By Will Jarvis, Sake Matters
To you it’s heavenly but your basement emits a heady aroma that has the neighbors wondering about just how much you’re drinking. Your backyard is an engineering playground as you weld pipes, tubes and hoppers, foraged from the junkyard, into usable brewing equipment. The mailman some days squints to read the packages franked with Japanese stamps and unintelligible Hiragana.
That’s right, you’re on the cusp of opening a sake brewery in North America.
At this point, it’s easy to fall into the trap of feeling like much of the hard work is done and only excitement and sake experimentation lie ahead. In this article we want to leave you informed and forewarned of the potential regulatory headaches ahead, and to assure you that the sake community won’t leave you out in the cold.
The recent webinar ‘Rules Of The Brew’ hosted by Bernie Baskin, founding President and current Board Member of the Association outlined the current challenges and opportunities ahead for North American sake and touched on the progress achieved in the relatively short existence of the Association. But there’s still a long way to go, and the reality of what the industry could be is still heavily restrained by some short-sighted law-making and poorly thought through policies.
One of the first things Bernie told us was that: “Until 2019, nobody had catalogued Federal and State laws and regulations across the USA, Mexico and Canada.” Yet by the summer of 2019, a 166-page document existed that did just that, thanks to the Association’s efforts and now rather than facing the challenges somewhat blindly, it’s clear where they are, as well as where the opportunities exist.
We would encourage you to watch the captivating hour of footage (here) with Jamie Graves (Skurnik Wines), Sachiko Miyagi (Tippsy), and Andrew Centofante (North American Sake Brewery). Their passionate words will convey far better the idiosyncrasies of their situations, and how they’ve all learned to deal with adversity in their respective roles. However, it’s still worth taking a closer look at the key regulatory impediments to industry growth as this is where the Association can advocate for change at the Federal and State levels.
The overriding challenge for anyone associated with the industry here is that sake is not defined under US, Canadian or Mexican Laws. As a relatively small segment of the alcoholic beverages market, this has not been such a big hurdle but by shining a spotlight onto the industry through the positive growth and recognition we are now experiencing, it will be hard for things to remain under the radar.
“As sake attracts more consumers, the need for them to know what they’re drinking from the label and bottle will become more important, and will need to be consistent,” says Bernie. Consumer confidence and buy in is vital to the ongoing success of North American sake and so ironing out the finer details of the definition with relevant agencies is a critically important undertaking. “People will need to be told what sake is, and what it is not, and that’s down to the regulators,” Bernie continues.
Depending on your location, incorporating a sake brewery can be a difficult affair. In almost all States sake is categorized as a beer, yet more often than not labelling falls under wine industry guidelines. Laws and regulations have been hastily put together and simply don’t make a whole lot of sense. You might need two permits, one allowing you to act as a brewer and the other permitting production and blending of wines. A crazy amount of unnecessary bureaucracy.
Complexity doesn’t end there. For Andrew Centofante in Virginia and his North American Sake Brewery there is the added stipulation within Virginia State Law to have a food made fresh on-site requirement with a minimum $2,000 of revenue per month. “We have a wonderful restaurant here but we shouldn’t need to be worrying about this when there’s enough going on with simply brewing sake,” explains Andrew.
In States where sake is defined as a beer, there are challenges also. Tennessee, for example, has a cap on sales of beverages that are over 8% ABV, so this of course affects sake. This means that two cases (5 gallons) is the maximum purchase per visit. Not great for wedding planning, summer parties or Thanksgiving family dinners once life returns to normal.
So that’s where this problem lies. In opening this Pandora’s Box of regulatory uncertainty, the confusion over whether sake is a beer or a wine – of course it’s neither – will be scrutinized and this scrutiny will largely be conducted by those with next to no sake knowledge of their own.
What is needed is a more rational and harmonized system for regulating sake. The task should smooth the set-up process for new breweries across the nation but it’s a big undertaking as “Every State acts like a different country,” Sachiko Miyagi from online retailer Tippsy points out.
As of right now, your choice of location also has the benefits, or more likely disadvantages, of taxation rules as to how the State categorizes your sake line up. Taxes can vary significantly but that’s not all, in some places your route to market can be compromised. For example, in some local jurisdictions your sakes may not be eligible to be stocked within grocery stores along with all other alcoholic beverages, and that’s a big deal.
As a maker of alcohol, sake brewing sits within one of three tiers in the US alcoholic beverages supply chain. As a ‘maker’, breweries cannot also be a ‘distributor’. Distributors, such as Skurnik Wines in New York, reside in a second tier and can sell to restaurants and businesses but cannot sell to consumers directly. Plus, there is no such thing as preferential pricing for bulk purchase and loyal customers. It’s one price for all, and that doesn’t feel right.
Tippsy on the other hand, an online distributor, makes up the third tier of ‘sellers’ and is permitted to sell to you and me, the end user consumer, but cannot sell to restaurants, clubs and sports venues.
This three-tier system is a rather antiquated legacy of the prohibition days and full of its own legal complexities and limitations which doesn’t work in the industry’s favour. However, it is a very entrenched system and one that is unlikely to see any change.
It’s clear now that the Rules Of The Brew need to change. We are at a turning point. Tippsy recently surveyed their audience and concluded that the industry is definitely in growth, and that it’s now “just the tip of the iceberg.” You can see why they are growing their sake portfolio by 40% this year.
Jamie from Skurnik Wines talked about the passion for sake in the restaurant industry: “A real big moment in the last five to ten years took place whereby people used to say ‘I didn’t know sake could be good’ are now saying ‘I don’t know what to get’.”
That’s a seismic shift in how consumers are viewing and interacting with sake. Riding this wave of enthusiasm is key and it is in the best interests of the sake community to reduce the structural and legal impediments that may hamper industry growth.
“If you’re out there listening and want to do something in the US – setting up a brewery or bringing your sake here – we have a home for you and we have a community waiting to help you,” are Bernie’s final words.
Sounds good, right? Let’s do this.