Support Our Heroes – Buy Veteran Made Beer

Discovering Veteran-Owned Breweries

This is the first in a series of articles where we highlight breweries throughout the country owned by military veterans. Our veterans have made sacrifices for our nation and the best way you can say thanks is by supporting their businesses. Next time you’re at the store picking up some cold ones, try a beer from one of the breweries on our list. It’s our way of saying thank you!

NOLA Brewing

Founded in 2008 by former Naval officer Kirk Coco, NOLA Brewing is located in New Orleans, Louisiana. Kirk was on active duty and deployed when Hurricane Katrina unleashed massive destruction across the gulf coast. After leaving active duty, he returned to New Orleans to help rebuild his hometown and shortly thereafter opened NOLA Brewing.

The brewery has a taproom where you can sample or drink as much beer as you want. True to the New Orleans heritage, the beers are named after all things New Orleans. From a Mardi Gras seasonal beer named after a krewe (Muses) to a beer named after the brewery’s neighborhood (Irish Channel Stout) to an IPA made with six type of hops that pays tribute to the street the brewery sits on (Hopitoulas).

If you get hungry, don’t worry they’ve got you covered. Co-located inside the taproom is McClure’s BBQ, one of New Orleans best BBQ joints. While New Orleans isn’t typically well-known for BBQ, McClure’s is no joke and can hold its own against any Southern competition. And if you like sauce with your ‘que, they’ve got just about every style from Alabama white sauce to sweet and tangy Kansas City style sauce.

Tours are offered weekly. Check their events page to learn more.

Bayou Teche Brewing

Credit: Bayou Teche Brewing

Located in Arnaudville, Louisiana, Bayou Teche Brewing was founded in 2009 by U.S. Army veteran Karlos Knott and his brothers. Karlos developed an appreciation for the finely brewed beers of Europe while stationed in Germany. He learned to appreciate the regional foods and beers of many countries, and how they had evolved to complement each other. He decided to brew beer that does the same with with the cuisine and lifestyle of Cajuns and Creoles he grew up enjoying. This is how Bayou Teche was born.

The taproom is open daily where you can enjoy some unique flavorful beers. Bayou Teche pays homage to its Cajun and Acadian roots (Full Disclosure: author shares similar cultural heritage and may have been biased in this review!) when naming their beers, such as LA-31 Bière Pâle their flagship pale ale named after the rural highway near the brewery, LA 31 Acadie a farmhouse ale named in memory of their Acadian homeland in Eastern Canada, and Loup Garou Stout named after the mythical Cajun werewolf rumored to roam the swamps of Southwest Louisiana.

Unique is that visitors can tour the brewery in either English or French. Tours are available every weekend. Check their events page for more info.

Railhouse Brewery

Credit: Railhouse Brewery

Founded by three veterans (Navy, Army and Air Force), Railhouse Brewing opened it’s doors in 2010. Located in small town Aberdeen, North Carolina, Railhouse is Moore County’s first craft brewery. The owners promote their commitment to our country not only by using bottles that feature American Flag bottle caps, but they recently partnered with the KA-BAR knife company to co-brand an English brown ale. As a former Marine, not only were KA-BAR’s standard issue for troops in the field, but I can attest that KA-BAR’s also make excellent bottle openers as well, among other things!

In their pub, you can now only enjoy their wide-selection of beer, but you can grab a bite to eat and shoot some darts. Some of their year round beers include Free yourself from Corporate America (i.e., FCA IPA), Mastiff Oatmeal Stout and Pineland Pale Ale. Their beer has received several awards, including first place for Stout in the North Carolina Brewer’s Cup 2013 and Best in Show at the 2013 Blues N’ Brews Festival. The KA-BAR Brown Ale not only won a gold medal at the 2013 International Craft Beer Awards, but Marines stationed at Camp Mujuk in South Korea (one of the largest U.S. Marine Corps bases in the world) can find it readily available.

The pub is open daily and tours of the brewery are offered regularly, but they suggest to call in advance for the schedule.

New Tax Cuts for Craft Breweries and Distilleries

The sweeping tax overhaul law passed last week by the U.S. Congress included the Craft Beverage Modernization and Tax Reform Act of 2017 which will lower excise taxes for small brewers and distillers starting January 1, 2018. The tax cuts give small producers more profit that can be used to help them expand, experiment, market or even lower prices. As mentioned in an earlier article, the legislation has been widely supported throughout the alcohol beverage industry as a means to further growth.

Small producers of distilled spirits (i.e., rum, gin, vodka or whiskey) will pay a tax of $2.70 per gallon on the first 100,000 gallons, then $13.34 per gallon thereafter.

Craft breweries will pay a tax of $3.50 per barrel on the first 60,000 barrels. Large producers brewing more than 6 million barrels will continue to pay $18 per barrel, the current level for beer.

While craft beer makes up about 12.3% of the beer market and craft distillers about 12.1% of the spirit sales, the tax savings will probably not translate into cheaper alcohol beverages. Most likely craft brewers and distillers will use the money to expand operations by adding additional employees and move into more markets. But regardless the outcome, this new law is certainly a win for all small alcoholic beverage producers.

Are Your Beer Ingredients Exempt from TTB Formula Approval?

Craft brewers continue to experiment with a wide variety of non-traditional ingredients to concoct new and exciting beers. For example, Fulton’s HefeWheaties (a Wheaties-themed Hefeweizen), Oxbow Brewing’s Sasion Dell’Aragosta (brewed with live Maine lobsters and sea salt), Porterhouse Brewing Company’s Oyster Stout (you guessed it…made with live oysters!), and Short’s Key Lime Pie (made with fresh limes, milk sugar, graham crackers and marshmallow fluff). From these limited examples you can only imagine where brewers will go from here.

The use of new and novel ingredients in beer is not prohibited by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”). However, if a brewer intends to use an ingredient in a beer that is not on the TTB exemption list, then the brewer is required to obtain formula approval (or a pre-import approval for imported beer) from the TTB.

In December 2015, the TTB issued Ruling 2015-1, which re-states and supersedes Ruling 2014-4, by adding more than 50 new ingredients exempt from the formula requirements, including ingredients such as tea, jasmine, rosemary, grapes and figs (a complete list of exempt ingredients is listed here). Although this new ruling has exempted many flavoring materials added to beer, including several fruits and spices, sugars, chocolate, tea and coffee, it does not (and cannot due to existing regulations) exempt flavorings and extracts, which continue to require formula approval prior to use. For example, while a brewer can add watermelon, strawberry juice, strawberry puree or strawberry concentrate to a beer without obtaining formula approval, adding a strawberry flavor still requires formula approval.

Ruling 2015-1 was issued by the TTB in response to a petition filed by the Brewers Association requesting to expand the list of exempt ingredients. Although the TTB did not exempt all the ingredients requested by the Brewers Association, the TTB remains open to future petitions regarding additional ingredients. A procedure for such a petition is located at 27 C.F.R. § 25.55(f).

If you have any questions about beer regulations or formula requirements please contact our attorneys at Morsel Law.

Growing Craft Beer Industry Through Tax Cuts

While the craft beverage industry has grown significantly over the past decade, it has the potential to grow to new heights if small producers weren’t burdened by federal regulations that have failed to keep pace. This could all change, however, if Congress passes a bill now pending titled the Craft Beverage Modernization and Tax Reform Act (“CBMTA”). If passed, the bill would decrease taxes on craft brewers in order to help small businesses profit and encourage continued growth in the booming sectors. (Note: the CBMTA also cuts federal excise taxes on distillers, vintners and cider makers)

Under current law, a tax is imposed on all beer brewed or produced in, or imported into, the United States. The excise tax rate is $18/barrel (about $0.05 per 12 oz. bottle/can). Brewers that make less than 2,000,000 barrels per year may qualify for a lower excise tax rate on its first 60,000 barrels. If a brewery qualifies for this lower rate, its first 60,000 barrels of beer sold will be taxed at $7/barrel (about $0.02 per 12 oz. bottle/can).

Breweries are required to pay excise taxes semi-monthly (24 payments per year); however, a smaller brewery can qualify for quarterly payments. To qualify for quarterly payments, the estimated annual tax liable for the brewery must not exceed $50,000 (~7143 barrels) and their excise tax for the previous year must not have exceeded $50,000.  It is important to note that paying quarterly taxes may greatly increase the amount of a brewer’s bond.

Under CBMTA, the federal excise tax on the first 60,000 barrels will be reduced to $3.50/barrel for domestic brewers producing less than 2 million barrels annually. It also reduces the federal excise tax to $16/barrel on the first 6 million barrels for all other brewers and importers. The excise tax of $18/barrel would remain for breweries producing more than 6 million barrels annually.

Lowering the excise tax is important to small brewers, the majority of who operate on tight margins. Unlike large multinational brewers who enjoy the benefit of economies of scale, small brewers maintain higher costs for raw materials, production, packaging, marketing and distribution. Adjusting the excise tax would allow small brewers nationwide to reinvest more than $70 million annually into growing their businesses. Passing this bill is crucial to sustain the continued growth of the craft beer industry, so if you’re a craft beer fan please contact your congressional leaders and tell them to support the Craft Beverage Modernization and Tax Reform Act.

 

Craft Brewers Should Prepare for FDA Inspections

“Whoa, hold on,” you say, “I’m a craft brewer. What does the FDA have to do with me?” Well, that’s a good question. As a brewer you are already familiar with your state liquor agency and the Tobacco, Tax and Trade Bureau (TTB), but what you probably don’t realize is that the Food and Drug Administration (FDA) also regulates your operations. With the increased focus on food safety, and additional regulations under the Food Safety Modernization Act (FSMA), it is only a matter of time until FDA comes knocking on your door.

“Okay, you’ve got my attention,” you respond. “So what part of my business does the FDA regulate?” Glad you asked. The FDA has jurisdiction over many aspects of your business, including both the inputs to and outputs of your operation. Below are just some examples:

Registration:

Just like food manufacturers, breweries are required to register as a food facility with the FDA and renew their registration every two years. This registration requirement applies regardless of whether you brew domestically or overseas (i.e., import beer into U.S.A.).

Labeling Requirements: 

Beer that contains both malted barley and hops are subject to TTB labeling regulations; however, beer that doesn’t contain both malted barley and hops (i.e., rice or wheat beer) are subject to FDA labeling regulations. These regulations require additional disclosures, including: ingredients (such as spices, flavorings, colorings, chemical preservatives); allergens, such as wheat; and nutritional facts (think of that dreaded word “calories”), of course unless it meets certain exemptions.

Good Manufacturing Practices (GMPs):

Federal regulations have established GMPs for the manufacturing, packing or holding of human food, which includes several of the steps in the beer-making process. Storing and holding grains and other food products for processing and beer for shipment is also subject to regulation. In order to comply with these regulations your operations need to be sanitary, you must perform an analysis of your operations to address any potential hazards, and implement GMPs to minimize such hazards.

Reporting and Record-keeping:

Food safety continues to be a primary concern of FDA and new regulations under FSMA. To ensure your brewery remains compliant you must keep records of the immediate sources of food and the immediate recipients of products you sell. In the event of food safety incident, such as the release of an adulterated product from a production, bottling or manufacturing facility, FDA may require the release be reported. These record will assist brewers and FDA in identifying the sources and recipients of the adulterated products.

Bulk Sales:

Bulk sales of foods and processing byproducts, such as spent grain for animal feed, are subject to FDA regulation. Brewers already implementing human food safety requirements would not need to implement additional preventive controls or GMPs for animal food, except to prevent physical and chemical contamination. This requirement applies even if you’re donating the byproducts for use in animal food.

Food Service and Sales:

In addition to selling beer, do you serve food or sell packaged food products, such as olive oils, cheese, meats or other snacks, in your tasting room or brewpub? Food products served or sold on premise may be subject to federal, as well as state or local, regulations. While exemptions that may apply, you should make sure you stay in compliance with the law.

Inspections:

Under the rules promulgated under FSMA, the FDA is obligated to inspect every brewery in this country over the next several years. This means the FDA can observe your manufacturing processes, inspect your facilities and every aspect of your operation. They also can review your records and take photograph your operations. You should be prepared for any kind of surprise inspection. Also, if the facility fails to meet compliance standards on the first visit to your brewery, FDA will reinspect at a later date and you will be charged at a rate of $221/hour.

As you can see, the FDA has quite a bit of regulatory oversight over your brewery. But it’s not too late to take action to ensure your brewery is compliance, as many of the food safety rules under FSMA have yet to take effect. If your brewery is unsure whether it is in compliance with, or need assistance in adapting your brewery to meet, FDA regulations please contact our attorneys at Morsel Law.

So You Want to Start a Brewery in Michigan?

How many times have you spent sipping on a cold pint of the dark stuff with your friends when one of them, after finishing his third beer, has an epiphany: “Dude, we should totally start our own brewery…I mean how hard can it be?” Although your kind-hearted friend’s idea sounds good at the time, what he doesn’t know is that starting a brewery is no easy task. Navigating the laws and regulations alone would send most people running for the hills. However, there are some of you out there with the drive and passion for good beer and a determination to bring these tasty suds to the masses. So for those who’ve made it this far into my article, below I’ll outline the different types of licenses need to start a brewery in Michigan.

While breweries are regulated under both state and federal laws, for the purposes of this article I’ll just touch in the Michigan specific requirements. Michigan law allows a brewer to operate under either a brewer’s, brewpub or micro-brewery license.

Brewery License

A brewery license permits manufacturing an unlimited quantity of beer. Brewers may sell the beer they produce to licensed wholesalers, but many not sell directly to retailers. A brewer may also sell the beer it produces to consumers for on-premise consumption at only one brewing facility in Michigan, but it may sell beer that it produces at all of its facilities for off-premises consumption. Sampling of beer in a hospitality room located on the brewery premises is also permitted.

Micro-Brewery License

A micro-brewery license permits manufacturing of up to 60,000 barrels of beer annually (which includes any out-of-state production). Micro-brewers may sell beer to licensed wholesalers, but not directly to retailers. Micro-breweries that produce 30,000 barrels or less per year may sell directly to consumers for on and off-premise consumption without an additional license. Sampling of beer on the brewery premises is permitted.

Brewpub License

A brewpub license permits manufacturing up to 18,000 barrels of beer annually. In addition to a brewpub license, a brewpub must also hold an on-premise license (Class C, Tavern, A-Hotel, B-Hotel or Resort). The brewpub must operate a full service restaurant with at least 25% of gross sales coming from non-alcoholic items. Brewpubs may not sell their beer to wholesalers or retailers, but may sell their beer to consumers for on or off-premises consumption.

Key Differences between Licenses

The key differences between a brewer’s, micro-brewery and brewpub license are the amount of beer the establishment can produce, restaurant requirements and restrictions, and limitations on to whom you can sell.

Specifically, whereas a brewer’s license authorizes the production of an infinite amount of beer, a micro-brewery license restricts production to 60,000 barrels per year and a brewpub license restricts production to 18,000 barrels per year. While a brewery or micro-brewery may be allowed to have a restaurant on its premises, a brewpub license requires the brewer to operate a restaurant on its premises. No license permits the sale of beer directly to retailers and only breweries and micro-breweries may sell to wholesalers.

It is important to note that local regulations may further restrict your operations, such as stricter closing hours than state requirements. Thus, it is critical to research and understand the local ordinances prior to choosing a location. If you need assistance in establishing or navigating the laws and regulations that effect your brewery, please contact us at Morsel Law.

Michigan Craft Brewers Beware: FDA Labeling Rule May Impact Your Business

Over the past two years Michigan business owners spent considerable time implementing procedures to comply with the health care requirements under the Affordable Care Act (the Act). Just when business owners thought they could turn their attention back to doing what they do best (i.e., running their business), regulators issue new requirements, this time targeting the food and beverage industry.

The FDA’s final rule on food labeling (the Rule), as required under the Act, provides for nutrition labeling of “standard” menu items for chain restaurants with 20 or more locations and “similar retail food establishments.” Unlike earlier drafts, the final Rule requires chains to also issue caloric information for alcoholic beverages. While the Rule does not specifically apply to breweries, there may be unintended consequences that impact craft brewers, especially those brewers that sell to chain restaurants. Michigan craft breweries should take notice.

Michigan, ranked fifth in the nation, is home to more than 150 craft breweries. Consumer demand for craft brews continues to grow and many national chain restaurants operating in Michigan already carry local craft beers on their menus. Many restaurants rotate their offerings regularly and list the current beer selection on menu boards. While restaurants are ultimately responsible to collect nutritional information on the items they serve, it is unclear whether restaurants would instead place this burden on brewers.

The FDA has noted that restaurants can utilize nutritional databases in order to determine calorie content on the beers they offer, such as the USDA National Nutrient Database for Standard Reference.  According to the database, the calorie count for a “typical beer” is 153 calories per 12 oz. serving. But the problem is craft beers are not “typical”.  They are full-flavored concoctions which ingredients vary greatly from one brewery to another. Thus, labeling all craft beers 153-calories would clearly be inaccurate.

Under the Rule, businesses must provide an inspector with information substantiating nutrient values, including the method and data used to derive these nutrient levels. A “responsible individual” for the business must certify that the information contained in the nutrient analysis is complete and accurate.  So if a restaurant lists a 350 calorie beer as having that 153-calorie count, they run the risk of violating the Rule, especially if they cannot demonstrate they took reasonable steps to ensure the brewery adhered to the 153-calorie count. Failure to comply with the Rule, or if you don’t get it right, the menu item will be deemed “misbranded” which is a misdemeanor under the Food Drug and Cosmetic Act. The FDA retains the discretion to hold those “responsible individuals” who certify the menu labeling, criminally liable for a misbranding violation.

Knowing the risk of a potential misbranding violation could lead to restaurants not accepting the standard reference calorie count, forcing brewers to supply nutritional information. Thus, craft brewers may be faced with a choice: either supply calorie counts or take their products elsewhere. But with rumors circulating that the Alcohol Tax & Trade Bureau (the TTB) — which is responsible for approving alcohol labels — could look at its own labeling policies and enforce stricter regulations in the near future, even possibly requiring nutritional information on beer labels, craft brewers may need to consider analyzing their beers now. So in the event the TTB follows the FDA’s lead and implements new labeling requirements, brewers will be prepared and know the caloric content of their products.

Craft brewers have long stressed a “drink better, not more” philosophy, unlike the mass-produced beers who have offered low-calorie light brews for decades, so hopefully consumers won’t be deterred by the calorie counts. It may slow cross-over growth, but it won’t stop the momentum. My prediction: calories or not, craft beers are here to stay.

When Does the Court of Public Opinion Count More Than A Court of Law?

Recently, Bell’s Brewery of Kalamazoo, Michigan filed a complaint in federal court against tiny upstart brewer Innovation Brewing of Sylva, North Carolina. Innovation Brewing filed a trademark application for their name and Bell’s claims that if such a trademark was granted it would create confusion in the marketplace since they use two phrases in their advertising: “Inspired Brewing” and “Bottling Innovation Since 1985”. Whether Bell’s is successful or not in this dispute it may not matter as much as how their customers perceive their actions.

The complaint has created a negative social media storm where many fans and customers of both breweries view these actions as contradictory to what makes the craft beer industry so special. The craft brewery revolution is about collaboration not competition. The people who truly care about beer and bring passion to the craft band together to share ideas and their love of quality ales and lagers. But when breweries instead choose to duke it out, who are the real winners and losers? Bell’s, which made more than 310,000 barrels last year in contrast to Innovation which makes only about 500 barrels a year and sells exclusively in North Carolina, is being perceived as a “bully”.

Although Bell’s is one of craft beer’s greatest independent success stories, this isn’t the first time they’ve used courts to settle their affairs. In 2011, Bell’s filed a challenge against a California-based brewer for its Copper Bell beer, but the matter was settled and the brand later withdrawn.

But Bell’s isn’t the only one using legal means to protect their brand. Recently, Lagunitas Brewing sued rival Sierra Nevada Brewing over its Hop Hunter IPA label. However, within a few days after filing the complaint, amid the firestorm reaction from angry customers using social media to voice their disappointment, Lagunitas founder Tony Magee quickly dropped the suit. Currently, New Belgium Brewing Co., the third largest craft brewer in the country, and Oasis Texas Brewing Co., a relatively new upstart, are slugging it out in court over the use of the name “Slow Ride” IPA. Just as in the other disputes above, fans are turning to social media to voice their concerns, but time will only tell the effect it will have on the outcome of this dispute.

Regardless of which brewery is right in the eyes of the law in these types of disputes, it only brings temporary relief. What matters most in the long run is how customers view their actions. In the case of Bell’s, several bar owners have pulled Bell’s from their menus until further notice and several brewing associations have signed petitions voicing their support of Innovation. In the spirit of the industry, it would be nice to see them resolve it amicably. Considering the cost of litigation, which in the case of a trademark defense can be between $40,000-50,000, wouldn’t the money be better spent on expanding their businesses? I hope other craft brewers will learn from these lessons and consider collaboration before litigation.