Maryland’s craft beer legislation is finally changing.

On March 16, House Bill 1080, sponsored by Delegate Carol Krimm, along with Senate Bill 704, sponsored by Senator Brian Feldman, were voted in unanimously by the House Economic Matters Committee.

Senate Bill 801, the Brewery Modernization Act of 2019, sponsored by Senator Antonio Hayes, was voted in on April 6.

Bills 1080 and 704 go by the title “Alcoholic Beverages – Beer Franchise Agreements – Notice of Nonrenewal or Termination,” and update Maryland franchise law for the first time since 1974, when the law first took effect. Meanwhile, the Brewery Modernization Act updates laws by increasing taproom sales, production capabilities, self-distribution limits and hours of operation for Maryland breweries.

Across the board, this new legislation eliminates legal hurdles that, according to many small breweries, impeded self-distribution and growth. And for many small breweries, this new legislation signifies a new era of craft brewing in Maryland.

BAM Announces Passage of the Brewery Modernization Act of 2019 and Beer Franchise Law Reform – Brewers Association of Maryland

The Brewers Association of Maryland (BAM) and its over 100 members are proud to announce the passage of Brewery Modernization Act of 2019 (HB1010/SB801) Saturday, April 6. Coupled with the successful passage of Beer Franchise Law Reform (HB1080/S704), the 2019 Legislative Session signifies a major leap forward for our industry.

The road to craft beer reform has been long and winding

Much of the struggle ultimately came down to outdated franchise laws, which many brewers considered to be hurting their bottom line.

Franchise law governs the relationship between brewers and their wholesalers; it’s all part of the three-tier system which basically goes brewer –> wholesaler –> retailer, and which does a good job describing the advantages and disadvantages of.

Separations between the producer and distributor tiers developed later and, even today, are far from universal. In many states, including big markets like California and New York, a brewer can become a distributor and vice versa. But in other states, the decline of local brewers in the post-World War II era and the rise of national beer brands led to laws – cousins of the original tied-house laws – mandating separation between producers and distributors. This development solidified, in many states at least, a legally-mandated three-tier system of separate and independent producers, distributors and retailers.

Until this update, small and independent Maryland breweries could not cut ties with their wholesalers without giving 180-day notice and showing “good cause” to terminate the relationship. If a wholesaler moved to rectify the issue with the brewery, the 180 days reset.

“The wholesalers are the much larger of the two in the relationship,” said Kevin Atticks, Executive Director of the Brewers Association of Maryland (BAM). “It got to the point where so many of our new breweries are reluctant to sign with wholesalers because they don’t know what the future will bring them or what’s going to happen to their brand.”

Essentially, breweries could be locked into a relationship that was not fruitful, or that was even harming their business, and there wasn’t much they could do about it.

The issues that these new bills rectify mimic Comptroller Peter Franchot’s platform in his proposed “Reform on Tap” legislation. However, Reform on Tap failed to gain traction with lawmakers, many who hoped to strip Franchot of his powers to regulate Maryland’s alcohol industry altogether.

House Bill 1052, which ultimately passed in the House but was vetoed by Governor Hogan, would have created a new Alcohol and Tobacco Commission. Hogan said the Bill was a solution to a problem that doesn’t exist. It was, he said, “not necessary, serves no purpose, will waste taxpayers’ money and disrupts a well-ordered and completely functional regulatory system.

Franchot considered HB1052 a politically-motivated act of retribution against his efforts to reform the industry.

Delegate Wayne Hartman, who represents Wicomico County and Worcester County, voted to sustain Hogan’s veto, citing the importance of local craft breweries to the tourism industry on Maryland’s Eastern Shore.

“Anything we can do to help the craft brewers, I support,” Hartman said. “I think if Maryland doesn’t move forward with helping the craft brewers, then our states around us will pass us by.”

Looking ahead

Once the new laws take effect on Jan. 1, 2020, breweries producing under 20,000 barrels annually will have a notice period of 45 days to end the relationship with their wholesaler, and will no longer be required to show “good cause” to end the relationship.

Brad Rifkin, a lobbyist for BAM, classified the legislation as a compromise between the breweries and the wholesalers.

“We have reached an agreement that we believe generates transformative and generational change for Maryland’s craft beer industry,” Rifkin said in a news release.

Like many brewers, Jason Hearn, owner of Tall Tales Brewing Co. in Parsonsburg, Md., is optimistic about the new legislation.

“It is a massive help to most of the breweries because with the way the legislation had been written before it could be devastating to the brewery,” Hearn told WMDT.

On the end of craft beer wholesalers and retailers in Maryland, the general consensus has been that what benefits breweries will ultimately benefit them, too.

“Brewers, distributors and retailers have hammered out a solid compromise that lays the groundwork for years of growth in the beer industry in Maryland,” Nick Manis, a lobbyist for the Maryland Beer Wholesalers Association, told the Frederick News-Post. “We are pleased to have worked together to pave the way for years of future success for the industry.”

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