HB 136, if signed into law, would end caps for on-site sales at breweries. | Photo by Rick Evans

Kentucky brewers once again are pushing legislation to loosen the grip state laws have on how they sell their beer, specifically at breweries.

A law that went into effect in 2013 dictates that breweries can’t directly sell more than 288 ounces of beer to any one customer in a single day, halting full keg sales and limiting carry-out beer in some cases. Part of this law is to ensure breweries funnel most of their beer through distributors as part of the three-tier system.

House Bill 136 would eliminate this cap. For instance, if a brewery hosts a beer release event, there is a cap on the number of growlers or cans a customer can buy. Or if an out-of-towner stops at a brewery and wants to buy a case to take home, the customer won’t be able to be served at the taproom that day.

“If you get a case of beer at Goodwood, they can’t serve you a beer” at the bar, said Derek Selznick, executive director of the Kentucky Guild of Brewers. “We want more to sell so we can invest and grow.”

While HB 136 would take away some of the control distributors have, and the concern would be that increased taproom sales would mean less beer for distribution, which is how distributors make profits, the breweries argue increased sales at taprooms would lead to more production in the long run.

Adam Watson of Against the Grain Brewery | Courtesy of Against the Grain

Breweries make a higher margin of profit through direct sales, and those profits could theoretically lead to investments in more brewing equipment, with the ultimate outcome being more beer for distribution.

The theory is that if someone comes to a brewery and finds beer they want more of, they will ultimately buy more off retail shelves rather than drive across town — or across the state — back to the brewery.

“How would you feel if you were the owner of a small business that sold an artisanal, one-of-a-kind product,” Adam Watson, co-owner of Against the Grain Brewery in Louisville and president of the Guild, wrote in a statement to lawmakers, “and … then, when an enthusiastic customer came to your new establishment and asked to buy your product, state law required you to say, ‘Sorry, the answer is NO’? That’s exactly the situation that many craft brewers in Kentucky face each day.”

The bill, sponsored by State Rep. Adam Koenig and others, passed through a committee reading and is headed to a floor vote, Selznick said. Other facets of the bill include changing the way breweries pay taxes on their product and offering small breweries the same freedom of on-site sales that small wineries have had since 1976.

In addition, Selznick pointed out that 32 states in the U.S. have done away with on-site sales caps. According to a 2017 Nielsen’s Craft Beer Insights Poll, craft beer drinkers who consume craft beer weekly reported being 67 percent likely to buy a “little” or a “lot” more of a brewery’s product after a visit. The number rises to 74 percent among craft beer drinkers ages 21-34.

Watson calls Kentucky’s cap “archaic” and added that the proof is in the 32 states without such a cap.

“The sky hasn’t fallen in a single one of those states,” he said. “Kentucky’s cap on sales made directly to a brewery’s customers are out of step with the laws of other states, basic principles of freedom in the marketplace and our culture in general.”

Other benefits breweries believe will come about from the bill include opportunities for better building brands, increases in state revenue, and increased revenue that will enable breweries to expand production through increased on-site sales.

Watson said the craft beer industry in Kentucky has invested roughly $79 million into the state, employing about 600 people. In addition, the Guild estimates breweries supported roughly $500,000 in charitable and community activities in 2017.

“HB 136 is a common sense, pro-business bill that truly does no harm to anyone,” Watson told Insider Louisville. “As taproom models succeed, we hire more people and package more beer to be sold through distributors to stock retail shelves.”