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011719-wsj-news-shutdown-breweries

Bottles, freshly filled with beer, move on a belt at Lakefront Brewery in Milwaukee. The federal shutdown is impacting the federal agency Alcohol and Tobacco Tax and Trade Bureau, which approves licenses for new breweries, some ingredients and labels for beers sent out of state. The brewery is now waiting for the federal agency to approve the "My Turn: Chuck" beer label, so they can sell it out of state.

MILWAUKEE — The nation’s craft beer taps are being squeezed by the government shutdown, which has put new releases on hold, prevented new breweries from opening and stopped shipments of some suds across state lines.

The partial shutdown halted operations at the federal agency that regulates alcohol production and distribution. That means government employees can’t issue the permits needed for the beer to flow.

“Regardless of which side of the aisle anyone sits on, the lack of understanding of U.S. commerce, and specific to the craft brewing industry, is laughable,” said Otto Dilba, co-owner of Madison’s Ale Asylum.

“I mean, they’re just making these decisions as though they don’t have a real-world impact, not only on the federal workers, but also really all facets of commerce for U.S. companies,” Dilba said. “I mean it’s a level of arrogance that is just appalling to me.”

Anxiety bubbling

Brewers are increasingly nervous they will lose money if brewery openings and seasonal beers are delayed much longer in the dispute over President Donald Trump’s demand for taxpayer funding of a wall along the border with Mexico.

“I’ve been joking with people that if you’re going to want a new beer coming out pretty soon, you’re going to have to drink your brother-in-law’s home brew,” said Russ Klisch, founder and president of Lakefront Brewery in Milwaukee.

At Lakefront, the release of a new beer has been postponed because the Alcohol and Tobacco Tax and Trade Bureau isn’t open to approve labels for the bottles and cans. The brewery can sell beer in Wisconsin, but sales in other states require federally approved labels.

The shutdown that began Dec. 22 pinches primarily craft brewers, which offer wider varieties of beer and selections that change constantly. The biggest brewers are largely unaffected because they already have government approval for their top national brands.

Big backlog feared

One of Ale Asylum’s beers has been affected so far, but Dilba said as the shutdown continues, it will cause a significant backlog once the alcohol and trade bureau reopens. The shutdown could potentially impact sales of up to six of the company’s beers.

“When I say significant, I mean months’ worth of backlog,” said Dilba, whose Ale Asylum beer is available in Wisconsin, Minnesota and Illinois.

Lakefront offers about 30 styles of beer throughout the year, including 20 that are sold out of state. In a typical year, about six of those need label approval because they are new.

Out-of-state sales account for about 10 percent of the brewery’s annual profits, Klisch said.

The end of the shutdown won’t bring an immediate end to the delays. The longer the shutdown continues, the bigger the backlog the bureau will have to sort through when work resumes. That means it could still be months before labels and permits are approved.

“A big part of it will be all the plans that brewers have for 2019 will get thrown out the window,” said Paul Gatza, director of the Brewers Association in Boulder, Colorado.

David Rowland’s plan to expand his brewery with a new location is also on hold.

“We really did expect to have our license by now or to be darned close,” said Rowland, co-owner of SoMe Brewing Co. in York, Maine.

The new brewery in York Beach is ready to open, he said. But first they need a federal permit. In the meantime, they still have to pay for rent, utilities and loans for the new location.

“We’re paying for a second brewery that is not open,” Rowland said.

Mosinee Brewing Co. expected to be making its own beer by now, but without a permit, it is limited to selling brews from other Wisconsin companies.

It’s too early to quantify the overall economic effect on breweries, said Mark Garthwaite, executive director of the Wisconsin Brewers Guild. But he said smaller brewers who are always introducing new beers — especially those that rely on sales to other states — are likely to suffer most.

A sudsy summit?

Klisch said a beer or two might help the negotiations between Democratic lawmakers and Trump.

“I think if they all got a beer together and they drank one in a room, they would figure it out,” he said. Then, after a pause: “A few beers. I think they need a few beers, and they’ll figure out this shutdown.”

Dilba, of Ale Asylum, is looking outside the craft beer market, noting the Food and Drug Administration has stopped some food inspections because of the shutdown.

“That’s probably not a good thing,” he said. “So my suggestion to Americans would be to just go on an all-beer diet because nothing that can harm you can live in beer. Romaine lettuce, maybe not so safe. But beer? You’re going to be fine.”

State Journal reporter Samara Kalk Derby contributed to this report.

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