In an embarrassing display of political bickering, the U.S. government was obliged to close many of its operations last week as Congress failed to pass a spending bill on Oct. 1, which is the start of the new fiscal year. House Republicans held their ground till last Friday (which is when this article was written) in a standoff with President Barack Obama over bipartisan issues like the debt ceiling, sequester and Affordable Care Act, often called ObamaCare. Facing public anger over the government shutdown, the House has adopted a strategy of piecemeal funding for some federal agencies in some capacities — throwing money at the likes of the Veterans Administration and the National Institutes of Health. Of course, most branches of government are not being funded. Where it concerns craft brewers, much of the Alcohol and Tobacco Tax and Trade Bureau (TTB) has been sidelined.
Read all the strict parameters of the TBB shutdown right here, but for craft breweries, new permits for breweries are on hold and so are label approvals and new recipe approvals. We refer you to this excellent article by the ABC affiliate out of Cincinnati.
That means no new breweries can open, and existing breweries can’t bring new beers to market. This is especially harmful to the craft beer industry as any new beer formula that requires adjuncts (additives to the beer such as spices or fruit), also require oversight from the TTB to make sure the product is safe.
In an ironic twist of fate, while the office of the TTB that oversees labels and formulas is shut down, the office that handles excise taxes is still open.
We don’t think that’s ironic, if you presuppose irony to be the opposite of what the government would normally do. Of course, the taxman is always open, but no new beers and new breweries means the high velocity growth of the craft beer market is about to slow down — thanks to the big brains in the U.S. government. According to a report we posted last Thursday, craft beer had one of the largest percent gains of any beer category in 2012 — 14.4 percent — and now accounts for 6.3 percent of total beer volume. Its upward trajectory looked to continue in 2013. The number of U.S. breweries was rapidly climbing. Brewers Association Membership Coordinator Erin Glass reported the May 31 U.S. brewery count as 2,514. This count is up 422 from the May 31, 2012, count of 2,092, but now those growth numbers are on hold.
How is the shutdown affecting specific craft breweries? Well, here are some stories and quotes plucked from around the industry and Internet. If you have a story, please tell us below.
That pain is being felt quite acutely at some of the breweries in Cincinnati. Many of the brewers said they have formula and label applications that are now on indefinite hold and that means dire consequences for their budgets if they can’t move the product. At Fifty West [Brewing Co.] on the east side of the city, the owners said while they don’t have any applications to the TTB, the shutdown is affecting state agencies they have to deal with. The brewery is getting ready to expand, and some of the applications and approvals they need to get from state agencies are being held up because the shutdown at the federal level. At Blank Slate [Brewing Co.], owner Scott LaFollette said he has one beer that he has to hold in his fermentation tanks while waiting for approval and two more that he can’t even start work on because of the holdup.
The federal government requires all beer labels to include certain information, and if you’re sadistic enough you can read all label requirements here. Jacob McKean, CEO and Founder of Point Loma’s Modern Times Beer, spells out how a government shutdown can stifle the innovation process in the beer industry. “For better or worse, the TTB regulates a lot of what smaller breweries do, including approving labels for new beers. Without labels moving through the approval process, many breweries won’t be able to release new beers, which is terrible news for brewers and beer drinkers alike.”
Closer to home, Alexandria’s Port City Brewing Company has felt the effects of the shutdown. I asked Port City’s founder Bill Butcher about difficulties they were facing after he mentioned to me on Twitter that they were trying to deal with an SBA loan ahead of the shutdown. Butcher told me that Port City “…had to scramble ahead of the shutdown in order to expedite all of our paper work to get everything in before Monday.” Fortunately, Port City got the paper work in and had their loan approved over the weekend, but even with that they’re not yet in the clear: Butcher noted that “if something comes up that we need to change during this period,” — meaning the duration of the shutdown — “it will not be possible.”
Connecticut’s breweries and brew pubs are reaching out to members of the Connecticut Army and Connecticut National Guard, along with other federal employees, who have been furloughed during the recent government shutdown. Several businesses will offer discounts and deals to affected employees. Among the participants: Back East Brewing in Bloomfield, Broad Brook Brewing in East Windsor, Cambridge House Brew, PubCity Steam Brewery Cafe in Granby, in Hartford, Shebeen Brewing in Wolcott, Two Roads Brewing Co. in Stratford, Tullycross Tavern in Manchester and Willimantic Brewing Co. in Willimantic. Promotions vary; see ctbeertrail.net for details.
Most of the established breweries we talked to didn’t seem too concerned with the TTB shutdown (as long as it doesn’t go on too long, many noted). “We should not be affected by the TTB shutdown,” said Jim Diley, co-owner of Fulton Brewing Co. “Generally, the TTB will continue to accept tax returns and tax payments.”