Government shutdown affecting breweries nationwide

Posted at 10:51 PM, Jan 08, 2019
and last updated 2019-01-08 22:51:18-05

GRAND RAPIDS, Mich. — As the government shutdown continues, many industries are starting to deal with the fallout. That includes the brewing industry unable to get federal approval for new labels.

Anytime a brewery wants to come out with a new or seasonal beer, they have to get the label approved by the Alcohol and Tobacco Tax and Trade Bureau, or TTB. With that on hold, many breweries are stuck waiting to distribute those beers, and some businesses getting hit harder than others.

Founders Brewing Co. is a household name in West Michigan, but they’re not immune to the effects of a government shutdown.

"Anytime you have a government shutdown, it’s not great for any industry really, but specifically to the beer industry we live and die by approvals for all of our beers," said Mike Stevens, co-founder and CEO of Founders Brewing.

Stevens says anytime a brewer wants to distribute a new beer, they have to submit the label for approval to the TTB to make sure information on it isn’t misleading, offensive and meets guidelines. It’s a process he says can sometimes take up to 30 days.

Stevens says smaller brewers are feeling the effects much more.

"As you look more at the smaller brewers in the industry, as we all know there’s a lot of variation, a lot of beers come out and they survive by the ability to bring out this new seasonal and this new beer month over month different beers coming out, they have to get label approvals and they have to get what we call TTB approval from the government and without the government open they can’t get this approval and without that approval they’re not allowed to sell that beer," said Stevens.

This doesn’t affect seasonal beers that have already been out, just new beers that would soon be released. Stevens says there’s a strict timeline that brewers follow that starts months in advance.

“We all live by schedules in our world, especially in the craft industry," said Stevens. "It’s very much this revolving door of different beers and when you create schedules and you create launches and you talk to your distributors and you get them on board for selling let’s say a spring launch, you have to get your approvals probably first quarter to hit kind of a spring-summer launch.

"If that doesn’t happen you could miss that spring-summer launch. What that really means is raw materials and all goods that are needed to produce this beer were purchased probably six months ago and as small brewers, you can’t survive carrying that much inventory and when you get backlogged on inventory like that can become pretty dangerous financially. Now you’ve got people carrying all this inventory anticipating sales of beer that they were going to sell in the spring to their distributors and now they can’t sell it because they couldn’t get the approvals in time and produce the beer in time to make that spring set.”

One brewery in Oklahoma called Prairie Artisan Ales releases new beers multiple times a year and has publicly said they’ll lose a ton of profit because of the shutdown.

“There is a brewery west of us called Prairie and they’re very dependent on quick movements and getting some beers out," said Stevens. "I don’t talk to them personally or catch up with them, but I have heard through kind of the beer grape vine that it’s become problematic, the shutdown, for them and that’s the stuff that really that’s unfortunate and people don’t probably put it all together, but these folks are dependent on getting their launches out timely and they’re one of those brands that moves pretty quick and gets different products out there and they’ve got to get this approval and without that approval they can’t meet their schedule and then things all fall apart from there because they have a distributors planning on it, retailers planning on it, and when that doesn’t get hit, sometimes that window of opportunity goes away and you miss it.”

Stevens says there’s a few beers at Founders being held back right now, but says they won’t see any serious hits unless the shutdown drags on for months.

“As we tweak labels, change things,  add new beers, we always have to get the approvals and the difficult part at our level, and I would say we are a larger level in the craft space, is that now we become very dependent on schedules," said Stevens. "When we say we’re going to launch a beer, it’s a national launch and it goes to all of our wholesalers , most importantly we talk to all of the various key national accounts, folks like Target and Meijer and Spartan and all these people and they start to plan in their planograms, their sets to put on the shelf this beer at this date and things really get screwed up when they’re putting together their advertising campaigns and their promotional schedules based on this beer showing up and then when we can’t provide them, that beer at that time, there’s a hole left on the shelf there and grocery stores don’t like holes.”

"When bad situations happen I think people just have to come together and fix things quickly because you’re hurting a lot of people this way," said Stevens. "We’ve got to have things working so we can keep things moving.”

Stevens also said that once the government does eventually reopen, he anticipates there will be a big backlog of people waiting to have labels approved by the TTB since all of the submissions that have been on hold right now will then have to wait to be approved, which will likely take longer than normal.