New Jersey Breweries Push Back Against Crushing New Rules

New rules from the state alcohol control board could grind breweries into insolvency.

In a column earlier this month on recent changes to alcohol legislation in several states, I detailed several good (and not-so-good) new laws. One state I didn't highlight was New Jersey, where an outrageous and asinine special ruling last month by the state's Division of Alcohol Beverage Control (ABC)—not a new law passed by the state legislature—is causing chaos for brewers and consumers in the state.

While "outrageous and asinine" might seem a bit much, here's just some of what the special ruling mandates of craft breweries in the state:

• All patrons of a brewery must take a detailed tour of that brewery before purchasing any alcohol for consumption on or off site. The tour may not include sampling beer. ("A licensee must provide such a tour prior to allowing any on-premise consumption, including but not limited to consumer sampling.")
• A brewery may not sell or serve food beyond trivial quantities of "water and single-serve, pre-packaged crackers, chips, nuts and similar snacks." A brewer also may not partner with one or more food trucks to offer food for sale on the premises.
• A brewery may not sell mixed drinks containing beer on the premises.
• A brewery may not offer either free drinks "as a gesture of good will" or discounted drinks.
• A brewery may not brew and sell coffee or may not sell any soda that is not produced at the brewery.
• A brewery may not host "'pop up' shops, bazaars, or craft shows."
• A brewery may not host more than 25 special events per year. Special events include live music, trivia nights, a "live-televised championship sporting event," or the showing of any television program—news, sports, movie, etc.—that the brewery markets via social media.
• A brewery may not hire an outside marketing company to assist with any special event.

At least some of the changes the special ruling mandates may look familiar to longtime readers. Many of these regulations were introduced in an earlier special ruling, I explained in a 2019 column. That controversial ruling was held in limbo after a combination of pushback from brewers and consequences of the Covid pandemic.

But now it's back. As the New Jersey Brewers Association—which represents dozens of craft brewers in the state—explained in a position statement posted at the group's website last week, the recent ruling made the terms of the 2019 special ruling a condition of renewing breweries' licenses in the state. "There are 18 new provisions in the special ruling that will impact New Jersey's 141 breweries," the Hoboken Girl reported this week. "Some had been on the books for a while but loosely enforced, while others are new."

Who in New Jersey could favor such strict regulation of breweries? Start with the state's powerful restaurant lobby. Back in 2019, the ABC claimed the special ruling was intended to "strike a balance between the craft brewing industry and restaurants."

By "strike a balance," New Jersey's ABC really means "use the power of the state to help restaurateurs by harming brewers." Call that what you may—bad policy, protectionism, crony capitalism, or just plain bullshit.

"The special ruling is grounded in an effort—an impermissible one, I'd argue—to protect restaurants, bars, and liquor stores in the state from competition," I explained in 2019. "The state's powerful restaurant lobby, for example, opposes 'any legislation that would relax the state's uniquely restrictive [brewery] rules.'"

The restaurants' argument against breweries has little to do with breweries.

"Detractors in the restaurant and bar industries have argued that breweries are in effect competing against them, but with one major advantage: breweries are not required to buy liquor licenses," NJ.com reported this week. "Liquor licenses currently up for auction in Hudson County range from $100,000 to $400,000 and in other parts of the state can cost more than $1 million."

While that is an absurdly high price to pay for a liquor license, the price is so high only because the state ABC limits the number of new liquor licenses available, creating artificial scarcity and driving up the cost of the mandatory license. Rather than simply issuing more licenses, the state—with the support of restaurateurs—has chosen to target breweries.

As soon as news of the special ruling spread, New Jersey brewers and their supporters expressed a combination of panic and outrage.

The special ruling "will harm us, our staff, and many people in the community like musicians and others who participate in the events we sponsor," brewery owner Brian Kulbacki told Jersey City Times this week.

"They are crippling the breweries by telling us we can't have events, we can't do fun things. Why is anyone going to want to come here? They're trying to make an environment that no one wants to come to," brewery owner Kat Garrity told NBC10 earlier this month.

"Just as they are on the heels of recovering from the pandemic, getting into the swing of things, to promulgate this regulation and create artificial barriers to the success of the economic recovery of these innovators, these small businesses, doesn't make a whole lot of sense to me," Jersey City assemblyman Raj Mukherji told NJ.com. 

Some brewers are even looking for greener pastures. Brewery owner Leo Sawadogo told NJ.com this week that he's "thinking of moving to Pennsylvania. Seriously."

New Jersey state law generally authorizes the issuance of special rulings by the ABC commissioner that are "necessary for the proper regulation and control of the manufacture, sale[,] and distribution of alcoholic beverages." The terms of this special ruling are not necessary. In fact, they are unnecessary. And, as I told CBS News three years ago, they also likely violate the First Amendment—they restrict how breweries may describe their events and products—and may increase alcohol-related injuries and accidents in New Jersey, since eating while drinking helps to slow alcohol's absorption rate (and serving customers coffee and soft drinks instead of alcohol is largely prohibited).

In 2019, I closed my column by noting that New Jersey's regulation of craft brewers should and will evolve—just "like the state ABC's understanding of craft beer." I was right about the "should" but wrong about the "will." The New Jersey ABC's understanding of craft beer, regulation, law, and fairness appears to instead be decaying.