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Brewers Face Tough Choices as the Government Shutdown Continues

January 17, 2019

By Diana Hubbell, January 17, 2019

Last year, Michael Roosevelt and Blake Crawford, who co-own Alementary Brewing Company in Hackensack, New Jersey, took out a loan in order to invest $1 million in steel fermenters and other brewing equipment. Business at their small brewery had been going well since they first opened in 2016 and they expected to be able to quadruple their beer production. The couple filed the necessary paperwork in August. Right around the time when they should have received approval to operate, the federal government came to a grinding halt. Now, in the midst of the longest shutdown in U.S. history, Roosevelt and Crawford find themselves in an increasingly precarious financial situation with a roster of equipment they cannot legally use.

“When you open a brewery, you spend the first year and a half writing checks. We weren’t sitting on a million dollars in cash to buy all this extra equipment,” Michael Roosevelt says. “You make a risk matrix when you build a business, but you never think that you have to factor in a completely dysfunctional government.”

Roosevelt estimates that between the loans on his equipment and the lease and utilities on his new building, he’s losing $1,000 a day. Although he and Spalding budgeted a little extra in case the license took longer than the projected 121 days to arrive, their buffer is quickly running out. On day 27 of the federal government shutdown with no end in sight, the pair are being forced to consider the worst.

Indeed Brewing Company

“I have 10 employees whose livelihood depends on me and I am not going to let a government shutdown stop me from paying their salaries,” Roosevelt says. “My next options include taking out another mortgage on my house or, God forbid, having to sell my house and move somewhere cheaper. I have retirement savings I can tap into, but no American wants to liquidate their savings because a government can’t do its job.”

With the employees at the Alcohol and Tobacco Tax and Trade Bureau (TTB) on furlough, breweries around the country cannot obtain federal permits for new facilities or labels for interstate or international distribution. While those federal employees will eventually receive their back pay, breweries will simply have to swallow the loss. It’s not the first time the industry has suffered under this administration; last year, the Brewers Association condemned President Trump’s tariffs on steel and aluminum, stating that they placed an “unnecessary burden on small, Main Street business owners who are creating thousands of jobs and pouring money back into their local economies.”

No American wants to liquidate their savings because a government can’t do its job.”

“It’s been tough and that didn’t just start with the shutdown,” says Michael Mallozzi, co-owner of Borderlands Brewing Company in Tucson, Arizona. He and his business partner Myles Stone recently expanded their production capacity in order to begin exporting to Mexico. As with most brewing ventures, all of their plans are currently on pause. “This is an administration of crumbling roads and bridges that wants to build a $5.7 billion wall. It’s frustrating to try and understand why my business is facing with these challenges.”

Mallozzi worries about his brother-in-law, who is on the cusp of signing a lease for a brewery in Texas. Even after the federal government reopens, the increased risk may scare away potential investors from new brewing startups. On top of that, no one knows how long the backlog will last once the TTB resumes operations.  

“With all of this uncertainty, we weren’t in a position to give raises this year,” says Laura Dierks, founder and CEO of Interboro Spirits & Ales in Brooklyn, New York. “It directly impacts my employees. I can’t risk anything at this point.”

Dierks recently invested in a new canning line and a series of 200-barrel tanks. She had hoped to hire new staff, but without the ability to release new beers for interstate distribution, she now has to concentrate on keeping the 30 employees she has. Like a number of breweries, she is offering free pints to federal employees in order to try and keep spirits up.

“We can drink together and commiserate about the shutdown,” she says. “We’re all about community and bringing people together and this is killing us. Even when the government opens again, it doesn’t end then. How long will this keep impacting us and causing residual delays?”

Es TeranA mural by Tuscan-based artist Joe Pagac for Borderlands Brewing Company.

Earlier today, Senator Tammy Baldwin of Wisconsin tweeted, “President Trump needs to agree to sign bipartisan legislation to end his shutdown and reopen the government. Our #MadeinWI craft brewers shouldn’t pay the price for the #TrumpShutdown.”

One of the breweries that were slated to open in Wisconsin is currently off-track to its projected opening date. Indeed Brewing Company, which is based in Minneapolis, had been planning to open a multimillion-dollar brewery in Milwaukee in 2019. At the moment, progress is stalled and a number of new beers or beer label designs are awaiting approval. Tempting as it may be to try and push the new can designs forward and seek approval after, owner Thomas Whisenand says to do so would be a serious gamble.

“A truckload of cans costs about $15,000. If we order them and that label later isn’t approved, we have to throw them all out. Do you take that risk?” Whisenand says. “If this lasts two more months or they open up and everything’s a mess, we’re looking at possibly delaying the opening of our brewery.”

If the government shutdown lingers on, matters could get rapidly worse for other breweries that are on the cusp of opening. For David Rowland, who co-owns SoMe Brewing Company in the small beachtown of York, Maine with his father Dave, the prospect is a difficult, yet familiar, one to face. The 2013 shutdown hamstrung the opening of their first brewery. Shortly after their five-anniversary, the father-son duo had planned to open a new brewery near the seashore. Without the necessary permit approval from the TTB, the new facility is still burning money and unable to legally produce beer. Business is slow in the dead of winter in Maine, and the lack of ability to sell new beers across state lines and to use the new brewery is slowly crippling it.

“I have a very expensive, beautiful brewery that I can’t do anything but look at. I’m legally not allowed to do anything,” David Rowland says. “We’re basically twiddling our thumbs waiting for the government to stop being children.”

Although Rowland is grateful for the outpouring of support from his local community, he knows that isn’t enough to keep his troubles at bay for long. His wife and mother also help out with the business and the stress is taking a toll on all of them.

“My father and I have to talk about the worst-case scenario and it’s depressing. We don’t want to take on more debt. We don’t want to lay people off,” David Rowland says. “I feel like I’m being held hostage and there’s nothing I can do about it.”

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