You don’t have to spend more than five minutes in a bar on Front Street or in the Kihei Triangle or any of the big Ka‘anapali and Wailea resorts before a visitor (usually a male) walks in, scans the bar taps and then asks the bartender what “local beers” they have. A decade ago, that usually spurred said bartender to offer a glass or bottle of whichever Kona Brewing Co. label the establishment sold. It was a simple, easy, straightforward transaction. Kona Brewing Co. had the word “Kona” on the label, and that was that.
Except that it isn’t so simple. Kona Brewing actually has four breweries, only one of which is in Kona, which is where the company began back in 1994. The others are in Portland, Oregon, Woodinville, Washington and Portsmouth, New Hampshire. Through a very lucrative distribution agreement the company struck with Anheuser-Busch in 2003, Kona now distributes their beers to 35 states and 15 countries. Put simply, most Kona customers around the world are drinking beer that wasn’t brewed in Hawaii.
For those small craft breweries who do actually brew 100 percent of their barrels in Hawaii–Maui Brewing Company being the most prominent–this has long been a matter of serious concern. Here’s a small brewery, which opened in 2004 (a decade after Kona), employs about 60 people in Hawaii and brews all of its beer on the island that appeared on its label, competing with a larger brewery that makes much of its beer in places that aren’t anywhere near the town on its label. But now, Maui Brew Co. has a powerful ally: West Maui state Representative Angus McKelvey, who chairs the House Committee on Consumer Protection & Commerce (CPC).
Early this year, McKelvey introduced HB1126, titled “Relating to Advertising and Marketing.” The bill would have added the word “brand” to any beer label “Where the geographical name ‘Hawaii’ or adjective ‘Hawaiian’ is used, or any geographical area within Hawaii is named by its formal name or used as an adjective, or any Hawaiian word or statement, design, symbol, or device… that tends to create the impression that the beer was produced in the place or region other than that of actual production.” It also says beer labels can’t contain any location of origin unless 75 percent or more of the beer’s content by volume comes from that region.
“The purpose of this measure is to clarify the marketing of beer produced in the State by requiring beers whose labels convey the impression that the beers were produced in the State to indicate otherwise if not produced locally,” stated a report on the bill from the House Committee on Economic Development & Business.
When asked why he introduced the measure, McKelvey compared the issue to GMO labeling. “Consumers have a right to know,” he said. “We have visitors coming here, asking for local beer. We have a whole economy based on visitors who want to support the local businesses.”
The word that popped up most in testimony favoring HB1126 was “confusion.” The message in these testimonies was clear: letting a brewery like Kona call their beer “Kona,” even though much of it isn’t actually made in Kona, messes with consumers’ heads.
“The common practice of brewing elsewhere by a brewer of Hawaiian origin or otherwise and then labeling said beer without indication of actual origin of manufacture can and does promote confusion as to its actual origin,” said Thomas Kerns of Big Island Brewhaus in an undated testimony letter on HB1126.
This actually does happen, and not just with consumers, either. While “researching” this story, we went to our local gas station and attempted to buy a six-pack of both Kona and Maui Brew Co. beers. They had the Kona, but no Maui Brew Co. But when we asked the clerk if they stocked any, he said sure, then pointed to the Kona. When we pointed out that Kona is, at best, from the Big Island, and that we wanted the beer brewed here on Maui, he looked flustered. After a few awkward moments, we paid for the Kona and left.
Eight individuals ended up providing supporting testimony for HB1126, the most notable of which was Maui Brew Co. founder Garrett W. Marrero. “This bill will protect Hawaiian manufacturing,” he told the House CPC committee. “Although there is an extremely high cost to produce in Hawaii we, as do many others, believe that a product marketed should be true to what it says it is. We have an enormous fan base here and abroad that support us for our innovation and further for our commitment to our local community. We simply will not put a product in the market and try to pass it off as local if it was not brewed here.”
Just two organizations offered testimony critical of HB1126. The first, which wasn’t at all surprising, was Kona Brewing Co. President Mattson C. Davis. Davis actually testified twice: first on Feb. 4 before the House Committee on Economic Development & Business and then on Feb. 24 before the CPC committee.
Davis testified that he’s worked for Kona since 1997, and that the bill is nothing more than the result of “competition manipulating the legislature to gain a competitive advantage.” He also testified that Kona is already complying with federal Tax Trade Bureau labeling requirements.
“In 2012 we modified our label to list all four locations where we brew instead of the primary place of business,” he said. “Our goal was to be transparent and make all the labels the same.”
In fact, the label Davis mentioned merely lists the locations of Kona’s breweries. It does not (indeed, most likely cannot) indicate on each beer bottle label where exactly that beer originated. But Davis also turned the whole notion of defining “local” Hawaii beer on its head: when it comes to beer brewed in Hawaii, the issue isn’t where the beer was brewed, but what goes into the beer.
Both Kona and Maui Brew Co. have long publicized the grocery list of local Hawaiian grown items that enhance their beer–lilikoi, coffee, guava, ginger and even Maui onions, to name just a few ingredients. But when you look at sheer volume, Davis testified, there’s really no such thing as a true Hawaii beer.
“Beer is made from Malt, Hops, Yeast and Water, with water being the largest part in VOLUME and less than 1 percent the COST,” he wrote in a Feb. 24 letter to the CPC Committee. “In Hawaii–all Malt, Hops and Yeast are imported. Water is not, however it’s a very limited resource–The USDA has declared many areas of Hawaii to be in a DROUGHT. Water isn’t considered a[n] Agricultural Product in the State of Hawaii and doesn’t qualify as a Local Product.”
Davis also took pains to list (in both his letters of testimony) all of the ways Kona Brewing Co. takes seriously its location in Hawaii: 175 employees in Hawaii, $24 million in Hawaii sales during 2012, paying $1.1 million in Hawaii Beer Excise Tax during 2012, installing a 229kw solar power system in their Kona brewery and brewpub and so forth. “We’ve created a successful and sustainable business model that respects Hawaii; it’s [sic] residents and the visitors,” he wrote in his Feb. 24 testimony.
But the issue isn’t whether Kona Brewing Co. is a Hawaii company. The issue is how important it is that Kona Brewing Co.’s beer bottle labels tell consumers where exactly the beer they’re drinking comes from. And on that issue, the Hawaii State Attorney General’s Office–the other organization that provided critical testimony on HB1126–threw a giant wrench into the legislative works.
Like Davis, representatives from the AG’s office testified twice. In a Feb. 25 letter to the CPC committee, the AG’s office listed four problems with the bill, all of which are pretty significant. First, and foremost, that it violated the Hawaii state Constitution, which says “each law shall embrace but one subject, which shall be expressed in its title.”
Second, the AG said that it may violate the free speech. “Product labeling constitutes commercial speech subject to the protections of the First Amendment,” the AG testified. On this, the AG added that the bill lacks “findings and evidence” showing the “real and substantial harm to the State that will be directly and materially alleviated by these regulations.”
Third, the AG pointed out that the bill also lacks findings and evidence should someone make a “Commerce Clause challenge,” which could happen given the fact that the bill “regulates all beer sold or distributed in the State without regard to where it is manufactured.”
And last, the AG said that the bill’s use of the terms “Hawaiian design, symbol, or device” is “vague and should be defined.”
Taking the part about violating the single-issue rule to heart, McKelvey told me that on Feb. 27 the CPC committee voted to defer HB1126. But it wasn’t exactly a victory for Davis and Kona Brewing Co. McKelvey added that his committee also voted to add HB1126’s language on beer label regulation to another bill, HB1314, titled “Relating to Liquor.” That bill establishes a new class of liquor licenses for distillery pubs.
“It will be Part Two of that bill,” McKelvey said. “Hopefully, they’ll hear it over there [in the state Senate].”