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The federal government is open but the pain continues for craft breweries

Frustration with the shutdown and its effects on his business and the brewing industry in general led Atlas Brew Works chief executive Justin Cox to file suit against the federal government.
Frustration with the shutdown and its effects on his business and the brewing industry in general led Atlas Brew Works chief executive Justin Cox to file suit against the federal government. (Paul Handley/AFP/Getty Images)

Chris Burns thought he had escaped the uncertainty of working for the federal government when he left his IT contracting job five years ago to open a craft brewery in the D.C. suburbs.

But even with the government shutdown over for now, he cannot widely distribute two new beers and had to cancel the release of a third. He also could face delays opening a second location.

“It’s been real,” Burns, the owner of Old Ox Brewery in Ashburn, Va., said about the consequences of the 35-day shutdown.

President Trump and congressional lawmakers reached a short-term deal Friday, but the pain isn’t over for the nation’s craft brewers.

They lost revenue they will never recoup and will continue to lose money while they wait for federal agencies that process labels, brewery permits and small-business loans to clear a backlog built up during the shutdown.

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During the closure, the Alcohol and Tobacco Tax and Trade Bureau within the Treasury Department stopped approving new labels, hamstringing businesses that consistently churn out new products.

“Growth in our industry is driven by innovation,” said Bill Butcher, the founder of Port City Brewing Co. in Alexandria. “If we can’t introduce new beers into the market, it stalls our business.”

His company spent the last four months of 2018 planning release and production schedules for six new beers. The shutdown threw those plans “out the window,” he said.

Wineries and small-batch distilleries don’t face the same conundrum because their products take longer to produce and are not released as often as craft beers.

Last year, the federal government received 192,000 applications for new lines of wine, spirits and beer, including more than 34,000 for beer, according to the Brewers Association, the industry trade group based in Boulder, Colo.

Craft brewers say Maryland laws cramp their growth

At that rate, it’s feasible that thousands of beer labels are awaiting review.

That includes the Precious One, an apricot IPA produced by Atlas Brew Works in the District’s Ivy City neighborhood, said founder and chief executive Justin Cox.

There’s a limit on how long the brewery can sell kegs of the seasonal beer and, without federal label approval, he can’t distribute it in Maryland, Virginia or Tennessee.

Frustration with the shutdown led Cox to file suit Jan. 15 against the federal government in U.S. District Court for the District of Columbia. He argued that he could not exercise his right to free speech because labels are how Atlas communicates with its customers.

No label means no speech, he said.

He sought a judge’s approval to distribute beer outside the District without label approval and was still awaiting a decision as of Friday afternoon.

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In the meantime, he said, he was glad his friends and neighbors will be back to work soon, “at least for a short while.”

Colorado brewer Zac Rissmiller recently contracted with a Baltimore brewer to produce beer under the name 1623 Brewing Co., a reference to the distance between him and his Maryland-based business partner and cousin.

They ordered a big batch, planned to sell it in the D.C. area, Northern Virginia, West Virginia and Pennsylvania, and submitted their label application. Three days later, the government shut down. They’re sitting on 1,000 cases worth about $30,000, with a shelf life of 120 days.

“You almost can’t do anything until everything’s set government-wise,” Rissmiller said. “You can’t assume they’re not going to do something dumb.”

Burns was also in limbo and wondered when he would get the go-ahead for wider distribution of Old Ox Brewery’s Goal Crusher IPA and War Wagon Kolsch, named for a local fire engine.

A portion of the proceeds from War Wagon go to the Ashburn volunteer fire department as part of an annual fundraiser that kicked off Saturday with a chili cook-off.

Burns’s family, which owns the brewery, recently purchased a new building in Middleburg, Va., for a tasting room and a second brewery. It needs a permit from the federal government to open. They could lose $40,000 to $75,000 for every month it languishes.

“I hope both political parties have seen how bad this has been for our region and our country,” Burns said, “and will work together to pass legislation that will prevent the threat of government shutdown from being used as a political bargaining chip in the future.”

Port City Brewing made a $2 million investment in a new bottling line financed by a Small Business Administration loan. During the shutdown, the SBA was closed, and Butcher couldn’t lock in an interest rate, potentially costing him thousands of dollars.

Although he didn’t get any answers Friday, Butcher said he hopes to hear more this week about the status of the loan. Just knowing some normalcy will be restored is a relief, he said.

He has been worried about the trickle-down effect of the 35-day shutdown on restaurants, wholesalers and farmers who grow grain and hops for brewers.

“Hopefully we can put this silliness behind us,” he said.