Caleb Pollard spent 10 years working in economic development, so he thought he knew all about red tape.
Then he opened a brewery.
There were inspections to pass, state and federal licenses to obtain, and excise taxes to pay — some of the highest in the region.
And to sell beer to a restaurant or bar, he and his partners by law must go through a distributor, even if the bar is just a few blocks from his Ord, Neb., brewery. Where's the closest distributor to him? Grand Island, more than 60 miles away.
OK, technically Nebraska law does allow Pollard to wheel a keg of beer from his brewery, Scratchtown Brewing Co., to a bar down the street. But a distributor would still have to handle the paperwork, and Pollard would still have to pay a fee. He estimates that increases the cost by 20 to 30 percent.
“We have all these politicians that talk about how much they want small businesses to start in the United States, and they do nothing to help us get started,” said Pollard, who is also the president of the Nebraska Craft Brewers Guild.
Nebraska is in the midst of a beer renaissance. The state has around 20 craft breweries, with 14 more planning to open within the next year. Pollard and others hope that as the brewing boom continues, regulations for craft breweries evolve.
But Hobert Rupe, director of the Nebraska Liquor Control Commission, isn't so sure a big change is needed. So far as he can tell, Nebraska's craft beer industry is doing just fine.
“I was a little bit incredulous that there was a problem when you have 20 breweries and 14 more opening,” he said.
State Sen. Kate Sullivan says it is at least worth looking at the concerns. She proposed a resolution earlier this fall calling for a study of the state's laws and craft brewing industry.
“My main intention is to get all of the entities involved to talk,” she said. “I don't have any preconceived notion of how those changes should be made.”
Sullivan represents a largely rural district, and craft brewing could be good for rural Nebraska. After all, the industry relies on ingredients such as grain and hops, and small communities with breweries could get a bump in tourism.
“I'm always looking for ways we can boost rural economic development,” she said.
Sullivan points to Nebraska's farm wine industry as an example of how laws can change to accommodate a new facet of an established industry. There were few wineries in the state a quarter-century ago; now there are about 25.
Jim Ballard, the owner and winemaker at James Arthur Vineyards near Raymond, Neb., remembers that when he opened for business in 1997, he also had to sell his wine through a distributor.
It didn't go well. His distributor, who is no longer in business, didn't find his small and unknown brand lucrative, and Ballard feared that the distributor's sales team wasn't as invested in his product as he was.
But four months after he started his business, the Legislature passed a law to allow small wineries to distribute their own wine. Ballard said in two weeks he sold more wine than his distributor had sold in those first four months.
“Nobody can sell our products like we do,” he said.
Now James Arthur Vineyards Edelweiss is one of the best-selling wines in the state at its price point, he said. Several distributors have even asked about selling his product, though he still distributes it himself.
Ballard believes that small brewers should have that option, too.
“It just makes sense,” he said.
But the liquor commission's Rupe said Nebraska's wine industry isn't a fair comparison. While wineries have a few advantages over breweries, they also have restrictions that brewers don't face. For instance, most wineries must primarily use grapes grown in Nebraska.
“Wineries are more complicated,” he said.
Rupe acknowledges that some craft beer laws are worth looking into, like how the state defines “growlers.” Those are the large glass jugs that craft brewers can fill with their brew and sell to customers. The state also hasn't said what constitutes a “small” brewery. Wineries have to produce no more than 50,000 gallons a year to be considered “small.”
But Rupe's less certain that the excise tax needs to be cut. At 31 cents a gallon, it is the highest beer tax of any neighboring state, though nationwide it's in the middle of the pack. It currently generates around $30 million a year for the state's general fund.
And the requirement that brewpubs use distributors followed Prohibition. Some breweries, prior to Prohibition, owned their own taverns and found ways to avoid taxes, Rupe said. So a three-tiered system to separate the manufacturing, distribution and sale of alcohol was set up to stop those abuses. That's why liquor distributors now collect the excise taxes.
“It's worked since 1936,” Rupe said.
Joe Kohout of the Associated Beverage Distributors of Nebraska said that the current system is “an effective way” to collect taxes and a way to encourage diversity, since distributors offer a wide variety of products.
The main thing, Rupe said, is that any changes to the law need to be made thoughtfully. For instance, distribution laws that favored local breweries over out-of-state distributors might be considered unconstitutional, he said.
Iowa allows local craft breweries to handle their own distribution, so long as they function only as breweries. They cannot have brewpubs attached to them. Several other states also have limited self-distribution laws.
Pollard hopes Nebraska will follow suit soon. And then within a few years, maybe Scratchtown will have enough of a following and market that he needs a distributor to handle that part of his business.
In the meantime, he wants the state to recognize the economic development potential of the craft beer industry, just as it has for other industries over the years.
“We have bent over backwards for agriculture,” he said. “We've bent over backwards for manufacturing. We've bent over backwards for IT.”
In his opinion, now it's time to bend a little for craft breweries.
World-Herald staff writer Paul Hammel contributed to this report.