The Government Shutdown Is Putting the Craft Booze Industry in a Pickle

beer sampler
A new brewery that's ready to sell its beers but doesn't have its permit to open because of the government shutdown will still have to make its finance payments - with no income coming in. (Photo: Kristen Prahl/Shutterstock)

I've been seeing a lot of headlines and Facebook posts about how the government shutdown is delaying the release of craft beers.

"Big deal," you may say. "So someone has to drink last month's release instead of a new release. It's nothing to whine about."

But they're missing the point.

If the only thing the alcoholic beverage industry had to worry about was a loss of social media selfies with the hottest new craft beer, natural wine, or small batch whiskey, the who-cares crowd would be right. It wouldn't be such a big deal. But the shutdown, which began on Dec. 22, has closed the Alcohol and Tobacco Tax and Trade Bureau, or TTB, and with that closure comes many delays for the beverage industry because TTB's employees have been furloughed.

One of the TTB's responsibilities is to approve various applications for permits, formulas and certificates of label approval that wine, beer and spirits businesses must legally have to run their operations. During the shutdown, business can fill out the application forms, but those forms aren't being processed. The TTB has suspended "all non-excepted TTB operations, and no personnel will be available to respond to any inquiries including emails, telephone calls, facsimiles, or other communications."

Electronic payments and returns for federal excise taxes and operational reports from businesses are still being processed during the shutdown. The government is taking money from the alcoholic beverage industry but not providing the industry with essential services.

No new labels or formulas

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Every aspect of a new beer label must be approved by the TTB, and if a new beer doesn't have an approved label, it can't be sold. (Photo: Micra/Shutterstock)

One of the TTB's jobs is to approve new labels (called COLAs, which stands for certificate of label approval) for bottles and cans. The laws are strict regarding what can and can't be written on the label of an alcoholic beverage. Every label, as well as many changes to existing labels, require TTB approval.

For mainstream, established beverages like Budweiser, Kendal Jackson Chardonnay or Jack Daniels Whiskey, the lack of new labels isn't a problem because those labels rarely change. If their producers want to make a slight change to a label, they can use the old labels until TTB gets through the backlog of applications. But for any new beverage that doesn't already have an approved label, it's a big problem.

VinePair reports that in 2018, TTB approved 192,000 labels for alcoholic beverages. Many of those beverages aren't mainstream. They're craft beverages that are small batch or seasonal, but if they're going to cross state lines, they need an approved label.

Another responsibility of TTB is to approve new formulas. The agency's website says that a company's "wine, distilled spirit, or beer/malt beverage may require formula approval or laboratory sample analysis" before a COLA can be applied for. This most often happens when a product has added flavoring or coloring.

If a company has created a new beverage that needs formula approval, it won't get that approval until TTB is operational again. For some craft beverage companies, this could mean entire small batches are waiting for formula or label approval — and these small batches may not have a long shelf life or are aimed at specific season of the year.

What about new businesses?

drinking beer, selfie
The government shutdown means a lot fewer new-beer selfies — but that's not where the real problem lies. (Photo: Ilhor Bulyhin/Shutterstock)

Minnesota's Superior Telegram reports that it's the small and independent craft producers that are "disproportionately affected because they often introduce new products on a regular basis."

Similarly, producers that aren't yet open are in the same boat. Startups that have applied for now-delayed permits have already incurred significant costs.

"You have to have a location before you can even apply for a permit. So you're going to have to sign a lease, which means you need to have financing, which means you have finance payments," Brian Sammons, president of the Wisconsin Distillers Guild, told the paper.

Some startups, such as not-yet-open Agonic Brewing Company in Rice Lake, Wisconsin, are in that exact position. The owners have signed a lease and taken on financing. They are continuing with construction. But the permit they filed at the beginning of December is now in limbo. If construction is done before the permit is approved, the new microbrewery will still have to make finance payments without being able to earn income.

If the government doesn't reopen soon, this could be damaging to alcoholic beverage industry. Some startups could close before they ever open their doors. That's jobs lost and money not being infused back into the local economy. Batches of craft beverages may never get sold, which means money and environmental resources down the drain.

There's a lot at stake here — much more than just the next craft beer to be discovered and Instagrammed.