Breweries sue for the same covid rules as wineries

Like most San Diego breweries, Deft Brewing resumed drink service last week, when the three-week stay-at-home order issued in early December finally lifted (after seven weeks). The Morena neighborhood beermaker offers a shaded patio and hosts a resident pizza counter — both crucial to covid-era business. Under current purple tier restrictions, only outdoor service is allowed. And thanks to a California rule issued last summer, on-premise beers may only be served to customers also ordering a meal.

Though Deft is equipped to handle such restrictions, it continues to lose business on a daily basis. Customers routinely show up wanting to drink beer, then walk away when told they must order food to do so. Best case scenario, they visit Deft’s neighbor, the Lost Cause Meadery next door. The meadery operates under a wine license, and unlike breweries, wineries are not required to serve food with drink orders.

The California Department of Public Health has explained this distinction by stating breweries are “social hubs and meeting locations for different households,” while wineries are “generally not.” Which might be subject to debate were it not for a simple fact: Deft shares its patio seating with Lost Cause. Whether ordering beer with food, or mead without it, customers drink their beverages at the exact same place.

The uneven application of rules between the two businesses aptly illustrates why the California Craft Brewers Association — on behalf of the state’s 1,000+ breweries — filed a lawsuit last month against state public health officer Sandra Shewry and governor Gavin Newsom. Citing the equal protection clause of the 14th amendment, the suit contends the unequal treatment of breweries versus wineries is unconstitutional.

As breweries and wineries throughout the state are allowed to resume service for the first time in 2021, the association has now filed for injunctive relief. In March, it will go before a judge hoping he or she will block the food requirement, in the same way a notorious November ruling briefly allowed a local strip club to reopen.

Last week, that injunction was overruled on appeal. But a more enduring precedent still stands. In the spring, Napa’s Caymus Winery filed a similar suit against an earlier version of the state rule that required food service of wineries, too. Within a month, that suit was dropped, and the state amended its rules to relieve its 4000+ wineries of the food service burden.

Leia Bailey, associate executive director of the brewers association, says the trade association hoped drawing up the lawsuit on behalf of breweries would likewise be enough. “We were hopeful to not have to pursue legal remedies,” she says, “We were hopeful we could have a conversation.” But ultimately the state held firm, and the brewers concluded they had “exhausted all avenues for resolving this issue through settlement negotiations.”

Six breweries from throughout the state are named as co-plaintiffs in the suit, including San Diego’s own Second Chance Beer Company. However, Second Chance co-founder and CEO Virginia Morrison, herself an attorney, notes that the brewers' group actually represents most of the breweries in California, it’s just too costly and complicated to add a thousand co-parties to a lawsuit.

Rather, Second Chance and its five co-plaintiffs represent breweries of different sizes and locations, that will each offer evidence their business has been irreparably harmed by uneven application of food requirements. For example, Ventura’s Topa Topa Brewing Company also shares tasting room space with a winery.

Second Chance represents small packaging breweries that do not serve food. It relies on a mix of 35 percent distribution and 65 percent taproom sales. With the pandemic, Morrison says, “Now we’re pretty much flip flopped. Which sounds great, because we had a 98 percent increase in can sales. But cans are the least profitable way that we sell beer.”

For every dollar made selling beer in a can, she says the brewery would have earned $7.29 selling the same amount of beer in its taproom. Which makes every on-premise beer served more valuable than a six-pack sold by a grocer. Yet despite this favorable math, Morrison says, “Our tasting rooms have just been losing money all year.”

The triple whammy of recurring shutdowns, social distancing requirements, and outdoor dining have already brought local breweries irreparable harm. Whether a California judge determines that the unequal burden of meal service does too could make the difference whether some breweries manage to stay afloat through the end of the pandemic.

“Going into the summer,” adds Morrison, “the breweries that are still in business, will one hundred percent need people not just outside, but inside their tasting rooms too.”