Michigan Takes the Lead (Again) with Package of New, Beer-Friendly Laws

Michigan’s governor just signed a package of groundbreaking laws that could jump-start his state’s already booming craft beer industry. Minnesota, are you listening?

By Brian Martucci

Minnesota has plenty to boast about, but the state’s beer lovers have been looking east—beyond the Badger State (sorry, Wisconsin)—with a tinge of envy. On just about every conceivable metric, from sheer brewery numbers to actual brewing capacity to distribution range, Michigan is several years ahead of Minnesota.

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Michigan owes some of its success to sheer numbers: the state has about twice as many inhabitants as Minnesota. It also has plenty of disused industrial facilities that beg to be converted into craft breweries.

But Michigan is also on the cutting edge of beer-friendly legislation. Michigan’s Republican-controlled legislature just passed a major package of laws that could bolster its craft beer industry even further.

A Handful of Game-Changing Laws

Michigan’s nine new laws address a variety of needs for the state’s craft brewers. They include:

  • HB 4709/PA 42-2014: State Rep. Kevin Cotter’s bill redefines “microbrewery” to include any brewery that brews 60,000 or fewer barrels per year. This doubles the previous limit of 30,000 barrels per year. Microbreweries in Michigan are allowed to operate and sell their beer at multiple locations, whereas breweries producing over the new 60,000 barrel cap are designated as “breweries” and can only operate and sell their beer at one facility.
  • HB 4710/PA 43-2014: Allows brewpub owners to hold six individual facilities with a total production capacity of 18,000 barrels per year. The previous limit was three at 9,000 barrels total per year.
  • HB 4711/PA 44-2014: This law makes several stipulations. First, it allows brewery owners to sell their beer at two discrete taprooms at their licensed brewing facilities. Meanwhile, sub-30,000 barrel brewers—as measured by total system capacity—can sell their beer at any licensed brewery location that they own. Brewers with annual capacities of 30,000 to 60,000 barrels can sell at three licensed locations.
  • SB 329/PA 45-2014: This confusingly-worded act lowers barriers to investment that were originally designed to protect independent vintners and distillers, but the general consensus is that it will make it easier for small- to medium-sized businesses to expand quickly. It allows wine makers, including brandy manufacturers and distillers, to buy, develop, and market property with the intent of leasing or providing it to another vendor in the wine/spirits industry. (Thanks to a mild microclimate in the Traverse City area, Michigan has a robust and growing wine industry.)
  • SB 504/PA 46-2014: This law tightens restrictions on the actions of the state’s Liquor Control Board, creating a more favorable regulatory environment for local producers.
  • SB 505/PA 47-2014: SB 505 reduces restrictions on advertising and promoting beer, wine, and spirits, allowing retailers to purchase items for giveaways and other gimmicks (and permitting wholesalers to sell or provide such items).
  • SB 506 and 507/PA 48-2014 and 49-2014: This “coupled” law simplifies and reduces the tax burden on small beer, wine, and spirits producers as well as industry wholesalers and distributors.
  • SB 650/PA 50-2014: This is a big one. It allows very small breweries, as defined by annual capacities of 1,000 barrels or less, to bypass Michigan’s strict alcohol-distribution network and sell directly to retailers.

Who Benefits?

The new 60,000 barrels per year cap for microbreweries clears the way for future expansion projects, but many of Michigan’s well-known smaller breweries, from the Upper Peninsula’s Blackrocks Brewery to Detroit’s Atwater Brewery, have yet to break that 30,000 threshold. Some, like Atwater and Arcadia Ales, recently completed expansion projects that put them at or below the former 30,000 barrel per year mark, perhaps because exceeding the cap limited their option to open a second facility.

To be sure, the state’s heavy hitters have long since blown past the mark. Founder’s, of Grand Rapids, has a “theoretical” capacity of 200,000 barrels per year (it churned out just over 100,000 last year). And Bell’s, the state’s reigning champ – and one of the country’s largest craft brewers – has an annual capacity of around 500,000.

Realistically though, these law changes will allow larger Michigan microbreweries to draw up expansion plans that could put them close to the 60,000-barrel mark. In addition to Arcadia and Atwater, expansion candidates include Mount Pleasant Brewing Company, Dark Horse Brewing Company, the Detroit Beer Company, and Short’s Brewing Company are all candidates for 30,000-plus expansion.

In fact, Short’s Brewing Company was ready to pull the trigger on expansion projects at their Bellaire brewpub, as well as at their Elk Rapids production facility that would increase their annual production capacity to 35,000–40,000 barrels annually. With the new law Short’s will begin development on the land they purchased in Elk Rapids and move forward with the Bellaire brewpub expansion.

Michigan’s vacation destinations may also benefit. Like Minnesota’s northern half, the northern part of the Lower Peninsula and the entire Upper Peninsula is littered with lakes and forests, and dotted with summer havens, from Petoskey and Charlevoix, in the north, to Saugatuck and Benton Harbor, in the south. Many of these towns have local breweries and brewpubs—Traverse City, the state’s largest tourist town, has nearly a dozen—but they’re also popular expansion locations for Detroit- and Grand Rapids-area breweries that want to follow their regulars on vacation. For instance, North Peak Brewing Company, of Dexter (a city in Metro Detroit), has two locations in the Traverse City area. The new law will allow it to open more, perhaps in other summer towns, should it choose to do so.

Building a More Level Playing Field

As the definition of “craft brewing” expands—and individual craft brewers continue to grow, mature, and seek new markets—laws like Michigan’s will help sustain the industry’s momentum and create new opportunities for development and investment. The nation’s macrobreweries have continued to add more craft beers to their portfolios in recent years, signaling the economic significance of the craft beer industry. Michigan’s legislature has taken a stance to protect the businesses that have made craft beer what it is today and open the door for growth in the future. Their legislative counterparts in Minnesota could learn a thing or two.

 

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