Maryland’s craft brewing industry is moving closer to changes that brewers have sought for three years.
The Senate Education, Health and Environmental Affairs Committee voted unanimously Friday afternoon to make changes to a 25-year old law that craft brewers complained kept them locked into agreements with distributors even if those contracts were detrimental to their business.
“This is essentially what we have been seeking — transformative change,” said Kevin Atticks, executive director of the Brewers Association of Maryland.
The agreements, known in the industry as franchise agreements, have been a bugaboo for smaller craft brewers who complain distributors don’t always market their products and instead favor larger beer makers.
Those same agreements are difficult to get out of and require at least 180 days notice. But even then, ending a deal is not simple.
Under the bill approved by the Senate Committee, operations that brew less than 30,000 barrels annually could give 45 days notice and buy their way out of the contract.
“This gives small brewers a chance to get out of bad marriages instead of being stuck in those bad marriages for life,” Atticks said.
For brewers who brew 12,500 barrels or less, the cost would be equal to the value of the product remaining in a distributor’s warehouse.
For operations brewing between 12,500 and 30,000 barrels, the company would pay the cost of the product plus associated costs for marketing by the distributor.
The agreement is similar to laws in Vermont but is lower than the 300,000-barrel threshold sought by the industry — a line that Atticks said was based on New York law but also gave Maryland businesses room to grow.
Currently, none of the small craft brewers are close to 300,000 barrels, according to numbers self-reported by the industry.
Flying Dog Brewery in Frederick is closest, producing about 100,000 barrels. Other local and regional companies such as Heavy Seas, Union and Jail Break produce between 20,000 and 50,000 barrels.
The craft brewers also appear to be edging close to an agreement with the Maryland Licensed Beverage Association over a bill that would increase the amount of beer that can be sold at some breweries with taprooms.
Representatives with the state licensed beverage association were not immediately available for comment.
Part of the deal, which has not been signed off on by legislative leaders, would include an agreement by the craft brewers to maintain their current hours of operation and also not seek additional changes to the law until 2023 at the earliest.
Atticks said there is more work to be done.
“While the Brewers Association of Maryland and Maryland State Licensed Beverage Association may have reached consensus on the modernization act, this decision can only be made by the General Assembly,” said Atticks. “No action has been taken yet. We are hopeful lawmakers will look favorably on our suggestions.”
Under the agreement, craft brewers they would receive an increase in the number of barrels of beer they can sell in taprooms from 2,000 to 5,000. The agreement would also eliminates a buyback provision that effectively required breweries with taprooms that exceed the 2,000-barrel limit to transfer beer to distributors and then repurchase it for sale in their establishment.
The agreement would also keep in place law that requires breweries with taprooms to seek retail licenses from local liquor boards rather than be issued them automatically.
The bills are far from done deals as both need the approval of the opposite respective chambers.
The agreements come in a year when Comptroller Peter Franchot, a champion of the craft brewing industry, has been sidelined with his own legislative battles.
Lawmakers have refused to introduce his signature Reform on Tap legislation, which contained some of the provisions being sought by craft brewing in their own separate bills. At the same time, legislation has been introduced that would strip Franchot’s office of the authority to oversee the state’s alcohol, tobacco and motor fuel regulations.