The craft beer scene in the state of New Jersey is booming. The state currently has 134 licensed craft breweries, with more set to open in the coming months. On July 1 of this year, however, the Alcohol Beverage Control board [ABC] reactivated a special ruling — originally set to go into effect in 2020 but postponed due to the pandemic — that will severely limit the ways in which breweries can attract and maintain their customer base.
New Jersey legislators on both sides of the aisle introduced bills in August that would help ease some of the most egregious of the regulations set forth in the special ruling, including the inability of breweries to collaborate with food trucks or other food vendors, and a strict limitation on the number of events breweries are allowed to hold and participate in each year. Additionally, there is a call to lift restrictions on selling coffee or other non-alcoholic beverages.
“New Jersey is home to a vibrant craft brewing sec- tor and the state should be working to facilitate, rather than inhibit, its growth,” said State Sen. Vin Gopal [D-11] in a statement released by his office. “This legislation will provide a fairer regulatory framework for the state’s craft breweries and encourage collaboration between breweries and the state’s other homegrown producers.”
SPECIAL RULING TIGHTENS ALREADY RESTRICTIVE LAW
The special ruling now being confronted by the New Jersey legislature builds on top of the legislation that allowed for brewery licenses in the first place. The ABC says that the ruling, distilled into 18 rules, is meant to keep the breweries within the bounds of the original legislation that allowed for the special brewing license. However, members of the brewing industry generally say this is an example of government overreach.
Lisa Coryell, the public information officer for the New Jersey Attorney General’s Office, shared a written statement that noted on behalf of the ABC, regarding the special ruling, “Each of the special conditions on limited brewery licenses derives from the 2019 special ruling, which in turn derives from the statute. The Division believes the activities permitted under the 2019 Special Ruling are consistent with the intent of the Legislature and strike a fair and appropriate balance between the interests of full retail license holders, such as restaurants and bars, and the craft brewing industry.”
Some of the 18 restrictions put forth in the Special Ruling that are considered more egregious include:
• No selling food or collaborating with a local food vendor. Microbreweries may provide menus from local restaurants, but they can’t have an exclusive relationship with them. Microbreweries can only serve “de minimis” types of foods, such as nuts or packaged crackers.
• A microbrewery can only have two television screens — none larger than 65 inches. Businesses with more than two screens can only use the extras to display information about the brewery and its products.
• No happy-hour or specially priced drinks on-premises, no mixing specialty cocktails, no mixing beer with other drinks such as soda or lemonade, and no brewing or selling coffee.
• A brewery may not host more than 25 special events per year. Special events include live music, trivia nights, a “live-televised championship sporting event,” or the showing of any television program — news, sports, movie, etc. — that the brewery markets via social media.
Additionally, the legislation currently mandates that breweries provide a tour to every customer every time they enter the brewery, or keep a list of customers given a tour annually.
Many local breweries are uncomfortable keeping a list of patrons who visit the brewery and so do not. Baylen Linnekin, Reason Foundation senior fellow, food lawyer, scholar and adjunct law professor, said he believes they have good reason to avoid keeping lists of their customers.
“Brewers are not interested in keeping records of people who visit their breweries because they’re not looking to get involved in things like custody disputes or investigations into people’s activities that could be used to pass judgment against them,” said Mr. Linnekin.
Michal Ziolkowski, owner of Bradley Brew Project, noted that the stipulation regarding the tour is also simply not what customers want.
“The ABC thinks that it helps us educate our customers but really no one wants the tour,” said Mr. Ziolkow- ski. “People ask if they really have to do the tour every time. We care about being customer-centric, thinking about what our customers want and this isn’t it.”
Mr. Linnekin has written extensively on both the original licensing legislation and the special ruling and believes that New Jersey is behind many other states when it comes to regulations around the craft brewing industry.
“New Jersey is definitely lagging and the rules are depressing the breweries’ ability to grow and really create a craft beer culture in the state,” said Mr. Linnekin.
“These regulations needlessly discriminate against the craft brewers and keep them small and struggling.”
In a recent article he wrote in his position as a senior fellow for the Reason Foundation, he stated that, “The New Jersey ABC’s understanding of craft beer, regulation, law, and fairness appears to…be decaying.”
TOP PRIORITY: SERVING FOOD ON PREMISES
Jay Mahoney, president of the New Jersey Brewer’s Association [NJBA] and owner of Third State Brewing, noted that while the state’s brewers have issues with several points of the original legislation as well as the special ruling, the newly proposed legislation to remove some of the provisions in the special ruling is very much in line with their biggest concerns.
“The removal of the brew tour would be nice but it’s not necessarily a top priority of ours,” said Mr. Mahoney. “At this point, we’d love the removal of the restriction on coordinating with food vendors — food delivery, food trucks, restaurants — most breweries don’t want to be restaurants, don’t want to run kitchens, we just want to be able to provide access to food for our customers to improve their experience and honestly from a public safety standpoint.”
Michael Frye, owner of Frye Brewing in Point Pleasant agreed with this sentiment.
“I’m not interested in running a restaurant but if I could serve nachos or a cheeseboard, I could create a better customer experience and serve beer more safely,” said Mr. Frye. “Under the current regulations our bartenders have to take a safety course and the first rule is don’t serve alcohol without food — but then, we’re not allowed to serve food.”
Bradley Beach Mayor, Larry Fox, sees the restrictions as limiting for the community, as well.
“We have a Latino heritage festival coming up in town and Bradley Brew Project is using one of their ‘away games’ to support it and brew beer for it,” said Mayor Fox. “The event organizer we’re working with had originally asked if we wanted Corona to sponsor the event — I thought why not use someone local? We have great restaurants and a brewery right here in Bradley Beach.”
He continued, “The brewery has been a wonderful addition to the town and brings business to the other establishments on our Main Street. It would be great if they could further collaborate with local restaurants. I think we’ve seen time and again that less regulation is better for business.”
A LICENSE PROBLEM
Michal Ziolkowski, owner of Bradley Brew Project, noted that the special ruling doesn’t align with the reality of what’s going on in the industry — nor does it address the root cause of the issue.
“Ultimately, the liquor license system in New Jersey is totally broken,” said Mr. Ziolkowski. “It creates a liquor license as a commodity. It’s an asset that can be held in a balance sheet.”
He explained that this creates an environment where holders of Class C liquor licenses, which can cost business owners upwards of $500,000 and allow businesses to have a full bar and serve food as well as alcohol on premises, are extremely protective of their markets. However, he also pointed out that there are 7,000 bar/ restaurants in the state and only 140 breweries.
“I understand their position, but it’s a fundamentally flawed licensing system,” said Mr. Ziolkowski.
Mr. Mahoney agreed, adding, “We understand that they want to protect these licenses, and while license reform is a whole other conversation than the one we’re currently having around this special ruling, you can’t just clamp down on one section of an industry.”
Mayor Fox agrees that the conditions set forth by the special ruling are prohibitive for the breweries and noted that they have proved themselves valuable to local communities. In fact, he sees it as almost a case study for the state to loosen regulations on licensing and create a more free market.
“Our restaurants are going to do well regardless of what the breweries are allowed to do,” said Mayor Fox. “It would be great to see more establishments able to sell beer and wine — some of the mom and pop establishments on Main Street would benefit from being able to sell draft beer, wine and cider. Small businesses are the backbone of our economy — they are the essence of the American Dream and we should try to support them.”
While time will tell if the new bills making their way through the New Jersey state legislature will help mitigate some of the more restrictive regulations put in place by the special ruling, local breweries are feeling the bite already.
“I had local musicians booked way out to play at the brewery this year and I had to call and cancel on so many of them when this came through,” said Mr. Ziolkowski. “It’s unfortunate, they’ve already said no to other venues to book with us and now we can’t host them because we can’t have that many events.”
Frye Brewing was also concerned about their ability to attract customers given the limited number of events.
“I’m concerned about being able to continue to bring customers into the brewery if I’m not able to do something like a weekly trivia night or have live music,” said Mr. Frye. “The cost of everything is going up right now too and there’s only so high you can price the beer. It would be great to be able to have events that are a draw for our customers. These regulations put us all in a tough spot.”