In a world where it seems every other startup wants to be known as the “Uber for _______,” call these companies the “Ubers for booze.” Tap an app on your phone, and have beer, wine or liquor delivered to your door by the likes of Ultra, Klink, and new entrant BrewDrop, which just launched in Austin.
And just as Uber drew government scrutiny as it moved from startup to industry upstart, it should not be surprising that some of these companies now being targeted by alcohol regulators. The first casualty is Ultra, whose operations have been shut down in Washington, DC, by the city’s Alcoholic Beverage Regulation Administration [ABRA].
The crux of the DC regulator’s argument against Ultra is that, while the booze orders are actually fulfilled by Ultra’s partners, which are licensed to sell liquor in DC, Ultra itself is also required to have a license because it is the one that processes and accepts the payments. ABRA set forth this position in an advisory opinion handed down in March in reference to another would-be competitor, BeerRightNow.com. Klink, for its part, notes that it does not actually involve itself in the transaction and remains in operation in Washington, DC.
So, for now, Ultra’s deliveries are grounded in DC, but remain ongoing in the Montgomery County suburb of Silver Spring, as well as several other cities including Chicago and New York. The company’s website indicates it also intends to expand soon to Boston and Los Angeles. Expect regulators to pay attention when they do.
Several new laws were passed in the recent Maryland legislative session that affect how small brewers may sell their products to consumers in the state. Generally speaking, sales of alcoholic beverages in the United States are funneled through a “three tier” system: producers (i.e. brewers, winemakers, and distillers) sell to wholesalers; wholesalers sell to retailers; and retailers sell to consumers. In Montgomery County, where I live and work, there is another tier — the county Department of Liquor Control (DLC) itself, which inserts itself between the wholesaler and the retailer, requiring all purchases by retailers to made directly from the DLC.
With the enactment of the following laws, the Maryland legislature has loosened the requirements of the three tier system when it comes to certain small producers. Unless otherwise indicated, these laws relate to holders of Class 7 micro-brewery licenses, which permit the production of up to 22,500 barrels of beer per year.
- Sale of Prepackaged Beer. Starting July 1, the holder of a Class 7 micro-brewery license may sell its own beer, in prepackaged non-refillable containers (i.e. bottles and cans, but not growlers), at retail for consumption off the premises. Think of this as allowing small producers to sell six-packs of their own beer directly to customers who come to visit their brewery, as wineries commonly do with bottles of their own wine.
- Direct Sales to Retailers in Montgomery County. In 2013, the Maryland legislature passed a law that permitted Class 7 micro-brewery license holders to seek a license to self-distribute (i.e sell directly to retailers, thus skipping the wholesaler tier noted above) up to 3000 barrels of their own beer to retailers in the state. Because of Montgomery County’s “fourth tier” of the DLC, however, this law did not apply to Montgomery County retailers. Effective July 1, however, holders of these special beer wholesaler’s licenses may bypass the DLC completely and sell directly to retailers and restaurants. For an explanation of the significance of this change, and how it will change the landscape for consumers in Montgomery County, read this fantastic piece on DCBeer.com’s Bill DeBaun. Montgomery County’s own Denizens Brewing Company was instrumental in getting this law passed.
- Self-Distribution by Farm Brewers. Maryland is one of handful of states — another is my native New York — that has a special farm brewer’s license, which is intended to promote both small brewers and Maryland farmers by requiring the beer produced to be made with Maryland agricultural products. A new law will allow those holding these Class 8 Farm Brewer’s licenses to obtain a Class 7 limited beer wholesaler’s license to they may self-distribute their beer to retailers as well.
- Craft Beer to Somerset County. Though it does not relate specifically to self-distribution, the legislature also passed a bill which added Somerset County to list of Maryland counties in which a Class 7 micro-brewery license may be issued. This is good news for aspiring brewers on the lower Eastern Shores and leaves, at last check, Caroline, Cecil, Kent, Queen Anne’s, and Saint Mary’s counties as the remaining Maryland jurisdictions thirsting for the possibility of local craft beer.
As craft beer continues to expand throughout the country, we can hope that enactment of these laws brings greater variety of beer to consumers, and promotes the growth of these important small businesses in our state.