Perhaps not since the Prohibition era has the federal government disrupted the beer market this much.
The last time, of course, it was intentional: the result of the 18th Amendment to the U.S. Constitution, which outlawed the commercial production and sale of alcoholic beverages from 1919 through its repeal 14 years later.
What happened a century afterward was unintentional and, to some extent, unforeseen. A partial shutdown of the U.S. government after President Trump refused to sign any funding bill that didn’t include $5.7 billion for a wall he wants to build along the southern U.S. border included the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau, blocking approvals needed to sell new craft beers across state lines.
It’s a challenge that Sens. Mark Warner and Tim Kaine of Virginia, Democrats who represent a state that ranks 13th in the nation for the number of craft breweries, are pushing to overcome. The lawmakers have asked Treasury Secretary Steve Mnuchin to quantify a backlog of permit requests that reportedly number in the thousands and explain his plans to resolve it.
“The craft beer industry depends on innovation to drive growth, and the shutdown has and will prevent craft breweries from introducing new beers to the market,” the senators wrote in a Wednesday letter to Mnuchin. “It is hard enough for these craft brewers to operate a business, and the shuttering of the Tax and Trade Bureau is yet another example of how the administration’s shutdown is making it harder for American business owners.”
The partial government closure, which Trump said on nationwide television he’d be happy to own but later blamed on congressional Democrats, is already the longest in U.S. history, shaving about $1.2 billion from U.S. economic growth each week. Not only have 800,000 workers been furloughed or required to do their jobs without pay, approval of new medications and federal review of corporate mergers and stock offerings have been delayed.
“Breweries in Virginia operate in a supply chain, and the shutdown’s impacts on breweries will resonate up and down the supply chain, negatively impacting the farmers, suppliers, and customers,” the senators wrote.
The state has 206 licensed breweries, a number that has quadrupled in the past seven years, and the craft industry contributes $76.2 billion to the economy nationwide.
For Old Ox Brewery in Ashburn, Va., whose products include pale ales such as Blue Ox, with hints of pine and citrus, and India pale ale brands such as Liquidity, the closing of the interstate market to fresh recipes has been particularly worrisome.
“That means we’re unable to distribute any of the new beers that we’re producing outside of Virginia,” co-owner Graham Burns told the Washington Examiner. “That’s the D.C. market,” including not only stores that sell the brewery’s products but bars and restaurants as well, he added. “That’s a big concern for us.”
For corporate beer-makers, with established brands and decades-old formulas, the effect of the shutdown might not be as immediate or significant.
In the craft beer market, however, “what everybody is interested in is what’s new and what’s different, what they haven’t tried before,” Burns said. “It’s like they’re trying to tick it off their lists.”
That attitude is one of the drivers behind Old Ox’s introduction of 38 separate beers in 2018, a number it had planned to widen this year. The new products developed so far, however, are available in Virginia alone.
The shutdown’s effect on the brewery’s customers, meanwhile, is evident in its tasting-room sales, Burns said. Revenue in the 30-plus days since the closing began in late December are 10 percent lower than the same period a year earlier.
“Part of that is government employees,” he said. “A big part of that is is government contractors, who are also affected by the shutdown. With discretionary income being reduced, going out and having a beer is not high on their list of priorities.”