I first want to apologize for my long absence. Blogging has always been something that has interested me, and when Mike and I started Twin Lights, we wanted to blog regularly as a way of not only keeping in touch with our community, but to shed light on our journey of starting the brewery. Sadly, as we both work day jobs in addition to stating this company, blogging has fallen to the wayside.
That being said, there has been much confusion as to how we are starting our brewery, and rightly so. The alcohol industry as a whole is extremely complicated, especially in the state of New Jersey. They are many laws, regulations, and nuances that must be navigated through in order to open one’s doors and serve the public. The purpose of this article will be to give a general overview of how the entire system works in the State of New Jersey, as well as how we will specifically open our business.
The Beginning: Prohibition and Beyond
In the beginning, there were a bunch of jerk offs that thought if we banned the production, distribution, sale, and consumption of alcohol in this country, that it would solve all of our problems. Their goal was to stop everyone from drinking. Maybe this would have worked (who really knows), but they underestimated one important fact: people like to drink. And so people started making it in their backyards, smuggling it into the country, opening speakeasies, and forming large criminal organizations, all of which made a lot of money with not much left for Uncle Sam. To make a long story short, you can’t stop people from drinking, and the government wants to get paid, so they ratified the constitution again and initiated the 21st amendment, which was the repeal of prohibition.
This is where it gets confusing, especially in the state of New Jersey. New Jersey passed laws that required 29 different licenses to make, distribute, or sell alcohol, each one with a different purpose. The most common or well known is a license to sell alcohol directly to the consumers, often referred to as a retail liquor license. These are the licenses that bars and restaurants hold so they can serve alcohol. To make it even more moronic, each town is only allowed to issue one license per 3,000 residents. So when you see Bring Your Own Beer restaurants and think “why can’t they serve alcohol?”, it is because there are not enough licenses available. This leads to a shortage, which increases the price of licenses, which is why it is also not uncommon to see liquor licenses, especially in popular areas, selling for $500,000. That’s right! Half a million just for the right to serve alcohol. Supply and Demand, Economics 101.
The 3 Tier System
Let’s take a step back and go nationwide. In the wake of the repeal of prohibition, the government set up the 3 Tier system for the Manufacture, Distribution, and Sale of liquor. We can speculate as to why they did this, but I personally think it has to do with competition and monopolies. How crazy would it be if Budwieser made beer, controlled all their own transportation, and then owned their own bars and restaurants! They would completely corner the market and stifle out competition. The 3 tier system works very similar to the way the United States Government works, with a system of checks and balances.
The first tier are those who make the alcohol. They are the only ones that are allowed to make it, and they need a special license to do so. The only people they are allowed to sell their product to are distributors. They cannot load it onto their own trucks and bring it to bars, restaurants, and liquor stores, and they certainly cannot open their own stores to sell it directly to the consumer.
This is the middleman. They purchase alcohol directly from the manufacturer, and then distribute it to retail establishments like bars, restaurants, and liquor stores. They are under no circumstances allowed to physically make the product themselves (although they can slap their own brand on someone else’s) and they are not allowed to sell directly to consumers.
These are you local bars, restaurants, and liquor stores. These are the people that serve the finished product to the general public. They can only buy the products from distributors; it is illegal for them to purchase directly from the manufacturer.
Craft Breweries vs. Brewpubs
So where do craft breweries fit in to this 3 tier system? The simple truth is they do not. They are exempt from the 3 tier system because of their size and new laws. Because most of these companies are small and produce a limited amount of product, they are allowed to manufacture the product, load it onto their own trucks, bring it to bars and restaurants to sell, or sell it directly to the public themselves through their tasting room. This is how most craft breweries operate in New Jersey.
Because of this exemption, and the fact that a brewing license costs around $1,800 per year (vs. the $500,000 it costs to own a retail liquor license), it would be pretty unfair if breweries were allowed to do everything a restaurant would do. Because of this unfair competitive advantage, the State of New Jersey has put many rules into place to differentiate breweries from bars and restaurants.
Breweries in NJ cannot:
- Serve Food
- Serve any Spirits, Wine, or Beer not manufactured by themselves
- Have live entertainment (although this is changing, with limited events allowed)
These are the major things, but there are a slew of other minor rules and regulations.
So what exactly is a Brewpub? Well, a brewpub is a brewery that DOES fall under the 3 tier system, but they do so by choice. To operate a brewpub in NJ, one must purchase both a brewing license AND a liquor license. This allows them to not only make their own beer and serve it to the public, but it allows them to do everything else a restaurant might do, including serving food, other spirits, and other outside beer. The main thing a brewpub CANNOT do is self distribute their product to other bars, restaurants, and liquor stores. This is mainly why you do not see brewpubs’ beers at other bars or on the shelves of your local liquor store.
Gypsy Breweries: The Inbetween
I do not blame you if you have never heard of a gypsy brewery. I only knew of 2 in New Jersey, the most popular being Bolero Snort (no longer a gypsy). Simply put, a gypsy brewery is exactly what its name implies: it has no home. Gypsy breweries do not own their own brewing equipment, but rather travel to other breweries and use their equipment to make their product. Often times they do not even brew beer themselves, but rather hand their recipe and brewing specifications to another brewery, who then in turn makes the beer exactly how they want it. The beer is branded and packaged under the gypsy breweries name, and then it is sold exclusively to bars, restaurants, and liquor stores.
Technically a gypsy brewery falls under the 3 tier system because a gypsy brewery must acquire a distributor’s license. Because of this fact, they cannot sell beer directly to the general public through a tasting room, but rather must go through other retail licensed establishments.
The Story of Twin Lights
Now that you have the background, you can now understand how we got to where we are today, how we will be opening our company, and what we can and cannot do.
Our initial plan, and the one that we wrote a 150+ page business plan on, was to open a brewpub in Highlands. We were going to acquire a space in downtown Highlands, obtain a retail liquor license, buy brewing equipment, hire a full brewing, restaurant, and kitchen staff, and open to the public as an awesome little joint with fantastic food, beer, live music, and good vibes. This is STILL our dream.
Unfortunately, dreams sometimes have to be put on hold. The cost of doing all of this was well over $1,000,000, and to put it plain and simple, we did not have the money. We also did not want to give over half of our business away to an investor, which was equally as hard to find. Additionally, the proper building to open such an establishment is not easy to find in Highlands.
Because money was the big question mark, we decided to open up the cheapest and fastest way possible, which is a gypsey brewery. We will not have the massive overhead of buying our own equipment, buying a building, paying for insurance, hiring a head chef, or the limitations of only being able to serve our beer in our own house.
All we need to open as a gypsy brewery is a warehouse to store the beer in, a truck to deliver it, and the licenses to do so. We have recently signed the lease for a warehouse in Ocean Township and have purchased a truck. We are in the process of obtaining the license to legally sell our product.
It is important to reiterate what we can and cannot do as a gypsey brewery.
- Sell beer to bars, restaurants, and liquor stores, both in kegs or cans
- Deliver the product ourselves
- Have whoever we want make our beer for us
- Do collaboration batches with other breweries
- Do tastings at liquor stores and certain festivals
- Have people come to our warehouse to buy beer from us. You will have to go through a bar, restaurant, or liquor store that carries our product.
- Make the beer ourselves
- Sell beer directly to the public in any form (delivery, private events, etc)
Once we establish our brand and our customer base, we will eventually apply for a bank loan to purchase the equipment to convert ourselves to a brewery and/or a brewpub. Our goal will always be to begin to manufacture our product ourselves and operate our own retail location, both because this is the most profitable from a business standpoint, as well as desirable from a customer service standpoint.
I hope I have shed some light on the muddled alcohol industry. In a perfect world it would be much easier than all of this, but as the old saying goes, we have made our bed and now we must lie in it.
Twin Lights Brewing hopes to begin having our beer for sale to the general public by Spring 2020. Keep an eye out and from the bottom of our hearts, we appreciate the love and support. I am convinced that our fans, many of which have never even tried our beer, are better than all the rest and will make this company great. Until then, keep drinking.
- Will Grundmann, Founder of Twin Lights