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What was the former legal/regulatory environment in MoCo? Alcohol in the USA vs. Maryland

Maryland has no state regulations, all alcohol laws are governed locally.  This is the only state in the entire country that functions this way regarding alcohol laws. The *only* state!

(courtesy of click nathan via wandrlymagazine.com)

Full Control Jurisdiction vs. Control Jurisdiction

Please see this link, and read with a heavy helping of salt"¦ Control Jurisdiction Explained.

Montgomery County is the only standing full control jurisdiction in the US.  Control jurisdictions control one facet of the alcohol industry either by serving as the distributor or retailer, often times in one or many of the three alcohol industries: beer, wine and liquor.  MoCo is the last place in the US where you have to buy beer through the county run distributor.

How did that affect the sale, production, and consumption of beer? Three-tier System Review The Standard US System for Beer (Alcohol)

Straight-forward explanation of how beer is bought and sold in most states around the US.  This ignores several unique situations by state, but provides a basic overview.

Montgomery County Basic Setup

Montgomery County is a full control jurisdiction.  The government acts a secondary distributor within the county.  This adds both tax and overall cost to alcohol in all forms, including beer.

Montgomery County Workaround before July 1, 2014 law change

Prior to July 1, 2014 breweries had an additional option to work around the four tier system.  They could do this by establishing a shell corporation and becoming an NRD, or Non-Resident Dealer.  In real terms, this allowed them to drive beer to county warehouses and use DLC as their primary distributor for Montgomery County.  NRD breweries enjoyed a mild strategic pricing advantage over those that continued using the four tier system.  That being said, most craft beers coming out of non-regional breweries were being sold at the "˜Special Order' markup, which is still a non-competitive unfair tax to consumers.

Workaround Still a Four-tier System for Tax Purposes

The primary purpose for this brewery as an NRD work around was logistical.  Because the government didn't have a "˜true economic interest', many breweries became NRD's to gain a logistical advantage in shipping.  As a retailer I've struggled continuously to receive shipments on time, correct orders and the like.  Brewers were able to get one step closer to their end consumers by becoming NRDs.  This did however cost them financially because NRDs are taxed at a higher rate than NRBs.

Ordering "˜Stock Item' Beer

Either the DLC keeps a continuous stock of any given beer or they choose to make it a special order item.  This is the ordering/distribution cycle for stock items.

Ordering "˜Special Order' Beer

Ordering NRD Beer in a variety of scenarios

Depending on which beers a Montgomery County retailer decides to purchase and what means they go about that could set off a large number of scenarios regarding how that beer gets to them.  The major takeaway from the graphic below is that the government's involvement in beer distribution obfuscates the entire process.

One Final Note Regarding the Sale, Production and Consumption of Beer

All of these intricate and complicated ordering/sales cycles all lead to one road: consumers pay more for their beer at a significantly higher tax rate.  This also creates undeniably large advantages and disadvantages in what should be a fair market system.

What about the law has changed? Self-distribution below 22,500 Bbl/year

As of July 1, 2014 Maryland class 7 microbreweries and Non-resident brewers will be able to self-distribute in Montgomery County.  The below graphic accurately depicts the change in purchasing power/brewer distribution/retailer environment.

Less Tax / Cost for the Consumer

What does the change mean? For (small) Brewers; the big winners

Montgomery County is now a more favorable place to own and operate a brewery than the District of Colombia.  You are allowed to self-distribute, pour pints in a manufacturing only facility (no food required) and there are no zoning restriction on "˜commercial or manufacturing' districts that DC breweries put up with.  Seemingly overnight, what was the worst place in the entire country for small craft brewers to operate will become one of the most favorable business climates to operate in.

For Retailers; a significant victory for the prudent

Purchasing power has weight and consequences.  Variety of beers available will quadruple (from local breweries).  Kegs will be cheaper and ordering will be significantly easier (assuming many breweries adopt self-distribution).

For Consumers; a mild victory with some unintended consequences

More options at a lower price and fresher beer.  An inevitable surge in the local craft beer scene and a progressive disengagement in regional craft + big beer.  Overall likely a progressive and positive movement, just a shift in purchasing decisions that have little to do with individual purchasing power.

Who was involved? What formerly prohibited activities are now allowed?

Emily Bruno and Jeffrey Ramirez did a bunch of research and case compiling which Julie Verratti then presented to MD ABC / Montgomery County DLC.  To be clear, Emily and Julie are married and Julie is loosely related to Jeff.  Emily, Julie and Jeff all have varying degrees of ownership in the business.  They decided to open a brewery and a confluence of events led them to seek business in Silver Spring.  Discontent with the state of affairs, Emily and Julie began researching ways to create legislative change.  Jeff weighed in with professional brewing experience and then the collective that is Denizen's formed a pitch.  Being the extroverted personality of the group, Julie went before several different rounds of politicos and put the state of affairs into a frightening matter of fact sense for legislators (sheep).  They recognized that the current legislative structure was unfavorable to the only industry showing significant growth in the last 5+ years so the state of Maryland and Montgomery County came to an agreement.  They decided to allow small breweries the ability to self-distribute.  What I gather they didn't anticipate was me.  Being the eccentric, crazy person that I am, I researched the hell out of this and figured that the legal structure presented loopholes for nearby DC breweries as well, otherwise known as NRB (Non-resident breweries).  At the time of writing this, over 3 different well-known local breweries have filed applications with MD ABC to change their status from NRD to NRB.

What are Republic's plans under the new legal framework?

Over the phone / in person only

Who are you working with and to what end?

Over the phone / in person only

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I would like *everyone* to read through that last post. It's extremely important. Wait until you have a good 20 minutes of free time, and then really concentrate on it - ask Brett anything you don't understand - he gets it better than I do.

It seemed very odd to me that Passion Food Hospitality would have gone into Montgomery County blind, without a game plan to tackle their archaic liquor laws, or beer and wine laws - finally, this might shed some light on the subject.

Brett, THANK YOU for having taken the time to write this. You seem willing to explain things - folks, I hope you feel free to flow up on anything you don't understand - it's *very*, very confusing to the average consumer, and even to the educated consumer. I can say that *I* certainly don't understand it, so you shouldn't feel bad if you don't either. There is no such thing as a dumb question; ASK!

We're lucky to have Brett as an active member of this website, and we owe him a genuine debt of gratitude for doing this research.

I wonder if Montgomery County has any idea of how many thousands (yes, thousands) of restaurant tax dollars they've lost from *me alone* in the past ten years.

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Changes in Maryland law affecting craft beer. The tap room limit went up July first and the wholesaler agreement changes go into effect New Year's Day 2020.

Here's a 4-minute radio report from Esther Ciammachilli of WAMU on "two new laws — the Brewery Modernization Act and the Beer Franchise Law — will dramatically alter the craft beer industry. One law increases the amount of beer craft brewers can produce and sell. The other loosens provisions on contracts between brewers and wholesalers. The changes mean craft beer enthusiasts will see more of their favorite drinks in stores around the Washington region."


Here's the Brewers Association of Maryland's press release. Their website has more technical information:



BAM Announces Passage of the Brewery Modernization Act of 2019 and Beer Franchise Law Reform

April 7, 2019 by mdbeer

The Brewers Association of Maryland (BAM) and its over 100 members are proud to announce the passage of Brewery Modernization Act of 2019 (HB1010/SB801) Saturday, April 6. Coupled with the successful passage of Beer Franchise Law Reform (HB1080/S704), the 2019 Legislative Session signifies a major leap forward for our industry.

“These bills represent transformational change for the craft beer industry in Maryland and serve as a reminder that organized, persistent and thoughtful advocacy matters,” said Brad Rifkin, lobbyist for the Brewers Association of Maryland.  We are grateful for the support of the General Assembly and our industry partners for the passage of this legislation as well as their efforts earlier in Session to reform Maryland’s beer franchise laws for the first time since 1974,” said Rifkin. The Brewery Modernization Act of 2019, among other things, updates Maryland’s beer laws by increasing taproom sales, production capabilities, self-distribution limits and hours of operation while also eliminating outdated legal hurdles and streamlining the laws for day-to-day business operations.  “The Brewery Modernization Act of 2019 provides long-term flexibility for Maryland brewery owners, incentivizing the investment and reinvestment in both infrastructure and employees,” noted Rifkin.

The Beer Franchise Law Reform legislation represents the first time since the laws were passed in 1974 that small brewers are able to take full advantage of the free enterprise system. Under current law, small breweries that enter into distribution agreements with a wholesalers are unable to leave those relationships without giving 180 days notice and showing there was “good cause” to terminate the wholesaler – effectively mandating a perpetual business relationship. Beer Franchise Law Reform achieved this year changes that dynamic. Most importantly, upon this legislation taking effect January 1, 2020, breweries that produce less than 20,000 barrels annually may, without showing cause, leave a wholesaler after providing 45 days notice and upon payment to the wholesaler for its fair market value and the repurchase of the inventory in the possession of the wholesaler at the laid in cost.

“BAM wants to extend its sincere thank you to House Economic Matters Committee Chairman Dereck Davis, and Senate Education Health and Environmental Affairs Committee Chairman Paul Pinsky for their dedicated leadership in driving a compromise between all industry stakeholders on such important issues,” said Kevin Atticks, executive director of the Brewers Association of Maryland.

BAM also thanks our lead bill sponsors for the Brewery Modernization Act of 2019, Delegate Vanessa Atterbeary and Senator Antonio Hayes (and the 63 co-sponsors) as well as our lead bill sponsors on Franchise Law Reform, Delegate Carol Krimm and Senator Brian Feldman (and the 26 co-sponsors).

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Is there a Montgomery County law that affects these? Is the tap room limit going to be smaller than the rest of the state?
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