Small companies' spirited efforts to get fair regulations

Fairfield distillery typifies struggle of a nascent industry to be fairly regulated in crowded market

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    When Krista Haley, left, and Brant Braue asked regulators how to get a license for their Fairfield distillery, 'they didn't have an answer,' Braue says. That was just the first hurdle they faced from Trenton.
    When Krista Haley, left, and Brant Braue asked regulators how to get a license for their Fairfield distillery, 'they didn't have an answer,' Braue says. That was just the first hurdle they faced from Trenton. - (AARON HOUSTON)

    When Brant Braue and Krista Haley decided to open a craft distillery, they asked the Division of Alcoholic Beverage Control how they should go about getting a license.

    "That was probably the scariest part — because they didn't have an answer," Braue said.

    It turns out New Jersey's distilling industry never quite recovered from Prohibition. Thus, when Braue and Haley applied for a plenary license to open Jersey Artisan Distilling, in Fairfield, they unwittingly became regulatory trailblazers.

    "It was actually probably a much more interactive process than most people go through in terms of licensing," said Haley, a lawyer by trade. "We were all kind of learning it as we went along together."

    With the rise of small wineries, craft breweries and now artisan distilleries, entrepreneurs and regulators alike have had to play catch up to create controls that protect the public without burying boutique businesses in red tape.

    Jersey Artisan Distilling was granted its license earlier this year, the first since Prohibition, but it came with drawbacks. For instance, the license won't allow Jersey Artisan to hold on-site tastings, even though Haley said the typical craft distillery makes 59 percent of its sales off such tastings and tours.

    Braue and Haley are now pushing for legislation to create a special license for smaller distilleries, one that would allow tastings and sales of spirits for off-site consumption.

    Eric Orlando, a lobbyist at the Kaufman Zita Group who helped the craft brewery industry win similar regulatory changes, said it can be hard for nascent industries to get lawmakers' attention. He said the brewers succeeded in large part because they formed a guild and coordinated outreach to their local lawmakers.

    Jersey Artisan Distilling wants to loosen the regulations it faces, much as the wine and beer industries have done here.

    "When it comes down to it, there are certain things that the state of New Jersey is looking for," he said, like create jobs and raise tax revenue.

    Still, Orlando said small, artisan shops will always face a challenge when going up against bureaucracy and much-larger competitors with an interest in keeping the status quo.

    "We're the Davids still, honestly," Orlando said. "The industry is expanding, but we're still small."

    Alcohol producers aren't the only ones fighting a regulatory mismatch. With the growth of community-supported farms and locally grown food movements, some farmers have run up against regulations that, for instance, ban them from selling baked goods on their farms.

    Camille Miller, executive director of the Northeast Organic Farming Association of New Jersey, said operators of farmers markets have to meet the same health standards as other food sellers. Regulations limit the ability of farmers or artisan food makers to offer samples at markets.

    Miller said other states have very different laws, though she said the industry isn't up in arms about the limitations.

    "People just fall within whatever the guidelines are," she said.

    At Jersey Artisan Distilling, Braue and Haley said they can succeed within the current regulatory framework, but could grow even more with right-sized regulations. And while bills addressing those concerns have been introduced in the Legislature in the past few years, none have passed.

    The latest, an Assembly bill sponsored by Reed Gusciora (D-Princeton) and Connie Wagner (D-Paramus), would allow on-site tastings and sales for off-site consumption. It also would lower the annual license fee from $12,500 to $938.

    "Handcrafting and small-batch production has helped New Jersey make a name for itself in the beer and wine markets," Gusciora said in a prepared statement. "It's high time we did the same for distillers."

    However, Haley and Braue have qualms with some parts of the bill — in particular, how it defines a craft distillery. The bill limits the "craft" designation to distilleries producing up to 20,000 gallons of spirits a year. Haley said the industry average is more like 50,000 to 100,000 gallons, while large industrial distilleries can produce 100,000 gallons each day.

    "I don't know why they would want to restrict so severely our ability to produce," she said.

    While they are hoping for regulatory changes, Haley and Braue are feeling optimistic either way. There are now almost 400 distilleries in the United States, Haley said, and only a handful have closed due to lack of sales.

    "Those are odds I'm willing to play," Haley said.

    E-mail to: jaredk@njbiz.com
    On Twitter: @jaredkaltwasser

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