The potential positive fallout from the New Mexico State Legislature passing multiple bills to help the craft brewing industry continues to be anticipated across Albuquerque. I was recently able to talk to some of the brewery owners to get their take on what those bills, once they are (hopefully) signed by Governor Susanna Martinez, will mean for their respective establishments.
“I think the story that the Brewers Guild has to tell is a compelling one,” La Cumbre’s Jeff Erway said. “One of job growth and economic growth in a state that has not seen much of either recently. I think that we represent a portion of the alcohol industry, that as much as any other is going out of their way to promote responsible drinking both in our establishments and at events. I think that we promote the state’s most thriving industry and that’s tourism. So when you add all that up it’s hard for even would-be opposers of our legislation to make much of a case.”
Senate Bill 238 will enable brewery-restaurants to begin distributing, something that will not affect La Cumbre (at least not at present) but will affect places like Nexus.
“On a distribution side it gives us the option if we choose to go that route,” Nexus’ Ken Carson said. “(But) as of today I’m choosing not to distribute. I might distribute to some friends. Like for instance we have a couple of beers over in the Blue Grasshopper. At one point, probably more under Addison (Poth), we had beer down at Back Alley. If other breweries are interested in carrying our beer we might consider that on a low-volume basis.”
Nexus has recently increased their capacity, but that was aimed more at a second location than any plan for distribution to other establishments.
“We’re going to save our capacity for additional taprooms,” Ken said. “I think that’s the route I want to go. I haven’t jumped out there too fast, primarily because I wanted to make sure our systems are in place. That’s one thing I’ve looked at. And also I don’t want to be bogged down with high costs on rent and lease costs. I’ve been playing it close to the vest and if I see a location that I really like, work on it, and see if I can bring a win-win situation for me and the landlord. If I can’t, then I don’t get into the deal, I just leave it alone.”
Senate Bill 440 will allow breweries to open a third off-site taproom, should they choose. Tractor already has one in Nob Hill and could consider more, co-owner Skye Devore said.
“Certainly like the third taproom could be awesome,” Skye said. “We have a wine license, (so) we can now have six taprooms that serve beer and wine which is pretty amazing if we wanted to become Dion’s. There’s that, which is really cool.”
La Cumbre could also look to open future taprooms, but right now the bill would probably benefit another of the Albuquerque heavyweights, Jeff said.
“SB440, primarily it’s going to positively affect quite possibly Marble Brewery,” he said. “I wouldn’t be shocked to see them open up another taproom here soon. It opens me up to expand as I see fit. Obviously Gabe Jensen over at Bosque had a real interest in seeing SB440 move forward. It just made sense since the wine growers were already allowed to do it.”
Another bill will enable breweries to start selling wine and cider even if they do not have a wine growers license. This should help out the many customers who are seeking gluten-free alternatives.
“I don’t know that I would necessarily sell wine in my taproom or taprooms,” Jeff said. “I’m not 100 percent opposed to it, I just haven’t given it much thought. But cider, if consistent draft cider becomes available, why wouldn’t I carry it?”
That should be good news for Tractor, which already produces their own cider with plans to put it in cans in the near future.
“We make a cider, so I don’t know who will want to carry it,” Skye said. “But there are limited options out there in terms of ciders especially in terms of players that are big enough locally to make enough to distribute to local breweries. It was already in our game plan to put cider in a can. So perhaps there’s room there for other breweries to carry our cider, if we can keep up (with demand).”
This could also impact another future plan at Tractor.
“For us, also, something that David (Hargis) and I planned once we got cider was to make our own wine,” Skye said. “That opens a door there that other breweries could not only buy cider from us but wine, once we’re at that level.”
Nexus had already acquired a wine license to sell cider and wine in bottles. Ken noted that many of his customers were coming for the food first and the beer second, so it already made sense to keep them all happy.
“We had both Santa Fe ciders in here,” Ken said, referring to Santa Sidra and Santa Fe Cider Works. “We did go out there and get our beer and wine license. We only have Black Mesa wines right now, which are from Espanola. It’s worked out really well. It’s a good relationship between two New Mexico businesses. Jerry, who owns the business, is as down to earth as any of our brewers. They bring their wine down periodically, instead of going through the distributor, so it’s a direct relationship there that’s positive. I think that’s a good thing. I think it’s good for the industry as a whole.”
Senate Bill 471 will allow alternating proprietorship, which gives smaller breweries the chance to lease space from larger breweries for a batch or two.
“SB471 really just kind of put in place what is already a federal law allowing for breweries to operate on an alternating proprietorship basis,” Jeff said. “It’s kind of what Abbey Beverage was already doing at the Rio Grande/Sierra Blanca facility. And to me, again, it just makes sense. Why would you not want them to do that and use the capacity they already have? I’m not saying I would ever consider producing other people’s beers, but we’re about to put 240 barrels of fermentation capacity into our facility and I’m hoping I can find something to put in there. That’s a lot of capacity all at once.”
The deadline for most of the bills to be signed is around April 10, so fingers are being crossed across the state.
“At the end of the day, these bills, while they have made it to the governor’s desk, the governor could simply veto them, she could simply not sign them just leave them on her desk,” Jeff said. “What we’re hoping is that she does sign them. We’ve continued to lobby the governor’s office. I’ve personally asked members down at city hall that are close to the mayor and close to the governor to approve them. One thing I don’t think anyone can really argue about this governor is that she’s anti-small business or anti-job growth. She’s very much supportive of small businesses and job growth and so is our mayor, Mayor (Richard) Berry. I suspect most or all will be signed by the governor. I’ll keep my fingers crossed.”
Jeff went on to say that the members of the NM Brewers Guild will have a small docket for 2016, with the real aim being to make some major moves the following year.
“We’ve met as a group and 2017 we will be using some of this political capital that we’ve gained in the last few years to do our best to get some real changes for the craft brewing industry as a whole,” Jeff said. “It’s such a different landscape now that it was even five years ago. It’s a completely different landscape. We’re producing three times the amount of beer that we were five years ago. Not my brewery, the breweries as a whole are producing three times the amount of beer.”
La Cumbre has grown at a rate of 65 percent a year, something Jeff said they will match again in 2015. Many other breweries are experiencing similar positive growth. All of that, however, could be undone as increased production slams into the hefty New Mexico excise tax.
The state excise tax in New Mexico is 41 cents per gallon, as opposed to just eight cents per gallon in neighboring Colorado. Jeff pointed out that is why Colorado is the second-biggest producer of craft beer in the country. The high tax rate in New Mexico could hinder the future growth of the biggest breweries here like La Cumbre, Marble, and Santa Fe.
“I think excise tax is going to have to be addressed,” Jeff said. “(Santa Fe’s) Brian Lock, (Marble’s) Ted Rice, and myself, I think it’s going to be pretty hard to expect us to build a 50,000- or 100,000-barrel-a-year brewery by taxing us at 41 cents a gallon. If you want to produce 50,000 barrels a year … 635,000 dollars is going to be going to the state in excise taxes. Even at 50,000 barrels a year, I’m not making 600 grand a year. I’m not making what we pay in excise taxes right now. That’s just going to the state. The TTB would take another 350,000 dollars. We’d be paying over one million dollars in excise taxes. That would be any brewery in the state would be paying over one million dollars in excise taxes once they would get to 50,000 barrels. I think that’s just not tenable, not going to work.”
None of the breweries are closing in on 50,000 barrels of yearly production yet, so patience is the order of the day while the Guild starts to work on changing the minds of the politicians to lower the tax.
“It’s funny, when I’m in board of directors meetings with the Guild I’m always the one saying we should do this and we should do that, and hey, we should just not have excise taxes or anything,” Jeff said. “And Berkeley (Merchant) and Chris (Goblet) are just slow down, slow down. This is not a Ferrari Testarossa that you’re trying to turn here. This is a cargo ship. Baby steps, nice and slow and steady. They’re right, you can’t try to move mountains all at once. You just have to slowly but surely chip away at everything you need to grow your business.
“I try not to get too involved in politics outside of my industry. I know the legislature has gotten a bit of a black eye this past year, not much got done. We’ve got no complaints. The legislature, both sides of the aisle, have been good to us. When we have little roadblocks or hiccups, the powers that be have stood right back up and stood up for another day. I’m pretty ecstatic at what’s been accomplished here recently.”
Skye agreed and said the Guild needs support more than ever.
“So something we’re really advocating for this next year is for people to support the Guild,” she said. “The Guild’s festivals and events are ways that you can go and support the existence and well-being of beer in New Mexico and to keep that in mind. We’re requesting that a lot of the festivals we attend that are put on by for-profit entities give a portion of their profits back to the Guild.”
All of the developments in Santa Fe have the brewery owners feeling upbeat about the future.
“Really, I think the state, liquor is going to be here as long as it’s legal and as long as people drink it,” Ken said. “The bottom line is all we’re doing is bringing jobs back to New Mexico and pulling away from the large corporations that have dominated this industry. And creating something that’s unique. Everything that we do, there’s a difference between every brewery. It’s just diverse as to how we do things and adding to our culture.”
If/when the Governor signs the bills this week, we will have further updates. Until then, just keep those positive thoughts aimed at Santa Fe.