Craft breweries want to increase production cap as demand increases

11/13/2015 01:39 PM

FRANKFORT – Kentucky’s small craft breweries, which have seen a 600 percent growth rate in the number of breweries in the past five years, want state lawmakers to make changes to double the current production cap.

Currently production for craft brewers is capped at 25,000 barrels, and producers would like to see that increased to 50,000 barrels.

In 2004, Kentucky had only five craft breweries which produced 14,849 barrels of beer.
By 2009, the number had risen to 33, with three pending for Alcohol and Beverage Control approval and has produced 71,640 barrels of beer and has generated revenue of approximately $45 million.

Some of the larger craft breweries are projecting solid growth and may soon approach
the 25,000 barrel cap.

The Kentucky Guild of Brewers would like to see the cap raised so that the breweries can concentrate on building their businesses as the market allows, and not worry if they are getting close to the barrel cap.

Adam Watson, co-owner of Against the Grain Brewery in Louisville, and president of the Kentucky Guild of Brewers, told members of the Interim Joint Committee on Licensing and Occupations on Friday that raising the cap would allow Kentucky craft breweries to compete with breweries in surrounding states who have higher caps.

“Several years ago, none of us ever imagined that we would approach the 25,000 barrel mark,” Watson said. “But, there are now several of us looking at that mark in the very near future. As the current law stands, the most successful of us, would be forced with making the choice between abruptly stopping our growth or closing down our tap rooms.”

Sen. Damon Thayer, R-Georgetown, supported the proposal, saying that the cap acts as a barrier to commerce in the Commonwealth of Kentucky.

“It should not be up to government to set these artificial caps on commerce,” Thayer said. “It should be allowed for the free market to dictate to you how much beer you produce.”

In 2014, total Kentucky wholesale tax revenues on malt beverages were $57,108,402.
The total retail sales tax revenues on malt beverages were $6,124,446.

The 33 craft brewers employ a total of 460 people and have spent $23 million in start-up and infrastructure expenditures to date, with an additional $16 million planned in upcoming expansions and upgrades.

Watson’s second request to legislators was to copy verbatim the existing language in the Small Farm Winery statute and add it to KRS 243.157 for microbreweries, to permit craft brewers the opportunity to sell their products at fairs, festivals, and other similar types of events which would provide market access to smaller breweries, and increase tourism efforts and local revenues.

“We regularly turn down requests by a variety of community leaders and organizations because we are simply not allowed to vend at their events,” Watson said. “Procuring a temporary license would force our distributors to route a truck and driver to a new location for what is often an extremely small sales volume.”

Watson went on to say the advantages of adopting the two recommendations range from generating more state tax revenues to enhancing visibility and marketing of Kentucky products.

“They would improve growth, increase employment, generate economic activity and help Kentucky producers meet market demands for their products,” Watson said.

According to Kentucky Guild of Brewers statistics, the total economic impact of Kentucky produced malt beverages moving through the three-tier system is $495 million.


Subscribe to email updates.

Subscribe and get the latest political intelligence delivered to your inbox.