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Craft Brewers’ Growth Spurs Look at Rules

4 min read

The explosive growth of the craft brewing industry in Arkansas is causing the brewers themselves and state regulators to re-evaluate the rules governing the sector, a re-evaluation that has the potential to lead to new state laws.

The industry has grown about 500 percent in the last four years, said Michael Langley, director of the Arkansas Alcoholic Beverage Control Division.

The sector is divided into “native brewers” (for example, Diamond Bear Brewing Co. in North Little Rock) and “microbrewery restaurants” (Lost 40 Brewery in Little Rock). A native brewer typically focuses on beer production. A microbrewery restaurant tends to focus on the restaurant aspect, though it may also retail its product. One Arkansas brewer, Core Brewing & Distilling Co. of Springdale, has both a native brewer permit and a microbrewery restaurant permit for its tasting room in Rogers. And both native brewers and microbrewery restaurants are “craft brewers,” small companies that brew beer to sell at retail.

There now are 19 native brewers in the state and three microbrewery restaurants. The two categories require, of course, different permits, and where there are different permits, there are different rules. And where there are different rules, there are ways to run afoul of those rules.

It’s this situation, Langley said, that the ABC wants to address by seeking clarity in the laws. The microbrewery restaurant law, written in 1991, is “very well drafted and very clear,” he said. But the Arkansas Native Brewery Act, passed in 2003, “created a pile of coat hangers,” Langley said, adding that the ABC needs to “get some clarity as to what each can and cannot do as an operation in the state.”

With a score of brewers having emerged in Arkansas, regulators now are seeking to ensure that the state’s rules and regulations carefully address the needs of this burgeoning industry.

Before the agency introduces a proposal in the legislative session that starts today, however, Langley promises to solicit input from the industry. “What we’ve told them is we’re trying to come up with something to create a baseline,” he said.

What won’t change, however, is the state’s long-established three-tier system of alcohol production and distribution: the supplier (the producer of the beverage), the wholesaler or distributor and the retailer.

“Suppliers have to sell to wholesalers. Wholesalers have to sell to retailers,” Langley said. In the craft beer industry, “there are certain exceptions to the three-tier system, and we just need to create the clarity as to what is and isn’t accepted,” he said.

Currently, some brewers distribute their own product; some use distributors. Asked whether distributors were pressuring to change the law to force brewers to use their services, Langley said, “I don’t think there is pressure, but wholesalers keep a close watch on the issue.”

Brewers are reluctant to talk about potential changes in the law, requiring a lot of reading between the lines.

The ABC met this summer with brewers, including members of the Arkansas Brewers Guild, along with alcohol retailers and distributors to discuss potential legislation. In October, the guild issued a statement saying it hoped “to clean up some of the issues which are unclear or conflict with other laws, while at the same time working with the Beer Wholesalers of Arkansas to improve and grow this key growing industry in our state.”

Jesse Core, owner of Core Brewing, told Arkansas Business that “I respect what the ABC is up against right now. Anytime you have that kind of growth, it’s not easy.”

Asked what he’d like to see changed, Core said, “Honestly, Arkansas is pretty good right now at what they’re doing. I’m hopeful, like the rest of the brewers, that we don’t go backwards. We need to make sure that we protect these entities that are producing jobs.” Core currently has 23 employees and hopes to have 45 by the end of the year.

But he was cautious about specific changes. “It’s difficult right now, and the reason why I’m being a little vague as well too is because there are things in the hopper,” Core said. “I want to make sure over the next couple of months that we’re careful. You have to try to appreciate the position I’m in. It’s such a fine game right now and I have to be very careful about what I say.”

Reluctant to say what could be improved, he was asked what the state was doing right. “I would say self-distribution is a very good law for breweries in the state of Arkansas.” Although his company uses distributors, Core said, “Many states are actually making some changes to allow more self-distribution for native brewers. That’s a biggie. We need to make sure we keep that.”

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