How long does it take to open a brewery? I’ve put together resources as a part of our Brewery Startup Series in the past. I thought it was time to revisit the milestones we’ve provided, putting the brewery startup process into a helpful timeline for those thinking about getting started. This is a sketch of what it looks like for most emerging alcoholic beverage businesses, getting at how long it takes to open a brewery:
8+ months out:
-Business Planning: Put together a business plan, consider whether investors are needed. If so, you may need to add to the timeline, to compliantly raise funds and bring those investors onboard.
7-8 months out:
-Business Setup: Form your entity, obtain an Employer Identification Number, Open a Business Bank Account, Fund the Account. This comes first.
-Get an Operating Agreement together that guides decision making, transfers of interests, and sets forth the business and management structure.
-Take steps to clear your brewery name.
-As soon as the entity comes together, file for protection for your selected and cleared brewery name. (Can do this up to 3 years or so before you open, but best to wait until the entity is in place.)
5-6 months out:
-Begin seeking out space, negotiate a lease.
-Once a lease is in place, kick off federal licensing as much as is possible.
1-2 months out:
-Tee up the state licensing process as much as possible so that when federal comes in, you’ll be ready to submit.
-Obtain federal approval and submit to state.
-Submit label approvals to TTB or the state, if required.
-Clear and protect all important brand material, such as the brewery logo and flagship beer names.
There are many sub-steps of course, and the scope of the project and commitments of the founders may affect the timeline a good bit, but those are the big milestones. If you have a good idea of your team, a handle on brewing, and a vision of what you want to do, this is a realistic look at how it works for many brewery startups. We’re here to help for those who have questions or are looking to fill in the gaps.
Government authorities are great at drawing confusing lines. One example is understanding what beers need a TTB formula approval. (Note that TTB, or the Alcohol and Tobacco Tax and Trade Bureau, is the primary federal regulatory authority over alcoholic beverages and producers.) Before getting to the question of which beers require TTB formula approvals, it helps to cover some background material, and the necessary rigmarole it takes to get one. What are they, what beers need them, when do you apply, how long does it take? Read on and we’ll roll through it.
What is a TTB formula approval?
When brewing certain kinds of beer with certain ingredients and processes, TTB requires that the agency first approve your formula (your recipe / process essentially) before it will consider your beer for a Certificate of Label Approval (COLA). That process is commonly referred to as a TTB formula approval. This is required for a range of beers, as we’ll cover soon.
When do I seek TTB formula approval?
The time to seek formula approval is when you’re planning to package and distribute a product across state lines. That’s when you’d need to get something else, called a Certificate of Label Approval (which authorizes you to move that beer across state lines). The formula approval is a prerequisite to the COLA for beers that need it. Here’s another scenario that’s important to know. If your state requires a COLA before packaging and selling your product even within the state, then you’ll need to go through the formula-approval process first. (Submitting your TTB COLA label approvals is technically required by the Washington State Liquor Control Board, for example, so you’d need your (1) TTB formula approval and then (2) TTB COLA label approval, before you have authority to sell packaged product in the state).
How long does it take to get a TTB formula approval?
TTB does a great job, but it’s not as fast as getting your COLA. You can view average TTB formula approval processing times at this website. At the time of writing, it’s taking TTB about 53 days (so almost two months) to issues its formula approvals. In part, TTB’s backlog is due to the increase in number of producers and, thereby, the beers hitting the market and crossing state lines. Sneak preview, though…Based on statements from TTB correspondents at the Craft Brewers Conference this year, they’d like to see the number of required formula approvals go down, and may be easing requirements even more, letting more beers through the gate without requiring approvals first. We’ll touch on that in a second. In any event, you will want to budget this time when planning to release any beer to market that requires a formula approval. And then you’ll want to keep in mind that, after the formula approval, it’s going to take some time to get your COLA as well. (Current TTB COLA approval wait times here. Battle Martin does a fantastic job getting through these. Yes, it’s one guy at TTB who does every beer label, and he’s refreshingly also most awesome to hear speak and to deal with.)
Which beers require a TTB formula approval?
Well, let’s be glad not all of them do. But, the line drawing here doesn’t make the most sense. TTB requires formula approval for any beer that is made using nontraditional processes. If you’re brewing up a traditional recipe, this doesn’t need to be on your radar. Water, malt, hops, and yeast? No worries. It does, however, come into play when you start using adjuncts or creative processes.
As a general rule, the kinds of beer recipes listed below require a TTB formula approval. However, there are very important exceptions to this rule which I’ll cover below.
To which flavors or other nonbeverage ingredients (other than hops extract) containing alcohol will be added;
To which coloring or natural or artificial flavors will be added;
To which fruit, fruit juice, fruit concentrate, herbs, spices, honey, maple syrup, or other food materials will be added; or
That is designated as saké, including flavored saké and sparkling saké.
Which beers are exempt from the general TTB formula approval rule?
Here’s a list of the exempt ingredients below (thanks to a ruling in 2014 relaxing the standards). This list came from urging by the Brewers Association, wanting to relax the onerous approval requirements for beer ingredients and processes that really were traditional. As you peruse the list, you’ll see that certain fruit additions are okay…but not others, at least right now. For example, coconut doesn’t make the cut. So if you’re using coconut in any beer, you need a TTB formula approval. Moreover, a multitude of spices got the green light, but if you’re using something creative like lemongrass in your wheat, it’s not going to pass muster. Last, and fortunately, ingredients like brown sugar, chocolate, coffee beans and grounds, honey, lactose, maple syrup, and the like are all okay. But, notably, if you’re brewing a batch of coffee and then using that brewed coffee in your beer process, that is not okay. Just the beans or grounds. Hmm.
Fruits (whole fruits, fruit juices, fruit puree or fruit concentrate)
cocoa (powder or nibs)
orange or lemon peel or zest
vanilla (whole bean)
Other Exempted Ingredients
candy (candi) sugar*
coffee (coffee beans or coffee grounds)
maple sugar/syrup *
molasses/blackstrap molasses *
The below processes are also exempt. As you review the list, keep in mind that you can use woodchips (remember, though, you can’t say it’s a barrel-aged beer then or say on its label that it has barrel flavor, that gets to labeling issues), but you can’t soak those woodchips in alcohol.
Aging beer in plain barrels or with plain woodchips, spirals or staves made of any type of wood.
Aging beer in barrels, containing no discernible quantity of wine or distilled spirits, that were previously used in the production or storage of wine or distilled spirits.
Aging beer with woodchips, spirals or staves derived from barrels, containing no discernible quantity of wine or distilled spirits, that were previously used in the production or storage of wine or distilled spirits, or with woodchips, containing no discernible quantity of wine or distilled spirits, that were previously used in the aging of wine or distilled spirits.
In Conclusion, TTB Formula Approval: Moving Forward
Ultimately, based on comments from TTB authorities who attended the 2015 Craft Brewers Conference in Portland, TTB seems to be revisiting further ingredients / processes to include on the list. We’re hoping coconut and a multitude of other now-traditional ingredients make the cut. We’ll include them in a post whenever we get word. But, for now, as you make plans to expand into other territories, keep in mind that the COLA isn’t the first step for many of your creative beers. Instead, it’s TTB formula approval, then the important step of TTB COLA approval. Forgetting this, or doing them out of order, can add significant delays to your beer’s release time. If you have questions or concerns about your upcoming COLA or TTB formula approval needs, Doug and I can help, no matter where in the U.S. your brewery is located. Feel free to send us a note.
I want to point you to excellent reporting by Chris Drosner (aka the Beer Baron) over at the Wisconsin State Journal on the potential impact of the two competing beer tax bills. Check out his article here. We covered the Beer Institute’s Fair BEER Act and the Brewers Association’s Small BREW Act last week here, and through insightful discussion with Chris, edited it to correct and improve our coverage. Good stuff, and glad the Brewery Law Blog can help create a dialogue on these important topics, which is what Doug envisioned when launching five years ago. Most importantly for this story, Chris helps tell the part that keeps getting lost in other coverage; the Fair BEER Act is not just beneficial for “big beer.” Of course, that act would cause the biggest cuts to the federal revenue, but may also position the majority of today’s brewers for the most explosive growth. Check out Chris’s article for more details on that. What do you think?
Note: I should disclose, I’m a member of the Brewers Association. However, as a member and given my position as a small-brewery lawyer, I’m interested in what’s best for craft breweries but also the beer industry at large. At times, the line drawing between “us” and “them” and “our growth” vs. “their growth” can seem less important, and this tax scenario might be a case where everyone could come together and agree that more jobs and growth in the entire beer industry is a good thing. After all, consumers still seem to be cheering for the little guys, even when they’re not so little anymore. I doubt that tax cuts and attendant growth across the board will dupe craft consumers and change their David-leaning preferences. Even if big beer exposes more would-be craft beer lovers to the product through their efforts to become more relevant, I think that, just like all of us did, we’d eventually still see those consumers start coming out to their local taprooms, plugging into the truly craft beer scene, and evangelizing the awesome awesome stuff microbreweries are making today. That excites me more than line drawing on these tax issues here. Either way, passage of some measure of brewery tax reform would be a wonderful thing, and a huge accomplishment for the industry.
Here’s an overview of some TTB brewery requirements related to tax determination. We regularly hear from start-up breweries concerned about complying with TTB’s tax-determination requirements and this is understandable, as the regulations and attendant record-keeping requirements are confusing. Beyond that, this is one of the areas where a homebrewer entering the commercial brewing environment for the first time has a lack of experience and skills. The notes here are no substitute for checking in with your brewery attorney, and potentially taking a cruise through the Code of Federal Regulations to get hip to all of this. Still, here’s an overview of what you’re looking at. More notes on record-keeping will be posted on the Brewery Law Blog before long.
TTB Tax-Determined Beer Overview
Keep in mind that TTB is the Alcohol and Tobacco, Tax and Trade Bureau. Tax is the biggie here. TTB is concerned about protecting the revenue, and they want to make sure you’re not evading tax by serving untaxed beer or miscalculating how much beer you’re producing.
1. Brewery Tax-determination Vessel
In your Brewers Notice, you’ll be asked to tell TTB how you’re measuring your tax-determined beer. For more breweries, this is through calibrated brite tanks. Your equipment supplier can help you understand how these work if you’re not familiar.
2. Calibrating Your Brewery Tax-Determined Beer Measuring System
Note that if you’re using a meter, gauge glass, or the like to measure your tax-determined beer, this is the sort of thing you’ll need to test periodically. This works both ways, no one wants to be overpaying taxes, and TTB doesn’t want to see you underpay, either. In accordance with 27 C.F.R. §25.42, you need to test it “periodically” and maintain the following records in the brewery available for inspection by TTB: (1) Date of test; (2) identity of the meter or the measuring device; (3) result of test; and (4) corrective action taken, if necessary. Note that the variation in the beer meter can’t exceed +/- .5 percent. If it does, that’s when you need to take corrective action to get it as close to zero variation as possible.
3. Using/Labeling Your Brewery’s Tax-Determination Tanks
Pursuant to 27 C.F.R. §25.25, TTB wants your tax-determination tanks labeled in a durable way with the words “tax-determination” tank. Bear in mind that the purpose of the tank is to determine tax every time you add beer to it, and TTB expressly forbids simultaneously pumping into and out of a tax-determination tank. And, note, while it’s always fun to have a “brewer’s tap” in back for the gang to sip on or to offer to visitors, if that’s your beer for consumption, that must be tax-determined beer.
Opening and running a brewery is complicated, and Washington Brewery Law Resources aren’t necessarily all neatly gathered in one place. It can be hard to know where to look when your curiosity encourages you to start poking around. Today, I’ll do my best to help you start your research on how breweries in Washington State are regulated. There’s a bevy of laws/code/regs out there, that’s for sure. Here are some jumping off points for your legal excursions.
Keep in mind, these sources aren’t exactly written with readability as a primary objective. Important nuances pop up in all different places. That’s what we’re here for, if you’re ever not sure about something. Indeed, it’s through the code, and our understanding of it, that we can help answer all kinds of questions on the fly, such as: (1) Can my Washington brewery deliver beer to customers in Seattle?; (2) If I’m only selling beer within Washington’s borders, do I still need a Certificate of Label Approval?; (3) May those under the age of twenty-one come into my brewery without us having food service? The list of fun questions that vary from state to state goes on.
For anyone interested in checking out primary Washington Brewery Law Resources, here are some links along with my notes to help you navigate them.
Washington Brewery Law Resources – State Brewery Law
Revised Code of Washington. This is the law that the state legislature creates and revises. Primarily, you’re looking at the content in RCW 66, although keep in mind that other provisions relating to your business, potential distribution agreements, etc. all fall in other places in the code.
Washington Administrative Code. This is where administrative agencies put their regulations. In Washington, the primary administrative authority is the Washington State Liquor Control Board. They were created by the legislature by way of RCW 66 and given authority to do certain things relating to booze in Washington State. Any regulations they promulgate become part of the Washington Administrative Code. Unfortunately, this means that there are often provisions in RCW that address some of your questions, and then provisions in WAC that address other questions. It just depends on whether the legislature contemplated something or it’s LCB creating regulations by virtue of its authority.
Between those two, that’s the heart of Washington brewery law. Keep in mind there are some sanitation requirements set forth by the Washington State Department of Agriculture, and your compliance therewith is a part of maintaining your LCB microbrewery license. Further, there are some places where the County and your Municipality step in, particularly with respect to health codes and building codes.
Washington Brewery Law Resources – Federal Brewery Law
Of course, we all know that state and local government isn’t the final authority on breweries in Washington. Indeed, Uncle Sam, through the Alcohol and Tobacco Tax and Trade Bureau (TTB), has a say on a number of matters. When it comes to TTB, you’ve got to jump to the Code of Federal Regulations (CFR) to see all the regulations they’ve promulgated, and Title 27 is the place to go. Bear in mind, if you’re brewing off-the-wall beers, such as those without hops, the Food and Drug Administration (FDA) may be your labeling authority. And, very technically, FDA has concurrent authority over your brewing business—but TTB really is the place to go when you have questions of federal brewery law. Fortunately, they’ve put together helpful resources on their website to help you wade through labeling and advertising issues.