Government shutdown affects craft beer industry as Alcohol and Tobacco Tax and Trade Burea...

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Government shutdown affects craft beer industry as Alcohol and Tobacco
Tax and Trade Bureau closes
Local brewers stuck with beer they can't sell

CINCINNATI -- Among the many industries affected by the government
shutdown, craft beer is facing a crisis that could prevent consumers
from trying new brews.

The issue facing many existing breweries and startups is that the
agency responsible for overseeing the alcoholic beverage industry is
closed for business.

According to the Brewers Association , the U.S. Alcohol and Tobacco
Tax and Trade Bureau (TTB) cannot review new permit applications or
certificates of label until the shutdown is resolved.

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. It also requires that changes in labeling on cans or
bottles be approved by the agency.

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. That means that while the brewers can't get some of
their beer to market, they will still have to find money to pay their
taxes.

“It is our understanding that the only functions will be tax
collection from existing permit holders and enforcement functions,"
Brewers Association Director Paul Gatza said. "This limit of service
means that potential new taxpayers and potential tax revenues from new
beers will not occur, so the federal government could, in theory, be
missing a chance at these potential revenues at a time when our
government could use this revenue."  said.

Even before the shutdown, the TTB was already dealing with a decreased
staff and brewers had to deal with long approval delays.

Gatza said the average wait time for formula approvals was about 45
days. Add in the shutdown and the effects are multiplied
exponentially.

“One could think of this shutdown as basically stopping business
indefinitely for anyone who didn’t have certain paperwork in place
back in mid-August. I sympathize with the alcohol beverage companies
who are stuck in limbo,” Gatza said.

The Brewers Association said the country was on track to have between
400 and 550 brewery openings in 2013. That means that more than one
craft brewery per day on average was opening.

"Those new jobs and future tax revenues are on hold indefinitely,"
Gatza said. "Small brewers employ over 108,000 people in the U.S., and
is showing job growth of about 5,000 new jobs per year. This shutdown
has a direct effect on slowing that job growth.”

Effect On Local Brewers

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 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 , 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.

LaFollette said, “If you’re in the processing of starting a brewery,
the process takes months. You’re actually applying while you’re
starting to build the brewery. They might get to a point where they’re
ready to brew but the federal application is held up. So they’re just
bleeding money.”

That problem is especially worrisome for smaller breweries that make
several specialty beers or have to bring a lot of new beers to market
as they are just starting up.

“For the rest of us, especially if you have seasonals, you can’t get
that beer to market because the label approval is held up. You might
miss the window for the season because of the shutdown. That’s a big
cash flow issue for small breweries because you’re just sitting on
product,” LaFollette said.

Listermann Brewing is also feeling the crunch. Head brewer Kevin
Moreland said they have a pumpkin beer for fall in addition to other
pre-existing applications but they can’t even submit an application
because the TTB is shut down.

Another sticking issue for Listermann is that they are waiting on new
label approvals so they can’t start bottling a four-pack of their fan
favorite Chickow brown ale on their new bottling line.

The problem grows even more complicated because the brewery received a
$40,000 state grant to help buy the line. If the bottling line isn’t
operating by the beginning of November, Listermann might have to pay
back that grant to the state.

Moreland said they are looking at several options but they are at the
mercy of legislators in Washington and however fast the  
TTB can get through the mountain of applications it has waiting when
the shutdown ends.

In addition to the bottling line, Moreland said he estimates he has
about 20 barrels worth of beer that are just waiting to be released.
He said he’s worried he might have to dump much of it because the beer
will be out of season and hard to sell if the government standoff goes
on for too much longer.

When the cost of the grant, labor and ingredients are tallied up,
Listermann stands to lose about $55,000.

MadTree Brewing also has a beer in the tanks that is being held up by
the shutdown. Brewer Kenny McNutt said they have several barrels worth
of a new kolsch that is waiting for approval, along with a seasonal
Scotch ale called Thundersnow that can’t even be brewed yet.

Up north in Morrow, Cellar Dweller Brewery is waiting on several
applications and will have to sit on some beer if they don’t get
approval back in about 10 days. Three of those are for new beers that
they wanted to unveil.

It’s also affecting the brewery’s expansion effort. Because the
brewery is housed at a vineyard, they have to get federal approval to
any site changes they want to make. Head brewer Steve Shaw said they
had to submit a form to the government showing where every piece of
equipment at the facility will be housed.

Cellar Dweller can’t begin that expansion work until that application
is approved.

A few of the other breweries in town have reported similar, but not as
severe issues thanks to the shutdown.

All told, it means consumers could expect to see fewer beers on the
market in the coming months and possibly higher prices as brewers try
to recoup their costs.

http://www.wcpo.com/money/local-business-news/government-shutdown-affects-craft-beer-industy-as-alcohol-and-tobacco-tax-and-trade-bureau-closes


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