April 3, 2020
By Jennifer Tiedemann

The economic conditions created by the coronavirus outbreak are bad enough for small businesses—government shouldn’t be in the business of making it worse. In New Jersey, recent back-and-forth about the rules governing the state’s craft beverage industry has shone a big spotlight on the difference government can make in a small business’s success—and maybe even its survival.

The coronavirus epidemic has hit New Jersey especially hard; the Garden State currently ranks among the top states when it comes to diagnosed COVID-19 cases. As a result, the state has been under a stay-at-home order since mid-March, resulting in the closure of all non-essential businesses. Many businesses have been able to take advantage of workarounds—restaurants offering takeout and delivery, for example—but things are more complicated for the state’s craft breweries and distilleries, because of the strict regulations governing them. Taprooms and tasting rooms were forced to close for the time being, vastly scaling back these small businesses’ ability to reach their customers.

Last week, craft beverage producers in New Jersey rejoiced when Governor Phil Murphy issued an executive order rolling back a rule preventing the businesses from delivering directly to customers. But this win for small producers and consumers was short-lived: Less than a week later, the state clarified that the executive order applied just to bars, restaurants, and liquor stores, but not to craft beverage producers (other than wineries), since their existing licenses did not cover home delivery in the first place.

Confused yet? But the story wasn’t over: On Monday, the state’s Division of Alcoholic Beverage Control issued an advisory notice to clarify the executive order yet again. Here’s the update, direct from the ABC:

Direct shipping; craft distilleries and limited breweries. N.J.S.A. 33:l-10(3)d does not permit the holders of craft distillery licenses to direct ship distilled spirits to customers’ homes. Direct shipping of alcoholic beverages to customers’ homes by the holders of limited brewery licenses is not prohibited by N.J.S.A. 33:1-10(1)b, but was restricted by the Director’s Special Ruling Authorizing Certain Activities by Limited Brewery Licenses, dated May 28, 2019 (“May 2019 Special Ruling”). see Schedule A, paragraph 2(j). Concurrent with this Advisory Notice, the Division has issued a Special Ruling Granting Relaxation of Schedule A, Paragraph 2(j) of the May 2019 Special Ruling, which authorizes Limited Breweries to make home deliveries of their products as provided therein.

The non-legalese version: Under state law, breweries now have the ability to deliver to homes again, as a result of a “relaxation” of a May 2019 special ruling that had taken that right away.

To its credit, the state of New Jersey worked quickly to work out a compromise to bring home delivery back to breweries. But let’s go back to that new ABC advisory notice. While breweries’ ability to deliver was restored, the state’s craft distillers were left high and dry. New Jersey state law, says the advisory, “does not permit the holders of craft distillery licenses to direct ship distilled spirits to customers’ homes.” And since nothing in the advisory relaxes or changes that, the state’s craft distillers—some 25 small businesses—are left with few options in the midst of this crisis.

Fairfield’s Jersey Spirits Distilling is one of those small businesses. With the distillery’s small storefront location shuttered to the public and its sales to liquor stores dipping, owner John Granata told NJBIZ last week that right now, about 75 to 80 percent of his business’s ability to sell product is restricted. He’s had to lay off several employees to try to stay afloat. Meanwhile, as the crisis goes on, Jersey Spirits has gone from producing vodka, gin, and bourbon to producing hand sanitizer for first responders.

New Jersey’s approach to liquor laws has been notoriously difficult for small producers. In September 2018, for example, the ABC announced it would limit the state’s microbreweries to holding 25 “special events” on premises every year—events like trivia nights, concerts, and yoga sessions—and all of these events had to be reported to the state ABC at least 10 days in advance of the event. Fortunately, the ABC came to its senses and reversed its ruling just a few weeks later. But the story is indicative of the miles of red tape holding back the craft beverage industry in New Jersey. And with no clear end to the coronavirus crisis in sight, this red tape may end up being the death knell for some of the state’s distilleries.

Overregulation is bad enough for small business in good times, but in a time of crisis, it can be a small business killer. New Jersey made the right move this week in relaxing home delivery regulations for its craft breweries, but it should reflect on the damage its actions are inflicting on its other small businesses.

Jennifer Tiedemann is the Deputy Director of Communications at the Goldwater Institute.

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