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The Government Shutdown Will Hurt Craft Brewers Long After It's Over

January 08, 2019

By Diana Hubbell, January 08, 2019

For Prairie Artisan Ales, a brewery based in Tulsa, Oklahoma, January usually brings a welcome boost in business. This year, however, is a different story.

“We now have 500 barrels of beer just sitting in tanks,” says Zach Prichard, president and the fourth-generation owner of parent company Krebs Brewing Company. Oh Fudge, an imperial stout that was slated for approval right around the start of the federal government shutdown, is currently languishing in storage and all other beers in the pipeline remain stalled. “It’s frustrating. The shutdown has been a big problem for us and other brewers.”

As the shutdown drags into its third week, the extent of the damage continues to grow. From the garbage and bodies accumulating in our National Parks to the Native American reservations burning through their limited resources in order to maintain basic health services, the problems being created are unlikely to vanish even after operations resume.

A less expected consequence is the financial blow to craft breweries. As a result of the shutdown, the Alcohol and Tobacco Tax and Trade Bureau (TTB) is currently closed and unable to provide the all-important Certificate of Label Approval (COLA) that brewers need in order to sell their product across state lines. In other words, there’s no way to get the majority of new beer releases to the market. While big corporate breweries such Anheuser-Busch or MillerCoors, which tend to rely on well-established flagship beers, are unlikely to feel as much of a sting, it spells disaster for smaller operations that depend on buzz from smaller-batch new releases.

“Any brewery that relies on new, innovative beers as a greater percentage of their portfolio is going to be feeling this,” says Bart Watson, chief economist of the Brewers Association. “Certainly if this drags on for a couple months, it’s going to be hard to get new beers into the marketplace.”

Breweries have the ability to reinvigorate parts of town. This is one industry that’s both growing and adding a lot of jobs in the United States.”

While a little beer may not seem like such a big deal in comparison to more immediate looming crises, it has the potential to hurt small businesses in the parts of the country that need them the most. Small and independent breweries contributed $76.2 billion to the economy in 2017, directly employed around 135,000 people, and have jobs that impact roughly half a million. For the past several years, the number of breweries in the United States has risen by approximately 1,000 annually. Many of these have been a boon to the local economies of former manufacturing hubs like Detroit and Pittsburgh. With planned breweries currently unable to obtain essential permits, that number may well fall this year.

“It’s a lot of small businesses that add up to a lot of impact,” Watson says. “Breweries have the ability to go into those formerly industrial spaces and reinvigorate parts of town. This is one industry that’s both growing and adding a lot of jobs in the United States.”

To make matters worse, the shutdown comes at a crucial part of the fiscal calendar. Like most breweries, Prairie Artisan Ales relies on robust sales in January and February to compensate for the slump during the holidays. During this first quarter, Prichard estimates that new releases make up at least 60 percent of revenue.  

“One of the reasons that we've been successful is that we release a ton of different specialty beers. It keeps beer drinkers excited. It’s what drives our business,” Prichard says. Since smaller breweries lack the financial cushion of their mass-market counterparts, that loss in sales hurts even more. “We’re a small brewery and a growing brewery, so we invest a lot of our earnings back into the company.”

Most people’s jobs are safe for the time being, but the longer the stalemate in Washington wears on, the grimmer the prognosis gets. At present, Prairie Artisan Ales employs around 75 people, all of whom are wondering what an uncertain future will bring.

“If the shutdown lingers on, we may have to reduce hours or eventually even lay people off," Prichard says. "I really don’t want to think about that.”

ZX Ventures, a division within AB InBev, is an investor in October
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