Untapped Potential in New Jersey’s Nascent Craft Beer Industry

Two years ago, New Jersey lawmakers revised an archaic law that had been a major obstacle to anyone who wanted to launch a start-up brewery in the state. New Jersey’s old law severely restricted craft brewers’ ability to actually sell their beer to visitors of the brewery, thus undermining the economics of on-site bars or tap rooms, which most small operations in other states rely on as an important revenue source, especially in the early stages. The old law even limited how many free samples a brewer could hand out, which proved particularly troublesome for entrepreneurs trying to gain brand recognition and market share, and appeal to consumers’ varied tastes. The new law was intended to put brewpubs, microbreweries and so-called “nanobreweries” on an equal footing with competitors in neighboring states. While this legislation was a welcome step for the craft beer industry, more can be done.

Under the new law, craft brewers—anyone brewing not more than 300,000 barrels per year—can now sell full pints at the brewery and customers can buy a keg’s worth of beer (15.5 gallons) for consumption off-premise (the old law restricted sales to two six-pack’s worth). The new law also lets brewpubs (restaurants with a small in-house brewery) produce up to 10,000 barrels of beer—instead of being limited to just 3,000—and raised the cap of how many brewpub licenses a business can hold—from two to ten. Further, brewpubs can now sell their beer to wholesalers for distribution to licensed retail stores and restaurants within the state.

The changes appear to be working, especially for craft brewers: the relaxed law has sparked a renaissance of sorts, with approximately 15 new breweries to open in 2014. Organizations such as the Garden State Craft Brewers Guild and the New Jersey Craft Beer membership club serve brewers and beer aficionados alike, and festivals celebrate the growing industry.

However, there is work left to be done. According to industry insiders, New Jersey’s market remains largely untapped and ripe for additional investment: through 2013, New Jersey ranked only 29th in the country with 26 craft breweries. In terms of craft breweries per capita, however, New Jersey came in 48th (New York was 6th; Pennsylvania 7th). Even though New Jersey craft breweries made an impressive $777 million economic impact in the state, when viewed in per capita terms, New Jersey came in just 37th. Further, a recent Yahoo! News article ranked New Jersey a lowly 42nd out of 50 states based on the quality of its craft beer scene (Pennsylvania and New York ranked 8th and 9th, respectively; Delaware came in 19th).

On the heels of the recent growth spurt and successes in nearby New York, Pennsylvania, and Delaware, New Jersey would be wise to continue to incentivize its budding craft brewery industry. Next up on the legislative agenda? Microbrewers would like the ability to serve food on-site, and to switch distributors without needing to find another buyer. This writer, for one, supports any good faith efforts to pair cold Jersey brews with a Jersey cheeseburger!

Brett S. Theisen is an Associate in the Gibbons Financial Restructuring & Creditors’ Rights Department.
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