Imagine having a manufacturing business that, after having a great year of sales, you were compelled to shut down because you had reached the limit of what the state allows you to produce in a calendar year. Sound ludicrous, unfair and not “the American Way”? What is described above is reality under the existing law governing Nevada brewpubs, limiting their output to 15,000 barrels per year. (It’s worth noting that the cap applies to brewpubs, not production breweries, however all but one of the 34 licenses in Nevada are for brewpubs, and a brewery license does not allow for either a tasting room or restaurant to serve to the public.)
Help may be on the way. In the current legislative session, the Nevada State Senate Committee on Commerce, Labor and Energy passed Senate Bill 130 (SB 130) through committee, allowing legislation to move forward for a floor vote before the full State Senate. The bill would double the amount of beer Nevada brewpubs are allowed to produce, from 15,000 to 30,000 barrels a year, which can then be sold through distributors, and to cap sales sold at a brewpub’s taproom or restaurant at 10,000 barrels. Another bill, making its way through the Assembly, is AB 431, which as initially proposed would increase the limit to only 20,000 barrels, cap retail sales at 2,000 barrels and prevent any brewpub from operating more than two locations (Great Basin in Reno already has three); it’s rumored that the bill is being revised to more closely resemble SB 130’s directives, with a 30,000-barrrel cap and no limitation on brewpub locations.
How much beer is that?
To get an idea of how much beer we’re talking about, consider that one barrel equals to 31 gallons, so 15,000 barrels is 465,000 gallons. SB 130 would double that to 930,000 gallons, which equates to 12,917 six-packs or 60,000 standard 15.5 gallon kegs.
Why have a cap at all and who does it benefit?
Since Prohibition, the management of alcohol in most states, including Nevada, has been governed by the three-tier system, which creates a separation of ownership from the supplier (brewery), distributor, and retailer (bar/liquor store), to create an effective means for taxing sales. The obvious benefactor of a cap is the distributors of the major beer brands who prefer to shackle craft breweries and limit their competition in every avenue possible. According to the Brewer’s Association, Nevada’s neighboring states such as Arizona have a huge cap of production at 250,000 barrels, and Washington, Oregon, Utah and New Mexico impose no cap. While none of Nevada’s breweries have yet exceeded the 15,000 cap, some are coming close and others are considering expanding by adding additional brewing facilities, and clearly having such limitations stifles our state’s breweries’ ability to expand into other markets as breweries from neighboring states have.
The Nevada Beer Wholesalers group has consistently opposed efforts to increase the limit on production of Nevada breweries, postulating that a cap is in the best interest of the state’s brewpubs, hypothesizing that a larger, international player such as InBev/AB (Budweiser) could use an unlimited cap to come into the state, build large brewpubs and use their marketing muscle to sell an unlimited amount of product.
Isn’t a cap bad for attracting and keeping Nevada business?
Nevada’s newest brewery, Revision Brewing Company, opened in Reno last month, and was designed and built to produce more than 24,000 barrels and already has more expansion capabilities in place. CEO/brewmaster Jeremy Warren says that the increased cap would allow his brewpub to produce the beer that they have forecasted for, but under the proposed limits would not be able to build a sour/barrel aged facility it is planning unless they closed their taproom, as the numbers from that production would take away from what could legally be produced at the current location. Warren feels that without some serious changes on the restrictions on Nevada’s brewpubs’ production, Revision Brewing Company will have to eventually move its headquarters to California.
What do the brewers think?
While Nevada brewers of the more than 30 brewpubs in the state would prefer not to have any production limits, they have been open to compromise and see expanding the cap as a step in the right direction. Most are on board with SB 130 and possibly AB 431 if the rumors of its revisions pan out (at press time the proposed amendments to AB 431 had not yet officially been proposed on the floor).
Matt Johnson, president of the Nevada Craft Brewers Association (an organization comprised of Nevada brewers) and cofounder of IMBIB Custom Brews in Reno says: “SB 130 is supported by a large majority of the breweries in the state as well as the NCBA because it is a step forward to helping craft beer grow and thrive in our state. We are cautiously optimistic about the recently revised language included in AB 431 that was a direct result of public input on the unreasonable caps that were originally proposed in the bill. Unfortunately, most breweries were not consulted on this legislation so we need further clarification on the proposed changes before we can fully support the bill.”
Robert Snyder, CFO of Big Dog’s Brewing Company in Las Vegas and treasurer of the Nevada Craft Brewers Association, says: “There is almost unanimous support in the community for raising Nevada’s artificially low production limits. While simple logic would make this seem like a no brainer, the distributors have opposed our efforts. However, we have been open to common sense compromises that the brewers and distributors can both get behind and have already made significant compromises. Our plan for Big Dog’s is to build a new production brewpub in Las Vegas with a capacity of 30–40,000 barrels. Since all production not sold onsite goes through our distributor partners, there should be no limit on our ability to produce beer that goes through those partners. We simply want to sell more beer to our distributor partners!”
Tom Young, founder and brewmaster of Reno’s Great Basin Brewing Company, says: “Great Basin’s Taps & Tanks location could produce about 25,000 barrels with the current capacity, but we could double that by adding new fermentation tanks and doing some off-site warehousing. We brewers have chosen to offer compromises that we think answer all of the distributors’ concerns. We are puzzled by the need that the distributors’ lobbyist deems essential that we are capped on overall production. That is how the distributor and brewer make money—we sell beer to them and they sell beer to other bars, restaurant and stores. Why would they want to cap us at any level on that?”
Wyndee Forrest, co-owner of CraftHaus Brewery in Henderson, says: “Even though we are not near the ceiling of the 15,000-barrel cap, this unnecessary state-imposed stranglehold on manufacturing affects the entire Nevada beer industry. Why would a lender want to loan capital to a business that cannot grow past a certain point? Was Elon Musk told to stifle his production and manufacturing at Tesla when he entered our state? Was Tony Hsieh legally forced to only meet the demands of a portion of his Zappos clients? This is not a cap on beer manufacturers, it is a cap on Nevada industry.”
Kayla Callahan, operations assistant of Joseph James Brewing Company in Henderson, says: “Having a cap on annual brewery production in Nevada makes no sense whatsoever. Once brewers reach that production cap, they will have to reassess their business plan or move out of state.”
Matt Marino, Joseph James’ director of brewing operations, says: “Out-of-state breweries such as Sierra Nevada, New Belgium, Budweiser and MillerCoors can send unlimited amounts of beer into Nevada while Nevada brewers are capped at 15,000 [barrels]. And yet the distributors who fight these bills asking for increases make money off of all out-of-state beer, as well as all beer sold in Nevada except beer sold over the bar at brewery taprooms, which is a small number in the scheme of things.”
Jeremy Warren, Revision Brewing Company CEO/brewmaster, says: “SB 130 is a step in the right direction, but really there should not be a production cap. If there’s a cap on local brewery production, then shouldn’t there be one on the beer imported into the state? It’s interesting that out-of-state and foreign-owned breweries may sell an unlimited number of barrels in the state of Nevada, however local breweries may not.”