Denver Sake Maker Pushes for Change in Brewing Laws

Colorado seems like the perfect place to make alcoholic beverages; just look at the proliferation of breweries and distilleries around the state, and the growing number of wine and cider makers. So what if your drink of choice is sake? That shouldn’t make too much of a difference when it comes to producing and selling something that’s not so different from beer and wine, right?

The trouble is that state lawmakers don’t quite know what to make of sake. And that’s making life tough for William Stuart and Jennifer Eubanks, who are in the process of opening Colorado Sake Co.
There’s already one sake brewer in Denver: Gaijin 24886, founded by Marc Hughes and Keith Kemp in 2014. But Colorado Sake Co. plans to include a tasting room at its brewery at 3559 Larimer Street, which is proving to be a stumbling block on the road to be-coming fully licensed.

The problem arises in the way that state and federal agencies handle different kinds of alcoholic beverages. For production purposes, sake makers are treated as breweries and must have a brewery license. But the product is taxed like wine (or "vinous liquors, as they're called by law), which means that the state considers the sale of sake to be the same as the sale of wine. The regulations conflict: A brewery is allowed to sell only beer, not wine (to further complicate matters, a brewpub can sell beer and wine, but must also sell food), so a sake brewery is not legally able to sell its own product.

“We had to set up two separate businesses,” Hughes says of Gaijin 24886, “one to produce and one to sell.”

Even setting up a business that way doesn’t cover the ability to sell on site, though, as Stuart discovered when he attempted to get approval for the Colorado Sake Co. tasting room. But rather than throw in the towel on the tasting room, he’s trying to make changes to the law. He recently reached out to Lucía Guzmán, the state senator in his district, who agreed to introduce SB18-079, a bill that would classify “saki as a vinous liquor (wine) for the purposes of the ‘Colorado Liquor Code,’” according to the proposal’s language (which uses the “saki” spelling).
If the bill goes through, it would make Colorado Sake Co. a winery, not a brewery, which under Colorado laws would allow Stuart to have up to five sales locations, including an on-site tasting room — and even a booth at a farmers’ market (something beer brewers aren’t currently allowed). Gaijin’s Hughes is on board with this change, since it would also allow him to open a tasting room.

But someone else wasn’t on board with the bill as was originally worded, someone with a great deal of clout in Colorado. Beer brewers, particularly those who use rice as an adjunct, worried that they would be affected if the law were enacted, since beers made with rice might potentially be considered wine. Craft brewers sometimes use small amounts of rice as a stabilizer or flavor enhancer in their beers, but it’s the big boys — industrial producers such as Anheuser-Busch InBev — that really crank up the rice percentages in theirs.

Because of this, the bill was put on hold, and sponsors rewrote the proposal so that sake brewers would fall entirely the wine category for both licensing and taxation purposes. This required updating the verbiage to define "vinous liquors" as "wine, fortified wines, and Japanese rice wine, labeled as sake, that...are produced by the fermentation of the natural sugar contents of fruits or other agricultural products containing sugar." (The amendment also changes the spelling to the more standard "sake.") Stuart says he’d prefer to be considered a winery (because of the potential for five tasting rooms), but would also be happy to be considered a brewer if it meant even just one tasting room (the limit for breweries).

Andres Gil Zaldana, executive director of the Colorado Brewers Guild, says his organization was initially concerned about the wording of the bill, especially how it could impact brewers of gluten-free and gluten-reduced beers, who use more rice than most other craft brewers. But he’s also encouraged by the direction the bill has taken, and adds that it would be great to see Colorado Sake Co. open with its own tasting room.

The re-written bill passed through by the Senate Business, Labor and Technology committee on Tuesday, February 13, and will go to a Colorado Senate vote this week, with a thumbs up on the sideline from both the Brewers Guild and Colorado Sake Co.

From a production standpoint, beer and sake aren’t that different. Both are made by fermenting grains with yeast; beer relies on malting (sprouting and drying) barley to create enzymes that aid in fermentation, whereas sake relies on koji, which is the result of a mold (Aspergillus oryzae) grown on cooked rice, which then creates a similar enzymatic process as malted barley during fermentation.

As Colorado consumers grow more and more savvy and producers come up with plans to make food and beverages from all over the world that governmental agencies haven’t previously needed to worry about, more legal confusion like this is likely to occur. Can the regulations be simplified so that producers are licensed and taxed the same way, regardless of whether they’re using barley, rice, grapes, apples — or something that has yet to make it to Colorado? This kind of change would require the unraveling of decades of laws built from outdated post-Prohibition regulations and protectionist (read: anti-competition) measures created by the lobbyists of various industries.

Colorado’s craft-brewing and distilling industries seem like the Wild West, where anything goes; one brewery can put doughnuts in the tank along with malted barley and hops, and a distiller can use corn, barley, rye and wheat — sometimes all at once — to create new flavors from old traditions. But when something as simple as fermented rice comes along, sake brewers can’t join the fun — which means that we can’t, either.

You may not ever put a glass of sake to your lips, but if you don’t like the idea of larger organizations deciding what you can and can’t drink (because they will surely decide that their products get top legal protection), now’s the time to speak up. You can contact your own representative to make sure there are minimal obstacles for entrepreneurs like Stuart and Hughes, and you can support them by seeking out their products at bars, restaurants and liquor stores. Because tasting and making up our own minds would be a win — for Colorado’s sake.

Update: This story was updated at 10:30 a.m. on Wednesday, February 14, to reflect changes to SB18-079 that passed through committee on February 13.