According to new reports, it turns out the government shutdown is killing craft beer breweries across the country. Apparently, a division of the Treasury Department regulates craft beer manufacturers. And as “non-essential” personnel, no one’s there to issue licenses and regulate the industry, leaving taps across the country dry.
“No entrepreneur ever thinks to write down ‘completely dysfunctional government’ on your risk matrix when you’re thinking, ‘What are the things I have to account for?’” Blake Crawford, owner of Alementary Brewing in Hackensack, said to the New York Times. Crawford’s been waiting to get approval to begin brewing in their new warehouse space, but that application is now sitting on empty desks as their overhead costs add up.
“I’ve been joking with people that if you’re going to want a new beer coming out pretty soon, you’re going to have to drink your brother-in-law’s homebrew,” said Russ Klisch, founder and president of Lakefront Brewery in Milwaukee in an interview with CNBC. For Lakefront, selling across state lines and releasing their newest brews has become impossible.
According to the Brewer’s Association, the industry contributed more than $76 billion to the US economy in 2017. More breweries than ever before were expected to open this year, providing hundreds of thousands of jobs across the country. New Jersey and Kentucky tied last year for the most craft beer establishments in the country, with plenty of other states not too far behind.
Larger beer brands aren’t as affected by the shutdown as smaller joints. Craft beer breweries often have menus that change, seasonal products, and frequent new recipes that all require approval from the government. Big brands don’t change their products as much, so they can continue to sell what they’ve always sold. Smaller businesses tend to feel the brunt of these shutdowns a lot more.
The amount of money these smaller businesses are losing isn’t exactly unsubstantial. One brewery in Amherst, NY reported losses of over $20,000 in the last few weeks.
“We are in seven out-of-state markets, plus Colorado,” says Matt Cutter, the founder of Upslope Brewing Company in Colorado. “In order to distribute to those states, we’re required to have the Tax and Trade Bureau approve the label.”
Breweries are still allowed to sell new recipes and showcase new bottles in their designated states. The problem is that these businesses can no longer expand their markets. Or, if they do release a new brew or label they run the risk of having to redesign the whole campaign once the government shutdown ends and the bureau does give them a ruling.
When the government does come back, there’s an entire backlog of Certificate of Label Approval (COLA) requests from companies across the country, so getting approval is going to be a process that slows the entire industry’s revenue well into the year.
“Breweries should be prepared for the labeling and permit process to take longer than previously estimated,” according to Katie Marisic, federal affairs manager at the Brewers Association, publishers of CraftBeer.com. “Also, be aware that when the government is funded again there could be a backlog. Breweries should plan accordingly.”