, Chief of Staff to the Comptroller, indicated that Franchot was originally willing to allow the breweries and the wholesalers/retailers to reach their own compromise on reforming Maryland’s beer laws. However, the shenanigans around the passage of the original HB 1283 really incensed Comptroller Franchot, and led him to believe that his office needed step in and lead the process.

The Reform on Tap Task Force will bring together representatives from all the main stakeholders: breweries, wholesalers, retailers (liquor stores, bars, and restaurants), and consumer advocates. They will hold a series of hearings around the state (most likely at breweries), all open to the public, which will gather recommendations and hear from constituents about what changes they would like to see in Maryland’s beer laws. These meetings will take place over the course of the late spring and summer, and the goal is to have the task force come up with final recommendations by mid-fall. The recommendations will be formed into a piece of model legislation to be introduced into the Maryland Assembly for the 2018 session.

Foxwell made clear:

“You need diversity on the task force in order to present a credible product to the legislature. The objective is not to look at the benefit and value of the brewing industry; it is to modernize Maryland’s beer laws to support consumers and brewery interests. It will be a pro-brewery task force. We have the other stakeholders [wholesalers and retailers] to provide outside balance and perspective.”

I asked both Atticks and Foxwell if they thought that the wholesalers and retailers would play a constructive role on the task force. Neither of them seemed certain. However, Atticks explained that the task force “is an opportunity to shape the future of the industry as a whole, with input from all members of the industry, different from how HB 1283 was conceived. ” The goal for BAM will be to take the objectives of their modernization bill, introduced this year in the legislature as HB 1420, and use the opportunity of a changed landscape to push for as many reforms as possible.  

“The task force is great because it will be breweries, licensees, and consumers determining the future of Maryland’s beer industry, not lobbyists.” I pointed out that Mr. Atticks is himself a lobbyist, to which he explained (with a sense of humor, thankfully), “and that is why I will be in the second row by design.”

For his part, Chief of Staff Foxwell made it clear that, “the Comptroller does not believe this is a zero-sum game. The adversarial dynamic [in the three-tier system] is unnecessary and crazy. If breweries do well, it creates opportunities for retailers in other locations.” Foxwell offered up the example of a person living in the Eastern Shore and being introduced to Union Craft in Baltimore. A person may really like Union Craft beer, but they’re not going to drive two hours to Baltimore every time they want to grab a six-pack. That creates opportunities for local bars and stores in the Eastern Shore to feature that beer and others from breweries around the State. “If small family-owned shops want to stave off competition from grocery stores [for alcohol sales], they should support specialty and small labels.”

DCBeer reached out to the MSLBA, the trade group representing wholesalers and retailers, for comment. As of publication they have not responded to our inquiries. Should they respond, we will update the post.

If you are a reader who lives in Maryland, DCBeer strongly urges you to participate in this summer’s series of public hearings. Your input and participation will be crucial to supporting much-needed reforms in Maryland’s beer laws. The first public meeting will take place May 24th, at Hopkins University. Please check here for more details on the task force participants and how to get involved. In the worst-case scenario, you will get to enjoy some tasty libations in the company of fellow craft beer fans.

Two last notes about the Reform on Tap Task Force meetings: Comptroller Franchot has been remarkably candid throughout this process, so if you’ve ever wanted to hear a high level State official truly speak their mind, the task force meetings would be your chance. Also, if you dislike the Montgomery County alcohol monopoly (which basically all breweries, wholesalers, retailers, consumers, the Comptroller, and, most importantly, myself do) this reform bill and the task force that will shape it, would be a great opportunity to modify or do away with it.

Cheers,

Greg

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