Business

Beer battle: Advocates want legal changes to position state for industry growth

Beer laws that have been in place in South Carolina since the end of Prohibition now stand in the way of landing a California craft brewing giant’s $31million eastward expansion.

Yet, if time runs out to attract Stone Brewing Co. — as industry experts in the state say it likely will — the mere idea that the state could be a candidate has prompted calls for change that have found increasing success after decades of inertia.

If successful, the change to provide craft brewers more latitude in how they sell and distribute their products would mark a legislative victory unthinkable less than a year ago, when brewers last won the right to serve pints of their beers onsite.

The effort has brought together a coalition of brewers, lawmakers and economic development organizations who have placed so much importance on landing the company that they’ve named their effort the “Stone Bill.”

The name, however, is but part of a larger vision, they say.

“If we’re not successful in getting Stone, hopefully we get it set up for other folks to give serious consideration to our state,” said John Bauknight, co-owner of RJ Rockers brewery in Spartanburg and legislative delegate for the South Carolina Brewers Association. “There are several others giving great interest to our state, but we’ve got to get these laws changed.”

Stone — which reported $135million in revenue last year and after 17 years in business is the nation’s 10th largest brewer — has laid out its plans in a request for proposals. But the company has remained reserved about how and when it will choose a site for a new brewery.

Several communities in South Carolina responded to the RFP earlier this year — Greenville among them, Bauknight said.

Economic development organizations responsible for making their pitches in the Upstate declined to provide specifics.

Still, advocates say if any change in the law comes, it would do more than attract the larger craft brewers looking to expand eastward with multimillion-dollar investments as Sierra Nevada, New Belgium and Oskar Blues have done in western North Carolina.

The fledgling-but-booming industry in South Carolina, they say, will finally be able to compete.

Stone’s expansion plans

The laws in South Carolina governing how beer can be produced, consumed and sold have been on the books since the end of Prohibition and only in recent years begun to change significantly.

Currently, there are two legal constructs that allow brewers to produce on a large scale.

Under the provision of a brewery, a facility can produce unlimited amounts of beer to sell to distributors but can only offer limited quantities of beer for sale and consumption onsite and is barred from serving food.

The other legal provision, a brewpub, allows a brewer to operate a food establishment in conjunction with brewing up to a limit of 2,000 barrels of beer, which can only be consumed in the restaurant and can’t be distributed.

In Stone’s 36-page RFP, the company expresses its plans to open a sprawling brewery and restaurant similar to its Stone Brewing World Bistro & Gardens in Escondido, Calif., just outside San Diego.

The company lays out expectations to expand east of the Mississippi with an initial $20million capital investment and an initial production of 120,000 barrels a year with plans to grow to 500,000 barrels per year.

Total revenues would exceed $100million by the end of year four.

The company said in the RFP that it would select a site by the end of this year.

How and when, though, isn’t being released publicly.

“We have not made a decision,” Stone spokeswoman Sabrina LoPiccolo told The Greenville News. “We are still reviewing proposals.”

The proposed change in South Carolina law focuses on the brewpub aspect of the state’s regulations.

Under the change, brewpubs would be allowed to produce up to 500,000 barrels per year instead of 2,000, said Brook Bristow, a Greenville lawyer who helped draft the bill, which was introduced by state Sen. Sean Bennett of Summerville.

State Rep. Derham Cole of Spartanburg told The News that he will introduce a companion bill next week when the House is back in session.

The bill would also allow brewpub beers to be sold to distributors along with being served in conjunction with a restaurant run by the brewer, Bristow said.

While the bill caters to Stone’s requests, Bristow said, the legislation has been drafted to benefit the breweries and brewpubs already operating within the state.

“If they decide not to come, we’re trying to plan for the future, as well,” he said. “It’s a really good deal for our brewers, and that would happen even if Stone decided they didn’t want to come here.”

The legislation likely won’t be completed in time for Stone to commit its capital, he said. At worst, Bristow said, the hope is to start a dialogue and have something ready before the end of next spring.

At issue: consumption onsite

Tom Davis was a pioneer in Greenville when he and his father founded Thomas Creek Brewing Co. in 1998.

Thomas Creek has operated as a brewery ever since — but if the change to the brewpub law occurs, Davis said he would move quickly to change his license.

The issue comes down almost solely to the ability to serve beer for consumption onsite, he said.

It was just last summer that brewers successfully lobbied the Legislature to allow breweries in South Carolina to serve full pints of beer onsite. The law previously allowed them to offer limited samples.

South Carolina breweries found themselves at a disadvantage, watching as establishments in North Carolina flourished with tasting events and tours at their breweries.

However, since passage of the so-called “Pint Law,” which now ups the restriction to consumption of the equivalent of three pints per person, the business involved in tours and tastings has skyrocketed, brewers said.

At RJ Rockers, which opened in downtown Spartanburg a year before Thomas Creek, revenues related to tours and tastings has doubled and led the company to hire a new, full-time employee to coordinate the activity, Bauknight said.

At Thomas Creek, like newly opened breweries Quest and Brewery 85, the ability to serve pints resulted in direct investment into the creation of “tasting rooms.”

Now, on Saturdays, Thomas Creek’s tours are booked and business related to the activity has “doubled if not tripled,” Davis said.

The catch will be whether a new brewpub law would require a brewer to serve food in conjunction with production, said Davis, who worked in the restaurant industry before founding Thomas Creek.

Thomas Creek is expanding, with a new, 8,000-square-foot production facility that will add to the brewery’s 15,000 square feet. The brewery began with a 5,000-square-foot building. Today, it produces 13,000 barrels per year, and Davis said he hopes to increase to 70,000 barrels in five years.

“Do I want to be a restaurant? I’m not going to sit here and tell you that I do,” Davis said. “There were reasons I left the restaurant business — but if that’s what it would take to enable us to bring our business to another level, that’s what I will do.”

The experiment has already been put to work at the Swamp Rabbit Brewery & Taproom in downtown Travelers Rest, though without any provisions for distribution.

Swamp Rabbit, which only serves on site but doesn’t offer food, technically operates as a brewpub, owner Ben Pierson said.

“We broke ground for all the brewpubs,” Pierson said. “Now all the brewpubs that are going to start appearing on the horizon are going to benefit from not being forced to do food.”

However, Pierson said that while he has no ambition now to distribute his product, having the option to might lead him to try his beers in a few locations in town.

Industry transformation

The craft brew industry in South Carolina has transformed in the past few years into a legitimate economic contributor.

In 2012, statistics compiled by the national Brewers Association found that craft breweries contributed $254million to the economy.

The latest figures aren’t out, Bristow said, but the growth since then will show to be exponential, mirroring nationwide trends that show craft beer exceeding 10 percent of beer consumption.

There are currently 18 breweries in South Carolina and 11 brewpubs, Bristow said, accounting for at least double the amount from the previous study.

This time around, brewers have behind them the weight of the Department of Commerce, which has been involved in the effort to lure Stone, Bristow said.

The department’s coordinator for the effort, Ted Campbell, declined to comment on specifics, such as how many communities in South Carolina responded to Stone’s RFP.

Stone spokeswoman LoPiccolo said “we are not disclosing what cities submitted proposals.”

Myrtle Beach has been vocal in its effort to attract Stone, Bauknight said, putting up billboards promoting the effort. Likewise, Lexington has been open about its desire to attract Stone.

Rock Hill and Charleston have shown interest, along with Greenville, Bauknight said. Spartanburg indicated interest at first but backed out, he said.

Clay Andrews, a spokesman for the Upstate SC Alliance economic development organization, said that he couldn’t share specifics of the effort to attract Stone but that the industry in South Carolina has evolved into being an economic player statewide.

“All of a sudden the field’s gotten hot,” Andrews said. “We would have never focused on this, but now we’re finding that there’s a lot of opportunity here, but we’re not as competitive as we could be.”

Legislative support is a logical extension for lawmakers focused on attracting industry and creating jobs, said Cole, the Spartanburg state representative.

“They’re creating jobs and economic growth in communities throughout the state,” Cole said. “These projects can be really big projects. We’ve seen it in other states.”

New Belgium Brewing of Colorado recently announced that it would break ground on a $175million, 133,000-square-foot brewery in Asheville on May 1.

California’s Sierra Nevada company has committed $107 million to a brewery south of Asheville. Colorado-based Oskar Blues expanded to Brevard in 2012.

The prospect of a large-scale brewery locating to South Carolina has raised some concerns among brewers already here, but the benefits of exposure outweigh concerns, Bauknight said.

“I’m a firm believer in this business that the rising tide raises all boats,” he said.

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