Distinct Rules

Rise of Craft Beer 1

The uneven playing field in the craft world and the struggle of craft distilleries in Florida.

By Louis Terminello

A long time ago, a handful of brewers changed the landscape of the United States beer industry. Jim Koch of Samuel Adams, Pete Slosberg of Pete’s Wicked Ale and even Fritz Maytag of the storied appliance clan who created Anchor Steam, turned the American palate away from the blond lager and introduced beer consumers to the brave new world of flavor that took the form of pale ales, porters and “steam” beer.

Thousands of brands have come and gone since these humble beginnings, but Pandora's box was opened. Americans demanded flavor and hundreds of artisanal brewers were there to eagerly fill the void. Eventually, this demand for taste provided the impetus for legislatures around the country to re-write their laws and create exceptions to the long-standing Beverage Law doctrine of tied house evil.

Act One: The Evil

The concept of tied house evil finds its roots in pre-Prohibition America where alcohol production was controlled by questionable and colorful characters who strong armed retailers to sell their brands exclusively at their venues. Money, and sometimes force, created an uneven playing field where fair competition was a foreign concept.

Both the federal and state governments stepped in and codified the notion of tied house in law, effectively disentangling the relationships between producer and retailer (that sound you hear is the collective sigh of relief emanating from the mansions of wine, beer and spirit distributors around the country). For almost 80 years alcohol beverage manufacturers were prohibited from selling directly to consumers … until consumers demanded more. This is Florida’s story.

Act Two: The Exceptions to the Evil

Decades ago, a very large beer producer desired to open a theme park in the state of Florida. The producer imagined the theme park as contributing to the state as a tourist destination as well as a perfect place to sell its beers to consumers. But how was it going to do that given that tied house prevented this?

With great wisdom and deep pockets, the brewer’s executives and their attorneys managed to convince Florida legislatures to craft a statute that created an exception to tied house. The statute became known as the Busch Gardens statute and in one fell swoop, the nation’s largest brewer, Anheuser-Busch, effectively became a retailer. People came from all over the country to ride its roller coasters and tour the park with beer in hand. Busch Gardens enjoyed this privilege on its own for a long time and the statute, which allowed for its existence, stayed quietly in the background – until consumers demanded more and the bearded young brewers stepped out from the wings and wrapped themselves in the enabling statute.

Rise of Craft Beer 2Enter Florida Statute 561.221, which allows manufacturers of beer to operate both a manufacturing facility and a retail location on the same premises. Two distinct areas must be delineated on a sketch submitted to the state agency that issues the licenses indicating the manufacturing portion and the vendor portion. The state will then issue two distinct licenses (assuming all other qualifications are satisfied); one a manufacturer’s license and the other a vendor’s license.

If the brewer so desires, he may qualify for what is known as a 4COP Quota license where the vendor location is, for all purposes, a full-fledged bar serving the beer produced on the premises as well as beer, wine and spirts sold by distributors. These bars have allowed many of the state's craft breweries to thrive. Building a brand is tough, fighting for distributor attention is a challenge, but serving your own brew at your own bar (as long as it's tasty and meets consumer demand) is a recipe for success.

Act Three: The Craft Distillery

With the rise of the craft brewery and the expanding tastes of consumers of alcoholic beverages, the only natural extension was home-grown and flavorful spirits. Enter Florida Statute 565.03, also known as the craft distillery statute. Craft distilleries as defined by Florida law are those that produce fewer than 75,000 gallons of spirts annually. Craft distilleries have sprung up all over the state. As a serious point of distinction from its cousin the craft brewery, small batch distillers are not granted vendors licenses but rather may operate a souvenir gift shop on their premises.

A maximum of six bottles per brand may be sold in a face-to-face transaction with a consumer for off premise consumption only. If a craft distillery desires to build its brands in the broad market it must sell to licensed Florida distributors. Again, fighting for distributor attention is a serious challenge and as such, Florida craft distilleries have not seen the same success as its brewery relatives. If the concept of craft distiller is to thrive in Florida they, should enjoy the same privilege as the state craft brewers; a vendor premises where consumers may enjoy on-premise consumption.

Louis J. Terminello is a partner, chair of the hospitality, alcohol and leisure industry group and member of the firm management committee at Greenspoon Marder. He concentrates his practice on administrative law and providing legal services to all tiers of the alcohol beverage industry, including retailers, suppliers and wholesalers. Terminello can be reached at [email protected]

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