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Friday, February 11, 2011

Will the World End If Breweries Can Sell Pints to Consumers?

Will the World End If Breweries Can Sell Pints to Consumers?

The food world is all aflutter with one story: Surly’s announcement this week that they wish to expand with a big new brewery and event center in Minneapolis—if only they can get a few laws rewritten. If you want to have anything to talk about this weekend at cocktail parties, take sides now!

Here's the deal: Surly, the upstart brewery that put Minneapolis on the brewing map (after Summit put us on the map in the 1990’s, and Grain Belt, Hamms, and so forth put us on the map back in the day), announced plans to build a huge 20 million-dollar, 60,000 square-foot brewery with a 250-seat restaurant.

This comes on top of the little flurry of new breweries that are opening: Harriet Brewing on Lake Street in Minneapolis, and Fulton, which should open in a few months right by the new Target Field. And don’t forget Town Hall, the brewpub which just opened a second location called Town Hall Tap down on Chicago near 48th in South Minneapolis.

So, what is going on? Minnesota has a bunch of laws on the books from the immediate post-Prohibition era, meant to protect innocent citizens from evil brewers and/or ourselves. One of them is that a brewer is not allowed to sell pints of beer at their brewery directly to consumers. Another old law stipulates that brewpubs cannot sell their beer to distributors. So, if you own a liquor distributing company and would like to sell Town Hall Tap beer in Albert Lea, Minnetonka, or Duluth, and if you own a liquor store in Albert Lea, Minnetonka, or Duluth and would like to sell Town Hall beer, too bad. Another one stipulates that you can’t open a brewpub, then open a second location and drive your beer over. That’s why there’s never been a second Barley John’s, or Great Waters, or Herkimer or what have you; you’d have to buy all your brewing infrastructure again, which is a huge cost.

So, Omar Ansari, Surly’s owner—a Macalester grad and Current listener—has taken it on himself to try to change at least one part of this law, namely, letting breweries sell pints of beer. If this one thing happened, little breweries would be able to open much more easily, because it would solve one of their biggest problems—cash-flow on day one. So, the first benefit to our life if breweries could sell pints of beer to individuals: We’d get a big splashy Surly to show off to visitors.

But that’s not all! Benefit two: It would make Minnesota a tourist destination for beer tourists, the way Portland, Oregon, and Madison, Wisconsin are. People would come in from Iowa, Denver, all sorts of places, and patronize our hotels, restaurants, farmers’s markets, and so forth. But that’s not all!

Benefit three: Jobs! Surly owner Ansari estimates 150 full-time jobs at a new destination Surly brew complex and event center, and you can presume a handful of good jobs at every new brewery that opens. Benefit four: Improving of foodie culture, generally. Benefit five: Markets for farmers! Minnesota is a great place to grow barley and hops, and especially high-margin specialty barley and hops. If you are a farmer listening right now and want a business idea, here it is: There's no one in this country making specialty Belgian malted barley. A lot of the malted barley used in brewing in this country comes from a company in Shakopee called Rahr.

So, what can you do to help this all along? Right now, you can just discuss with friends and family whether you think the selling of pints of beer at breweries would be a good thing or a bad thing. (The Minnesota Licensed Beverage Association, which represents distributors who currently get a cut of every single drink you have which isn’t purchased at a brewpub, is dead against it.)

Also, if you want to see unbelievable evidence of the eloquence and erudition of Minnesota beer drinkers and blog commenters, check out this good article and fantastic comment stream—it’s like the New York Review of Books of comment streams.

Then, if you think it’s a good thing, you can Friend Surly on Facebook and ready youself for the day you’ll be called upon to contact your legislators.

Yet, what can you do if you want to taste all the great developments in local beer? Come to the Minnesota Monthly Food and Wine Experience! March 5th and 6th. There’s going to be a whole craft-brew area and pavilion. The Minnesota Craft Brewers Guild will be there in force—as of today, we’re counting 75 different beers on offer. Surly will have a huge presence and will be pouring a bunch of their hard-to-find brews like the 5th anniversary celebrating Pentagram, Surly Smoke, Molé Smoke, Mild, as well as the more commonly available Abrasive Ale, Furious, and so on. Harriet Brewing will also be there pouring their Belgian Style Ales. And it’s at the new Twins Stadium this year, indoors in the Target Field Metropolitan and Legends clubs. And of course the food & wine show will have all the usual great things—350 wines from 200 distributors, including an impressive presence from Washington State, and a cake challenge with cake decorators pulling out all the stops (I still can’t stop thinking about the Silence of the Lambs cake from last year). And it’s a benefit for MPR! And I’ll be there. So come drink wine and fine local beer with me. I’d love to see you! The event usually sells out, but there are still tickets left.

Posted on Friday, February 11, 2011 in Permalink

Comments may be edited for length, clarity, or appropriateness.

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Feb 11, 2011 04:28 pm
 Posted by  EJBiederman

FTA: "Another one stipulates that you can’t open a brewpub, then open a second location and drive your beer over. That’s why there’s never been a second Barley John’s, or Great Waters, or Herkimer or what have you; you’d have to buy all your brewing infrastructure again, which is a huge cost."

I thought that this is exactly what Town Hall does between main brewery and the Tap. You can open a second location and sell a brewpubs beer as long as it is owned by the brewpub. I think I've read one too many laws since Surly announced their plans and am now terribly confused.

Feb 11, 2011 04:37 pm
 Posted by  Roger That Too

The various state liquor laws are quirky-weird, as anyone who isn't from around here can attest. Ask somebody from Philly about buying a six pack of beer, which can be done from inside a bar but not a state run liquor store which only sells cases (which have incredibly limited selection, poor service, limited hours and are dimly lit DMV-level shopping experiences. Hence, Delaware or New Jersey road trips)

Surlygate highlights weirdness here in our home state. At the beginning and end of the day, they are a business and the extent to which they succeed or fail should be dependent upon their product and sales, not because of a throwback law from a bygone era designed to line the MLBA's pockets for doing exactly nothing. I like beer, and I like some of Surly's products and wish them success.

There would be a halo effect on jobs/tourism as you suggest, but the bottom line is there have to be enough locals that are passionate about Surly's product to make it a destination of their own.

I say there are.

Feb 14, 2011 09:39 am
 Posted by  Noodles

So how much does Surly want the tax payers to kick in to build this entertainment venue? Nothing? Ok, sounds good then. That is how backwards these laws are. A company wants to pay for all of their own upgrades, yet we don't let them proceed. The Vikings want to do this and we are trying to find a way to pay for the majority of it.

Feb 18, 2011 07:40 am
 Posted by  pinecone

So no more free beer when you tour the brewery?

Feb 22, 2011 08:45 pm
 Posted by  mn55372

The issue at hand is taxation, not preservation or obsolete blue laws. The current system was designed to prevent (in past days) a syndicate or (in modern times) a monopoly on alcohol retailing. Imagine if a large corporation like AB-INBEV bought out Applebees, TGIF, Ruby Tuesdays and Champps and won exclusive retailing rights at all state and municiple vendors. Suddenly one company would control/ dictate what beer(s) you have the option of buying and at what price determining the amount of tax collected (because that is based as a % of price). Or what if those retailers formed a brewery themselves and brewed their own beers and offered them exclusively at their establishments for 50 cents a pint? They'd dominate the market to the exclusion of everyone else. The "taste" or consumer demand argument loses out to price and mass production and retail availability under this scenario...the tied house scenario.

Though the law may be written in a somewhat exclusive nature for this project, it's the "can of worms" theory that messing w/ existing law is what leads to unintended consequences down the road.

There are already rumors of ABINBEV acquiring SABMILLER which would give that company 84% of the US beer market- of course regulators would force the company to divest some of their brands in order to approve the acquisition- the same regulators that currently hold the line on laws established in MN to check competition and avoid tied houses.

The idea that "free market" will increase the number or variety of beers you get to choose from is naive, capitalism in the beer industry = consolidation. It is the 3 tiered system that is keeping the variety open and available. The slippery slope created by adjusting laws for breweries of significant size like Surly only opens the door for the large national corporation to step in and slam it on every little brewery at a later date.

Feb 23, 2011 12:39 pm
 Posted by  Dara

So, what's the argument, precisely? That if we had liquor laws similar to Wisconsin's, Oregon's, and Colorado's that Budweiser would buy all the restaurants and turn our state into a beery waterpark? I think if the issue was taxation, the state is perfectly capable of taxing.

The free market already has increased the number of beers we get to choose from, see the newly opened Harriet Brewing, which opened as a direct result of the modification of the growler laws.

Feb 23, 2011 08:44 pm
 Posted by  mn55372

Well if you ever go to Colorado you'll notice that there is a brewery/ pub every 10 feet. Colorado, despite is relatively small population ranks number 1 in domestic beer production because there are strong limits on licensing and low beer taxation (1/2 the rate of MN's 0.15/ gallon). In Colorado a person/ entity may only hold one liquor license- so upon electing status as a production brewer (which would allow them to wholesale their product to retailers) they could grow unlimited in that capacity (as Surly is doing). If they elect brew-pub they would be strictly limited to selling at their site after 10,000 bbls (coincidentally the volume Surly is currently at). Wisconsin has similar laws w/ production size and limits on wholesaling past a certain capacity.

However, back to taxation, yes the state would lose a tier of tax collection/ verification. Brewers pay a tax on production, wholesalers on domestic and international imports and retailers pay a sales tax on sales as a % of revenue. If the price of beer declines rapidly or if the brewery controls the shipment of beer by skipping the middle tier tax determination level then the government (and I'm not advocating for more government) loses control of it's ability to verify and tax and foster an environment of competition and moderation. Furthermore, in Colorado, if you go to the many breweries/ brewpubs you'll notice they are all tied houses in that there is no competitive beers being served in each establishment. Colorado tolerates this by limiting the availability of liquor licenses to one per family (i.e. there are no chains w/ common ownership in CO).

You cite the modification of the Growler law, which was a huge benefit to local brew-pubs...but it only stands to reason that without 3rd party verification a larger percentage of liquid was sold tax free then had the establishment been limited to pints.

Anyway, not to crush your hopes, but this bill won't even get a hearing- it's poorly written.

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