SD beer brewers: Looser regulations could expand business

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At the annual State of the State address, Gov. Dennis Daugaard said that he will introduce legislation aimed at growing the craft beer industry. The governor wants to increase production caps and self-distribution.

“South Dakota statues limit the ability of our homegrown craft breweries to grow and thrive,” Daugaard said.

According to Jesse Scheitler, the co-founder of Lost Cabin Beer Company, the craft beer industry has the potential to flourish in South Dakota.

“On a national level, the craft brewing industry continues to grow,” said Scheitler. “As the wholesale beer market stagnates, craft brewing has still seen a lot of growth. There’s a lot of potential there.”

Current state laws allow breweries to produce 5,000 barrels of beer annually. Montana has a barrel cap of 60,000; Wyoming has 50,000; and North Dakota has 25,000. Daugaard proposed to raise the cap in South Dakota to 30,000 barrels.

“Five-thousand barrels is pretty restrictive for growth in the state, and it's pretty low compared to the states around us,” said Scheitler. “It’s really encouraging to see that raised to the potential 30,000 barrel limit.”

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Breweries must also deal through distributors to get their products into restaurants and liquor stores. Without the ability to self-distribute, some brewers, like Sam Papendick, the owner and head brewer at Hay Camp Brewing, say their growth is limited.

“Legislatively, they’ve put things in place that make it a little bit more difficult to go [to Pierre] and actually promote this legislation, the self distribution legislation,” Papendick said. “And as a partnership that a brewery has with a distributor, it’s hard to taint that partnership and actually go and pursue legislation that is going to grow your business and potentially hurt one of your partners.”

In 2016, the state had 15 craft breweries, producing a $209 million economic impact. Some brewers say those numbers could be higher as the industry sees less regulation.

“As a lot of manufacturing segments starts to stagnate, the craft beer industry is creating a lot of jobs and is creating a lot of support for our local economies,” said Scheitler. “Not only do we make beer and pour it here, but we’re involved in charity here and philanthropy around the Black Hills.”

Papendick said the growth of breweries will have a trickle-down effect, which will be felt in Rapid City

“It’s going to be good for both tourism and manufacturing if we can grow South Dakota craft breweries,” said Papendick.

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