Greetings Dayton, we are Kevin Connell and Adam Armstrong. We are lawyers from the Dayton-based law firm of Freund, Freeze and Arnold. We co-founded a practice group within the firm which we call “Ohio Beer Counsel.” We represent start-up and established breweries and distilleries in all manners of the brewery and distillery business. Dayton Most Metro asked that we help inform the Miami Valley and answer the curious questions orbiting around the burgeoning craft been scene. The first question is obvious: why does the world need beer lawyers? As lawyers, we learned the Socratic Method in law school, so we tend to answer questions with more questions. So, the answer to the obvious question posed above is: why doesn’t the world need beer lawyers?!?
The slightly more serious answer is that brewers and distillers encounter an arcane set of laws which often require our assistance with navigating the regulations and permitting requirements of the Federal Alcohol and Tobacco Tax and Trade Bureau (TTB) and the Ohio Department of Liquor Control. Ohio brewers and distillers are also small businesses and we offer guidance and advice on legal issues which affect any small business or entrepreneur.
Some of the questions we get all the time are: why the craft boom in Ohio and why now? There are several factors which created one of the fastest growing craft beer industries in America. According to recent data from the Brewers Association, the craft beer industry had a $1.3 billion economic impact on Ohio in 2012. With the number of new breweries opening every month in Ohio, that number will continue to grow. Here are some of the reasons:
- Changes in Ohio law – In March 2012, the Ohio General Assembly changed Ohio law permitting the holder of a brewers permit (A-1) to sell their beer in a taproom at the brewery. Less than a year later in July 2013, Ohio law again changed creating a new brewers permit (A-1c) for small brewers (those producing less than 31 million gallons per year) and set the permit fee at $1,000 (as compared to $3,906 for A-1 permit). This finally allowed home brewers and small brewers to showcase their beverages in a more consumer friendly environment. Wineries had enjoyed that privilege in Ohio for years, and took advantage, marketing themselves to tourists.
The new permit also allowed these “smaller” brewers to sell beer to retail and wholesale permit holders directly. Before this, smaller brewers were required to sell their products through distributors. While brewers can still sell through a distributorship, they can now self-distribute. Some brewers have embraced this concept which they believe gives them more control over their product, and gives them the ability to cut costs to the ultimate consumer. The removal of these barriers to market incentivized smaller brewers, especially because distribution or “franchise” agreements are notoriously hard to break. In Ohio, once the brewer signs with a distributor, the agreement can only be terminated with just cause. “Just cause” is hard to prove. Therefore, signing with a distributor is risky in Ohio. By allowing self-distribution, a “small” brewery can now control its own destiny.
- Change in tastes – The statistics don’t lie. The Brewers Association notes in its market research that Millennials spend more than 15 % of their “off-premise” beer spending on craft beer. Generation X and Boomers are also shifting toward craft beer, although the percentage is less. Supermarkets and other retailers have noticed the trend and have given more shelf space to craft beers over more traditional brands. From 2010 to 2014, craft beer and cider market share increased by a total of 6.1%. Premium light, premium, and economy brands’ market share shrank by 7.6%. The proliferation of breweries, styles and brands can at least partially explain the shift.
Breweries are opening nationwide at a rate of 1.5 per day. As of 2014, there were 3,464 breweries nationwide and another 2,000 in planning. (Fun fact, there were 4,131 breweries in 1873). Given the choices, it would seem beer drinkers are opting for variety, different tastes, and bigger, bolder varieties of beer. Ohio beer drinkers are no exception. In 2014, Ohio ranked 4th in craft beer production. With over 120 breweries in operation, Ohio was in the top 10 nationally for the number of breweries overall.
- Love of local – Although there are no statistics to support this, there is anecdotal evidence that Ohioans are driven to craft beer because it is locally made. Just like the local food movement, craft beer consumers seem to be drawn to the idea that they can be connected to the product they drink. The fact that brewers have tasting rooms where consumers can drink the beer, see it being made, and talk to the brewer only enhances the connection. The Ohio Craft Brewers Association has a great slogan, framed by an outline of the State of Ohio: “Drink Beer, Made Here.” The marketing folks get this local connection and market it directly to the consumer.
We view these as some of the biggest reasons behind the craft beer boom in Ohio. As brewery lawyers, we are enthusiasts as well. We love to help brewers fulfill their dreams to open breweries and help them thrive. We’re glad you can join us for the ride.
You can reach us at our Dayton office at (937) 222-2424 or visit our blog at www.OhioBeerCounsel.com
Kevin and Adam