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The government shutdown is threatening the craft beer market

The government shutdown is threatening the craft beer market

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WASHINGTON (CIRCA) — With no end to the tense political shutdown in sight, wouldn't it be nice to crack open a nice, cold brew?

Well, it turns out even the beer industry hasn't escaped the shadow of the shutdown. The closure of the the Treasury Department's Alcohol and Tobacco Tax and Trade Bureau, also known as the TTB, has prevented microbreweries from releasing new beers.

"It's challenging enough on a good day," said Bill Butcher, owner of Port City Brewing Company. "And then you throw something like a government shutdown, and it just really frustrates us to no end."

Located just down the road from the nation's capital in Alexandria, Virginia, Port City Brewing's plans to release a new beer have been put on hold. The problem isn't with its recipe or ingredients, it's because of its label.

Port City Brewery
Port City Brewing Company's flagship beer, Optimal Wit, had its label approved long ago, so it can be sold. But newer brands are still on hold. (Circa/Russ Read<b>)</b>

"They (TTB) have to approve all new labels before we can sell the new product," said Butcher. "We have to submit the new label to the TTB. They will review it and approve it."

The approval process reviews the label for things like government warnings, beer style and errors. Normally, this process takes two to three weeks, according to Butcher. But Port City has been waiting for six weeks for its most recent release, and the company doesn't expect the wait to end anytime soon.

"TTB will suspend all non-excepted TTB operations, and no personnel will be available to respond to any inquiries, including emails, telephone calls, facsimiles, or other communications. The website and operations will fully resume when appropriations are reenacted," reads a notice on the TTB website. "Once funding has been restored and the government shutdown is over, we will work to restore regular service as soon as possible."

TTB beer closure

Even if the government reopens in the near future, Butcher expects the backlog to cause further delays.

That poses a major problem for the more than 7,000 craft breweries across the nation. Larger breweries are less likely to be affected, since they have long-standing brands on the market. But many smaller brewers stay competitive by pushing out a steady stream of new styles of beer throughout the year. The planning, production, and marketing of these beers happens months in advance of their actual releases.

Butcher and his 56 employees spent much of the latter part of 2018 preparing their new 2019 products, for example. Unexpected delays can throw the whole business out of sync.

"Brewing is a very capital-intensive business," said Butcher.

There's the initial investment in the very expensive equipment, the purchase of huge quantities of ingredients, marketing materials and packaging. And that's before you've even paid your employees. Even when breweries have a product ready to go to market, they are often subject to more taxes than traditional businesses.

While the craft brewing industry is still growing, 165 breweries closed in 2017 alone, according to Brewbound. The industry reportedly employs more than 135,000 people.

Port City Brewing Labels
Boxes of labels sit in Port City Brewing Company's label room. Each label needs to be approved by the Alcohol and Tobacco Tax and Trade Bureau. (Circa/Russ Read)

The financial situation is further complicated by the fact that the Small Business Administration isn't processing new loans during the shutdown. Many craft breweries rely on these loans to expand their operations and grow their businesses.

"Not being able to bring new beers to market and not being able to close our business loans is very frustrating, and it hurts our chances to remain profitable," said Butcher.

It could also jeopardize the jobs of the more than 135,000 people employed by the industry.

But the problems don't stop with the brewers themselves. There are "upstream" and "downstream" effects, according to Butcher. These effects impact sectors ranging from the cardboard industry that makes the six-pack holders to the bars that serve the beer.

"It also affects our distributors," Butcher said. "They've got plans in place to roll this beer out. We've got retailers who will be waiting for this beer."

With no end to the shutdown in sight, it might be a while before you get to try that new seasonal IPA.

Can we guess your favorite beer?

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