Brewery Boom

Too much, too soon.

That’s what the state’s Alcoholic Beverage Control Division is saying about the explosion of craft breweries in Little Rock and Northwest Arkansas. Amid fears that current laws might not be adequate to handle an industry that has grown by more than 215 percent in the last three years, the agency’s director, Michael Langley, is calling all brewers to a summit sometime in July to hash out issues with microbrewery regulations and the landmark Arkansas Native Brewery Act of 2003.

Langley said proposed changes and improvements will be put into draft legislation and taken to the regular session of the 90th Arkansas General Assembly in 2015 for consideration. Langley said updates are necessary for a code that has been poked and prodded by brewers looking to furnish product to as many people as possible and in the shortest amount of time.

Prior to 2011, Arkansas had only six active brewer permits. But in the last three years, 13 such permits have been issued, bringing the state total to 19, with nine being in this region.

And also in the past, brewers, with the exception of Diamond Bear Brewing Co. of Little Rock, were producing for a hyper-local market, the pub. Now, at least in some cases, brewers are aggressive in their efforts to bring their product to the masses through accounts with bars, restaurants, convenience stores and supermarkets, and in the process are testing the law’s regulations on, among other things, wholesale, retail, shipping and distribution.

Langley said that one brewer in particular, Steve Rehbock of Saddlebock Brewing LLC of Springdale, aggravated the ABC with an assortment of do-now-ask-later actions that included an attempt at online sales, which is not authorized, and sales of high-alcohol beers to retail outlets that did not have the native beer permit.

While Rehbock was never penalized, Langley said the brewer could have had his license revoked and that he pushed enough buttons to raise the hackles of the ABC, which, according to Langley, had to “straighten up” Rehbock and “get him on the right path.”

Rehbock, meanwhile, says the Native Brewery Act is deficient in a few key places and that he will ask a member of the Arkansas Legislature to seek an attorney general’s opinion on an important licensing issue enshrined in the law.

Outside of Rehbock, the loose consensus among brewers is that the law is good. But, for Langley, the numbers don’t lie: What was once a small, quaint community of beer enthusiasts is now an industry populated by ambitious brewmasters, and with that being the case, it’s time to take another look at beer laws.

“I’m not sure our rules and regulations were ready for the growth,” Langley said.

 

Native Beer Permit

Ben Mills, owner of Fossil Cove Brewing Co. of Fayetteville, said he’s not so sure any of the beer laws need to be changed. Having swum in the craft brewery headwaters of California and Colorado, Mills says he has plenty of perspective on what’s going on in Arkansas.

“The brewery law is a good law,” he said of the Arkansas Native Brewery Act. “It has given us the freedom to create what we’ve created.”

A permit holder since April 2012, Fossil Cove is nestled in the warehouse district just north of the University of Arkansas campus. The Fossil Cove clientele is largely composed of graduate students, but any and all are welcome. While he doesn’t see any need for major changes in the beer law, Mills said if he could bring up one issue, it would be on the alcohol limit — above or below 5 percent by weight — that separates “beer” from “malt beverage.”

In a craft brewing world that treasures style and flavor, many beers have a higher alcohol content than 5 percent by weight, and thus qualify as “malt beverage,” which in Arkansas requires retailers to obtain an extra permit, the native beer permit. If the alcohol limit is raised, fewer beers will qualify as “malt beverage” and fewer outlets will have to obtain the extra permit to sell them, thus making it easier to put high-octane concoctions like an imperial IPA up on shelves. Mills, however, does not see this as a major problem. He tells retailers to get the extra permit.

“It’s not hindering me from selling my beer,” he said of the alcohol limit. “But I would bring it up.”

Russ Melton, owner of Diamond Bear, helped craft the Arkansas Native Brewery Act, and like Mills he doesn’t see a need for alterations.

“We probably have some of the best laws in the United States,” he said.

While he sees no reason to change the laws, he does realize that the time has come to expand the industry’s advocacy group, the Arkansas Brewers Guild. The guild’s board is about to expand from three seats to five, and it’s expected that brewers from Northwest Arkansas, where seven brewing operations have opened since 2011, will claim at least one, and perhaps even both, of the new seats.

Melton, looking back over the last decade, said the industry is in good shape due to cooperation, not conflict, within the beer community. He said he hopes the spirit of camaraderie continues.

“The reason why the laws are good is because, in the past, the brewers worked for the common good,” he said.

 

Shipping and Distribution

While Rehbock and his brewery appear to be flourishing under the current laws — Saddlebock is now being stocked at Harps Food Stores and Rehbock has been nominated to the guild’s board of directors — he said a few things have to change if the Arkansas Native Brewery Act is to reflect a modern marketplace.

For starters, Rehbock wants clarification regarding online sales, which are not addressed in the beer act.

“We need to straighten that out,” he said. He had planned to execute online sales from his website, but Langley and the ABC shut that down.

Rehbock also wants to ship his beer to in-state consumers, even if those consumers don’t have permits. As it stands, a brewer cannot ship to a person unless that person has a wholesale beer permit, according to Arkansas Code 3-5-1407(c).

“Our laws are outdated and we can’t ship [to in-state, unpermitted consumers],” Rehbock said. “We want to ship.”

He also said he will seek an attorney general’s opinion on Arkansas Code 3-5-1406 regarding the sale of native beer and malt beverages to retailers and wholesalers, an issue over which Rehbock and the ABC butted heads.

Rehbock is considering an expansion into a 10,000-SF building across the street from his brewery on Habberton Road, according to the Washington County Planning Department. When and if he does, he’ll likely face heavy scrutiny from the state. According to the Arkansas Department of Environmental Quality, his current facility was up and running before he obtained final approval of his process waste disposal system.

And according to Langley, Rehbock rubbed a lot of people the wrong way when he first started doing business and, as a result, now has little margin for error.

“If we have any more dust-ups, we’ll start an official investigation,” Langley said of Rehbock and his brewery.

When asked if Rehbock was the only brewer who had to be straightened out and put on the right path by the ABC, Langley said: “Yes. He is unique.”

 

Hog Pen

Competing keg-for-keg with Saddlebock is the other big brewery in Springdale — Core Brewing and Distilling Co. Its owner, Jesse Core, like Mills and Melton, said the beer laws are good.

But if the code is going to be amended, let it be for the better, not for the worse, he said.

“I hope the changes help us grow and create jobs,” Core said. “The last thing we want to do is put a chokehold on economic growth.”

The holder of a native brewer’s permit since April 2011, Core is now the bearded veteran of the Northwest Arkansas beer wars.

And last year he went to battle and won.

In July, Hog Haus Brewing Co. of Fayetteville sued Core, claiming Core did not honor its obligations while serving as the contract brewer for Hog Haus. Core, however, countersued in December, claiming that Hog Haus failed to pay for the beer Core had brewed. Core also claimed that while under contract to brew for Hog Haus, the restaurant “attempted to negotiate a new contract with a third-party brewer, and thereby conspired to breach the contract.” Just a few weeks after Core’s counterclaim was filed, the Hog Haus suit was tossed out, with prejudice, by Circuit Judge Doug Martin.

Once Core was out of the picture, Saddlebock came on as the Hog Haus contract brewer.

“They’re one of our biggest clients,” Rehbock said. “The relationship is going well.”