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The Story Behind San Diego's New Craft Beer Tasting Rooms

Andrew Keatts, September 30, 2014 -   

This story originally appeared on Voice of San Diego.

Craft beer is growing out of industrial parks and into urban neighborhoods.

There's a pronounced trend of new, old, big and small breweries alike opening satellite tasting rooms in walkable commercial areas — Stone Brewery, Modern Times, Belching Beaver, Rip Current, Twisted Manzanita, Iron Fist, Border X and Lost Abbey have all done it or are in the process of doing it.

The tasting rooms help address one issue that could affect the industry's continued growth: They allow the businesses to meet customers where they are, rather than relying on people coming to them.

"There are a certain number of people willing to drive anywhere, but there are more people looking to have that experience closer to home or work," said Vince Vasquez, a policy analyst at the National University System Institute for Policy Research who wrote a report on breweries' local economic impact.

They also come with a nice profit margin — by selling their own product directly, breweries are effectively cutting out distributors and bars.

The proliferation of tasting rooms in the city's core is thanks in part to a piece of language in the alcohol vendors' license most breweries have that makes it easier to get approval for additional locations.

But the easier process of opening urban tasting rooms could eventually stoke neighborhood concerns.

At a recent panel on planning concerns facing the craft beer industry, Amanda Lee, a senior planner with the city's code enforcement group, said the city needs to consider whether satellite tasting rooms, technically called "retail tasting stores," should have additional restrictions about where they could be located, or whether the city should be able to impose additional conditions on their permit to operate.

The thought is that at some point, the relative ease to open such a facility will run into community opposition.

Joe LaCava, chair of the group that oversees community planning groups throughout the city, the Community Planners Committee, said nuisance-related complaints are still mostly isolated to liquor stores in certain neighborhoods.

"They're fundamentally different animals right now, which is why they have different licenses in the first place," he said. "How that plays out will be driven by breweries themselves, and how they run their businesses. The pushback we have seen on alcohol licenses has been for much different operators, whether there's been too many licenses in an area, or there are off-site sale licenses granted where there are ethnic or cultural conflicts nearby."

But the breweries could end up regulating their own behavior, essentially, because breaking any rules at the tasting room could endanger the brewing operation itself.

Most craft breweries have what's called a "type 23" Alcohol Beverage Control (ABC) license. It allows them to sell their product to other licensed alcohol sellers, or directly to customers.

It also allows those brewers to request duplicate licenses, said Candace Moon, an attorney who specializes in the craft beer industry. And the law says those duplicate licenses are to be issued "forthwith."

"The biggest potential problem is that anything that happens as a result of a duplicate license affects the main license as well," she wrote in an email. "Think of them as one license.  So if there are complaints or violations against the duplicate license, the main license suffers the penalties."

That's why breweries with satellite tasting rooms are likely to be on their best behavior, said Jacob McKean, who opened a tasting room in North Park with a duplicate license from his Modern Times brewery in Loma Portal.

"Any sane person would go above and beyond to make sure they're not putting their brewing license at risk," he said. "Even a truly terrible person, acting in purely naked self-interest, even that would suggest you wouldn’t want to risk your company over over-serving someone, or breaking opening and closing hours."

He also said the relatively quick timeframe it takes to get the duplicate license isn't really the primary incentive, though.

"Tasting rooms keep a lot of breweries in business," he said. "The fact that the bureaucratic process is a little bit easier — and I do mean a little bit — isn't alone going to make you do it. Saving a month on the licensing process doesn't come close to making it worth it."

Vasquez's research showed in at least one instance, a brewer reported making $1 in profit on each beer sold through a bar or liquor store, but $5 per beer sold in their own tasting room.

"The ability to open a tasting store — or a second tasting store — can mean so much to their bottom line," he said.

For LaCava, talk of instituting an additional level of planning or permitting on the duplicate beer sales licenses misses the point. There are plenty of laws and regulations on the books to deal with bad actors already, he said, and if there are problems, they can be solved by enforcing those existing restrictions.

"The enforcement of existing regulations is more effective than piling on new regulations," he said. "We have a dilemma because when we pile on more regulations, that's paid for by the applicant (the brewery, bar, liquor store, etc.). But when we do enforcement, in this case by code enforcement or the police department, that comes from our general fund. We are still struggling to pay for all kinds of services, and so even if people agree, it's hard to find the money for it."

McKean agreed.

"It's far too hard to open an alcohol-selling business, and far too easy to misbehave once you're open," he said.

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