March 16, 2016 – Craft beer is booming across the country. In Wisconsin alone, more than 120 breweries now dot the state, up from just seven in the 1980s. And while more and more would-be brewers look to enter the market, the industry remains highly regulated.
From obtaining a license to open a brew pub to protecting trademarks, lawyers can assist clients navigating complex federal, state, and local laws, says Jeff Glazer, an assistant clinical professor at the U.W. Law School and an attorney who has represented dozens of breweries.
Read Jeff Glazer’s Article on Brewing Law in Wisconsin
“Starting a Brewery: A Web of Regulations,” Wisconsin Lawyer, March 2016
Our state hosts more than 120 breweries. In this highly regulated industry, lawyers ensure that the brewery’s owners can legally mill, mash, boil, ferment, cap, chill, label, and sell the beer. This article looks at the web of laws regulating breweries and untangles major legal issues confronting startup breweries in Wisconsin.
“Brewing law is a patchwork of laws across the United States,” says Glazer. “Every state is different. Indeed, every municipality can be different, so being able to navigate that regulatory maze is really difficult whenever you are dealing with alcohol.”
While there is an entire federal framework, Chapter 125 of the Wisconsin statutes is where all the brewing laws are held in this state.
Opening a craft brewery requires a broad understanding of entity structure, business formation, and contract work, says Glazer. “Once the brewery is up and running, a lot of the issues relate around employment issues and trademarks.”
The Three-tier System and Its Exceptions
“The fundamental basis for alcohol regulation in this country is the three-tier system,” says Glazer.
Each tier of the manufacturing and distribution process is kept separate and distinct. “Manufacturers can’t distribute, distributors can’t retail, and retailers can’t distribute or manufacture,” says Glazer. “The default rule is that if you are in one of those tiers, you can’t do the other two tiers.”
However, like a lot of rules, there are exceptions.
Take, for example, a brewery. It is a manufacturing facility. “Just like Nike manufactures shoes, just like Apple manufactures computers, breweries manufacture beer,” says Glazer. “The general rule with breweries is they can’t distribute and they can’t retail. Of course breweries have tap rooms… that’s an exception to the three-tiered system, because breweries in that case are selling directly to consumers.”
A brew pub, which is a brewery that is also a restaurant is another exception to the rule. “The reason why we make that distinction is because at least under Wisconsin’s laws, breweries can only sell beer,” says Glazer. “They can’t sell other alcoholic product.”
“If you want to run a restaurant where you are also selling wine and spirits,” says Glazer, “you need to have what’s called a class B license in the state of Wisconsin. The laws prohibit breweries from owning Class B licenses, so they created this new class of breweries that can hold Class B licenses and be restaurants.” This creates a different set of rules for brew pubs that don't entirely apply to breweries or restaurants.
How Federal, State, and Local Laws Impact the Three-tier System
“As you go down the three-tier system from manufacturing to distribution to retail, it sort of mimics the regulatory coverage of federal to state to local” says Glazer.
Manufacturers are largely governed by federal law. Once a brewery receives their brewer’s notice, “the state says, if you have one of those, and you follow a few other rules, you are fine,” says Glazer. “Distributors on the other hand are governed entirely by state law. Very little federal law applies to distributors.”
Finally, retailers are governed almost entirely by local law. “The state sets up some rules around the kinds of ordinances that the municipalities can pass, or that the municipalities can implement, but by and large, retailing is governed by local municipal law,” says Glazer.
