Craft breweries feel shutdown impacts on multiple fronts

One notable group getting attention for the various ways it’s been hit by the federal government shutdown is Colorado’s $3 billion craft beer industry.
Brewers looking to open locations, move addresses or expand operations are required to file paperwork with the Alcohol and Tobacco Tax and Trade Bureau, also known as the TTB. That department is closed during the shutdown, which means those permits are sitting on desks not getting filed. It can be a major blow for breweries that are currently paying rent but unable to launch their operations and collect revenue. Other breweries in the startup stage might have been expecting to get a Small Business Administration loan that they now can’t get, said Bart Watson, chief economist for the Brewers Association, a Boulder-based trade group for craft beer. 

Established breweries are also feeling the burn of the shutdown. Breweries that ship beer across state lines require label approvals for new products, Watson said. And any brewery that makes beer using an ingredient not on a pre-approved list requires a federal formulation approval.
The worst-case scenarios could be big for craft beer — an industry that has grown much since the last time there was a shutdown of a significant length.
“If the shutdown drags on, then we could see fewer new beers in the marketplace and the ones we have are only locally distributed,” Watson said. “At a certain point we reach the end of the pipeline of breweries with their permits approved, and we’ll see no new openings. It’s a possibility that we could see a high percentage of brewers give up on the process if they’re spending money on rent and taking on cost with no revenue. Right now it’s not that bad and not existential. But the cost could be exponentially worse.”
The current result of the shutdown has been a series of new roadblocks on top of several other challenges craft breweries have faced over the last few years.
“Readers might not think this is that big of a deal,” Watson said. “Brewers just have to sell beers in-state, they can’t get new beers, big whoop. But it’s one more piece in a set of things making it more difficult for craft beer. Cans are hit by aluminum tariffs, the market is getting more competitive, costs are rising for raw materials. In and of itself it’s not the biggest challenge but it’s one more thing in a whole host of many small things brewers are dealing with.”
While government shutdowns do happen, it’s difficult to plan for wild changes in the government, said Andres Gil Zaldana, executive director of the Colorado Brewers Guild.
“Our members were taken by surprise,” Zaldana said. “Breweries are a low-margin business; there’s not a lot of reserves they can set aside, especially in startup breweries. Breweries are already startup often with a second or third mortgage. Owners use all their savings just to start one and it can take months to get out of the red. It’s difficult to know how to plan for something like this.”
Despite their own impacts, Zaldana added that a lot of breweries are trying to do work to help out furloughed government employees.
That’s what Kirby Nelson-Hazelton has seen at her Estes Park brewery, Rock Cut Brewing Co. Located just outside Rocky Mountain National Park, Nelson-Hazelton said she had been starting to notice a slowdown of visitors. (However, she added January tends to be a slow tourism month for the park and the brewery has a steady group of community regulars. Rocky Mountain has also recently added some limited services.) Despite what she is seeing at her own brewery Nelson-Hazelton said she’s most concerned about furloughed employees and has seen the community try to bolster them.
“We feel their frustration and worry,” she said. “The community has gathered to support them, which is amazing. Things are happening like gift cards being put together for meals, lunch programs for school, paying for each other’s beers. That’s helpful, but of course, it still doesn’t make up for mortgage payments and utility bills.”
She said she also feels for neighboring businesses that rely on tourism and for her fellow craft breweries that might not be able to open or ship out of state.
“Depending on how long this goes, the backlog for brewing licenses tends to be testy already,” she said. “If you are planning a brewery or expansion or had beer in the pipeline you were expecting to distribute, this could be a wrench. Not distributing beer can mean a lot of money you’re missing out on. I think if the shutdown continues it edges some folks out of the market.”