New Illinois Law Allows Breweries to Sell Guest Beer and Cider in Taprooms

A bill signed into law last weekend by Illinois Gov. Bruce Rauner will allow the state’s breweries to purchase and sell guest beer and cider in their taprooms.

Under House Bill 4897, the state will allow licensed Class 1 breweries (producing up to 30,000 barrels annually) and Class 2 breweries (making up to 120,000 barrels a year) to purchase beer and cider from either a wholesaler or a self-distributing brewery. The state of Illinois does not cap the amount of beer that can be sold via a taproom.

The new law also includes language that eases storage and transfer regulations for beer companies.

In a press release, Gov. Rauner said the new law “removes antiquated regulatory barriers that have stifled the growth of smaller craft brewers and limited beverage choices for consumers who visit their taprooms.”

“Our goal is to become the #1 state for craft brewers,” he tweeted on Saturday. “Today brings us closer to that goal by getting government out of the way. Let’s lift a glass to toast another piece of legislation that helps us grow.”

Illinois Craft Brewers Guild executive director Danielle D’Alessandro told Brewbound that the guild worked with the Illinois Restaurant Association and the Associated Beer Distributors of Illinois to help pass the law. She said allowing brewery taprooms to sell beer and cider from other producers gives small businesses a chance to grow by offering unique offerings from local and national breweries alike. It also gives those companies the opportunity to sell collaboration beers brewed outside of their four walls, as well as gluten-free products for non-beer drinkers.

“We wanted to at least have one gluten-free option for non-beer drinkers,” she said. “That was something that we were definitely hearing from our members.”

Across the country, brewers have taken advantage of selling their offerings across their bar to capture greater margins and build cash flow. Earlier this year, Brewbound published a story that outlined growing concerns from bar and restaurant owners who believe that brewery taprooms and pop-up beer gardens are cutting into their business. One outspoken bar operator who was interviewed, Michael Roper, owner of Chicago’s Hopleaf, said his sales had declined about 10 percent over the last two years as more breweries opened branded retail establishments.

“Unlike a competing beer bar, we were subsidizing the growth of theses competitors because we were buying their beer,” he said at the time. “What it’s taken away is my more profitable customer.”

To assuage concerns about potential abuse, D’Alessandro said the guild didn’t push for the ability to sell wine and spirits.

“We want to be good partners with our retailers,” she said.

D’Alessandro said the new law also benefits wholesalers, who will be filling the majority of orders for guest beer and cider from brewery taprooms.

“So it creates new avenues of business for those distributors as well as it will continue to tighten that relationship,” she said.

In addition to expanding the number of offerings available for sale in Illinois taprooms, the new law creates a “Brewer Warehouse Permit,” which allows Class 1 and Class 2 breweries to store up to 30,000 and 120,000 barrels of beer, respectively, produced at their production facilities, inside of an off-site warehouse that isn’t required to have manufacturing capabilities.

“They can get this permit for $25 a year, and they can store that beer off-site, which clears up more space in the brewery, gives them the ability to potentially invest in more brewing equipment and make more beer,” D’Alessandro said.

Additionally, the new law allows Class 2 breweries to transfer up to 1,000 barrels of beer a year between a production facility and a brewpub. The barrels transferred will count toward a brewpub’s 5,000-barrel production cap.

D’Alessandro said the guild had been working since 2015 to eliminate the so-called “come to rest” provision, which required beer companies to go through a wholesaler — who would physically remove the beer from the brewery, take it to a warehouse and then sell the beer back to the brewery’s brewpub at a marked-up price — in order to sell the beer at a commonly owned facility.

D’Alessandro called the previous system “cumbersome,” and added that brewers shouldn’t have to pay a premium or be delayed in transferring products from one commonly owned facility to another.

A press release with additional details of the new law is included below.

Regulatory burden eased for Illinois brewers; beer offerings at breweries to expand

House Bill 4897 gives brewers more freedom to sell, purchase, store beer and cider

NORMAL, Ill., Aug. 11, 2018 — Gov. Bruce Rauner today signed legislation that makes it possible for Illinois brewers to serve a greater selection of beers at their own taprooms, giving smaller breweries new opportunities to expand their businesses without having to open new locations. The new law will also let brewers buy and sell ciders for the first time.

“This legislation removes antiquated regulatory barriers that have stifled the growth of smaller craft brewers and limited beverage choices for consumers who visit their taprooms,” Rauner said. “Craft beer production is a growth industry in our state and this will help ensure its continued success.”

Included in the legislation is an allowance for Illinois brewers to sell their own beer to other Illinois breweries, which will then be able to sell the purchased beer directly to customers in their taprooms, and to purchase cider for selling in their taprooms.

The Brewer Warehouse Permit created by HB 4897 will allow small and growing breweries to expand their operations by using warehousing and storage facilities instead of opening second locations or moving to larger spaces. The permit will allow for Class 1 and Class 2 Brewers to transfer and store, at an off-site warehouse within 80 miles, as much as 930,000 and 3.72 million gallons, respectively, of beer that the brewery manufactured.

Prior to this bill, brewers were restricted from any of the above by outdated regulations set forth by the Liquor Control Act of 1934. In addition to being unnecessary to ensure safe liquor consumption, the controls also created a barrier to market entry for small businesses and protected established businesses from competition.

“The craft brewing industry is growing every year across Illinois with wonderful, unique beers for consumers to enjoy in all regions of our state,” said Rep. Tim Butler, R-Springfield. “These changes help ensure everyone can continue to explore and learn about our local breweries and support our local small businesses.”

“This law is a step toward a stronger free market economy. It gives greater lift and encouragement to the entrepreneurs in our state,” said Sen. Barickman. “It makes it easier for Illinois’ craft brewers to market their products and do business in Illinois. Smaller and growing breweries will have a better chance at succeeding-knowing they can expand their operations and reach without as many limitations.”

“Today represents an important step toward strengthening and growing the Illinois craft beer industry,” said Danielle D’Alessandro, executive director for the Illinois Craft Brewers Guild. “HB 4897 not only enables our state’s taprooms to offer a more diverse selection of guest beer and cider, but it also eliminates product transfer and storage barriers that were cumbersome for our members. We’re grateful for the support of Governor Rauner and all those who made this legislation a priority.”

“There is a tremendous sense of community among Illinois craft breweries,” said Matt Potts, founder, CEO, and brewmaster at DESTIHL in Normal, Ill. “This law allows our breweries to tap into that community even more, promoting collaboration, selling one another’s craft beer, and giving our patrons more of what they want.”

The new law is effective immediately. Proponents of the legislation include the Illinois Craft Brewers Guild, Illinois Restaurant Association, numerous craft brewers and the Associated Beer Distributors of Illinois.

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