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Business/Economy

Beer industry bubbles in Alaska, while brewers feel 'crippled' by law

  • Author: Megan Edge
  • Updated: September 29, 2016
  • Published April 12, 2014

Alaska has a bubbling beer industry, with commercial operations in 16 different communities -- from the small Interior town of Fox to the state's biggest city of Anchorage -- all brewing craft beer. Some beer-based businesses are simply brewing, bottling and canning, while others are cooking up burgers and pizza, too.

But no matter what venture beer geeks and business people start up, a new state trends analysis says the industry is creating jobs and meeting Alaska's demands for local craft beers or microbrews, which are typically independently owned. Small-scale breweries focus on the taste and brewing techniques of the beer.

"It's just like if we are baking bread here; we have to have bakers," said Alaska Department of Labor and Workforce Development economist Neal Fried. "Instead of just shipping it up here, we are creating jobs. (Importing) generates less employment and less economic activity. (Local production) generates more activity. It creates an advantage and people are proud of locally-produced stuff, and that seems to be the same for the beer world."

But beer business owners say they could do much more with their businesses if Alaska's laws were clearer and less restrictive.

Breweries vs. brewpubs

Currently, 23 craft beer businesses are taking a sip from the state's bubbling beer industry, said James Roberts the president of the Brewers Guild of Alaska. The nearly two dozen businesses, most of which have popped up in the last decade, fall into two distinct categories -- breweries and brewpubs.

"Technically we are a brewery," said Midnight Sun Brewing Company General Manager Gary Busse. "Even though we do have a pub, most of our sales revenue comes from sales to distributors." The Anchorage Company brewed 5,500 barrels last year, he said. But that production number grows every year.

In 1995, according to Busse, Midnight Sun "couldn't have had more than three employees." He estimates that number is now around 37 people, some of whom work part-time. But Busse said restrictive laws restrict the brewing businesses from growing further.

"As a brewery, we don't have a (beer) production cap. which is good," said Midnight Sun Brewing Company President Mark Staples by email. "However, we do have to close our retail at 8 p.m. and serve a maximum of 36 ounces to customers per day. Those are bad things."

According to Roberts, breweries also cannot offer live music without a special permit. Nor are they permitted televisions, darts or even seating at the bar for customers. So instead, they focus on manufacturing over retail.

Brewpubs like Moose's Tooth and Bear Tooth, which fill glasses and growlers with Broken Tooth Brewing Company beer, focus on the opposite, not necessarily by choice, but by statute.

Moose's Tooth co-founder Matt Jones said that in 1996, the Midtown Anchorage establishment known for its fresh brew and pizza, had become a flourishing restaurant and brewery. But shortly after Moose's Tooth opened, the Alaska State Legislature changed the laws, which said business owners could no longer own both a restaurant license and brewery license. There was a clause in the legislation that grandfathered in Moose's Tooth and similar companies such as Downtown's Glacier Brewhouse and, not far away, Snow Goose Restaurant and Sleeping Lady Brewery. But it also stipulated that any business grandfathered in could not open a second restaurant. And by 2000, Moose's Tooth opened the Bear Tooth in the Spenard neighborhood -- forcing the company into a brewpub license.

A brewpub, though, can only sell 12,000 barrels annually, which is equivalent to 2,400 kegs. "Every year we have to work with our distributors to make sure they don't sell 2,410 kegs," said Jones. "So instead of promoting it, they are actually pulling the throttle on it. It is super frustrating because we can't ever grow the brewery side of the business."

Jones' co-owner Rod Hancock said in an email that Alaska laws are "crippling" his business.

A bubbling Alaska industry

Brewers, economists and enthusiasts all agree Alaska's beer market continues to grow. Roberts said several other beer businesses are in the works. And according to Fried, that means more jobs for Alaskans.

The economic trend reports that 290 people were employed by the beer industry last year. The previous year's total brewery payroll was $7.6 million, and the annual average wage for an employee was approximately $33,830.

Most of those jobs come from brewpubs, which employ more people, according to Fried. "They are more labor intensive," said Fried. "If you look at the brewpubs in Anchorage, most of the employment is not in the brewery part of it."

But support from Alaskans for local brew keeps the market booming. Between 2003 and 2013, the amount of beer being purchased from big companies that mass-produce beers like Coors and Budweiser decreased 30 to 40 percent while the sales of all craft beer, which produces less than 6 million gallons a year, has more than tripled in the last decade.

Craft beer companies also can earn some Alaska tax breaks if they become eligible for the "qualifying beer" category, and to do so a company must sell its first 60,000 barrels of brew to Alaskans. Although all Last Frontier beer companies are qualifying beer companies, suds from other states can also fall into that category under the same circumstances because it would be illegal to tax an out-of-state company differently.

"Malt Beverages" is the second category for beer tax and is aimed at national companies producing more than 60,000 barrels. Companies like SABMiller, which produces everything from Miller High Life to Foster's, are taxed at a much higher rate.

Fried wrote in his report that the current tax structure is a strategy meant to encourage local business, but business owners, brewers and distributors are all in agreement that the industry could be even more successful if Title 4, the current law that deals with the regulation, control and distribution of alcoholic drinks sold in the state, were revised and more clear -- and that project is already in the works.

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