Legislature to look at craft beer breweries

CHARLESTON – West Virginia legislators will look at whether regulations meant to govern large beer distributors unfairly burden the state’s small but growing craft beer industry.

Seven breweries are registered with the West Virginia Department of Commerce and featured as West Virginia craft brewers. Brewers say there are about a dozen breweries in some stage of production in the state, and officials want to lower some of the potential hurdles those small businesses face.

The Legislature’s Joint Commission on Economic Development has requested a study on the state’s craft beer industry by the Joint Committee on Government and Finance.

Sen. Bob Williams, D-Taylor, co-chairman of the Joint Committee on Economic Development, said he became aware of issues for craft brewers after changes concerning distribution passed through the Legislature last year. Williams said he also spoke to several brewers who said state regulations and fees were placing an undue burden on the small businesses.

“It became apparent they felt there were impediments to their growth and development,” Williams said. “I asked to study what impediments there might be and how we can remove some of those.”

In Davis, two breweries sit within only a few miles of each other, and a third brewery is in the early stages of becoming a business and brew pub.

Lincoln Wilkins, owner and brewer at Blackwater Brewing Co. in Davis and a member of the board of directors for the West Virginia Craft Brewers Guild, said craft brews promote tourism, but state regulations keep those breweries from reaching more customers.

“I think what we’re faced with her is a regulatory system and code relative to craft breweries that is perhaps a little bit antiquated,” Wilkins said. “It’s not just about the fees, but the general structure and definitions of what is a brew pub, what is a tavern, what kind of licensing do you need for different activities, and how those are defined and regulated.”

Wilkins said brewers can face thousands of dollars in licensing fees to be able to produce and sell craft beers. Each step toward expanding an already small and limited business is met with more fees and licensing requirements, he said.

“We need to provide these businesses with a little more flexibility,” he said.

Only about two miles away in Thomas is Mountain State Brewing. Owner Brian Arnett also is the president of the West Virginia Brewers Guild, which was formed in response to proposed changes to state legislation which would have made self distribution even more difficult for small brewers.

“A fundamental part of craft brewing is the ability to self-distribute, and that is something that is always under attack,” Arnett said.

Two years ago the Legislature passed rules that limited some self distribution in the state and put a limit on the amount of craft beer that can be sold directly to a customer.

“Limiting self distribution is extremely harmful to the industry,” Arnett said. “We love our distributors and we want to work with them, but we need that self distribution

“Self distribution is something near and dear to my heart, something I want to see remain open for the state,” Wilkins said. “I think there is an opportunity for this fledgling market to grow. We just need to keep those options open for small brewers.”

Arnett said the cost of licensing and the number of fees a brewery must pay also is a hurdle to small businesses.

Commissioner Ron Moats of the state Alcohol Beverage Control Commission said brewers can pay several thousands of dollars in licensing fees depending on the nature of their business. For example, a local brewery would pay a $1,500 licence fee, but may pay an additional $1,000 fee to be designated as a brew pub.

“For some of that it may be a small problem,” Moats said.

“If you are paying $3,000-4,000 just to get started, that’s a problem,” Arnett said. “To make $4,000 in profits just to cover the cost of the license, that’s really hard.”

Bill Smith, executive director of the Tucker County Convention and Visitor Bureau and Chamber of Commerce, said for the small rural towns of Davis and Thomas, the breweries are a huge tourism draw.

“Our main tourism market, they come from metro D.C., Baltimore, areas like that,” Smith said. “When they hit the quaint towns of Davis and Thomas, there are no franchises. There are local owned and operated businesses, and it really adds a great deal to the overall feel of the town.”

The planned addition of a third brewery to the area, Smith said, may help draw in those tourists specifically looking to sample and purchase craft beers.

“We can only hope,” he said. “I think when we get the third one up and running we will certainly do some test marketing to that demographic.”

Smith said the county already uses the craft beers in its marketing, offering tours of the breweries to convention-goers at Blackwater and Canaan Valley. The breweries often supply the chamber with local beers to sell at events, he said.

“We are proud of our craft beer outlets,” Smith said. “They are gaining in popularity and it definitely adds to the draw of this area.”

Williams said removing these restrictions and burdens will help grow the industry and at the same time bring more tourists into the state and especially into rural communities.

“We want to see them grow. We want to see folks come and visit these small towns,” he said.

Moats said the commission does not track the economic impact of the breweries, but only regulates the licensing and sale of alcohol. Moats said officials at the commission are aware of the brewers’ complaints.

“We’ve had maybe one or two conversations with them,” he said. “We’ve not formally gotten into any issues with the studies they’ve been talking about.”

Williams said it is a conversation that needs to happen soon.

“We often try to fit new and evolving industries into the current regulations we have. It appears to me to be one of those things we need to look at and bring up to date,” Williams said. “We need to make sure we are protecting the public, but we also need to look at these businesses and make it easier for them to succeed. We don’t need to be bonding a craft brewery the same way we bond a big distributorship.

Williams said he anticipates the brewers returning to the Legislature in October to present more information and suggestions on changes which could benefit the industry.

“These craft breweries are not Miller and Coors and Budweiser,” he said. “We need to treat them a little differently.”