The Montana Beer and Wine Distributors Association (MBWDA) announced today it has withdrawn from a coalition of alcohol industry groups over a disagreement with the Montana Tavern Association’s and Montana Brewers Association’s plans to seek changes to alcohol licensing requirements during the 2015 Montana Legislative Session. For background on the proposed “license stacking” bill, see Sunday’s story here.

Noting a number of breweries do not support the license stacking proposal, Carter Mollgaard, President of the MBWDA explains, “We would support the brewers if they choose to increase the production cap as an alternative to the stacked license bill.”

Montana’s current “small brewery exception,” as it is known, allows breweries producing less than 10,000 barrels to sell up to 48 ounces per person per day for consumption at the brewery.

This turn of events puts the Montana Brewers Association in an interesting spot.  The MBA and MTA have apparently worked hard to improve their relationship – an effort sorely needed.  Yet the Distributors’ press release raises the question of whether the MBA has put the same effort into its relationship with its own members.  As you can read below, the MBA’s biggest member (by volume), prefers the Distributor’s alternative, as does one of its longest running members.

To be clear, the MBWDA has not said it would draft or otherwise seek sponsorship for a bill to lift the 10,000 bbl limit.  Nor has any one else publicly stated an intent to do so.  Rather, the MBWDA is making it clear that any brewers wishing to seek such an alternative would have the association’s support.

This public declaration by the MBWDA is a far cry from the MTA’s behind the scenes divide and conquer effort in 2013 to find brewery supporters for its bill to further restrict brewery tap rooms.  (Something the MTA has declared is behind them.)

So the questions become: Who makes the next move? Can the coalition survive its first dissent?

Here is the full text of the Distributors’ press release:

December 9, 2014
Helena , Mont.

This week, the Montana Beer & Wine Distributors [herein “Distributors”] are announcing that they have withdrawn from a beer industry group which is promoting a bill designed to make sweeping changes to the current system of alcohol sales.

The group calls itself the “Alcohol Beverage Coalition.”   But its discussions have been just about beer.  The current proposal leaves the Distributors scratching their heads as to what problem is being addressed, or whether it is simply “a solution in search of a problem.”  The beer industry in Montana is strong according to Brian Clark, Fun Beverage, Inc. Clark cites a March 2014 The Motley Fool survey which ranked Montana as the #1 Beer Friendly State.  That ranking was achieved because Montana ranks 1^st in bars per 100,000 people, 3^rd in breweries per 100,000 people, 3^rd in per capita Beer consumption and tied for 6^th lowest Beer excise tax.  Clark claims that this vitality is due to the current system which intentionally provides checks and balances which level the playing field so everybody wins.

The essence of the industry group’s proposal it that it allows bars to become both brewers and distributors of their own beer.  That means, a bar will have the right to brew beer on-premise and sell its beer to other retailers.   Bars using the new law will become vertical monopolies – able to dominate the market and disadvantage the little players.  The proposal would also further entrench the quota system for retail alcohol licenses.  Breweries wanting to effectively compete with those breweries taking advantage of the proposal would be forced to also buy a quoted license and become part of the quota system.

According to the Distributors, not all businesses in the subgroups (tavern owners, brewers, etc.) are in favor of the “stacked license proposal.  A significant number of breweries do not want to become bars (own a bar license) but would prefer to support a proposal to raise the 10,000 barrel production cap on brewers.

“I believe raising the barrel limit is a much better solution to allow Montana breweries to grow their production without losing their ability to operate a taproom,” stated Brian Smith, managing partner of Blackfoot River Brewing Co.  He followed up with “in the long run, the ideal solution would be to create a Brewpub license that would remove the retail restrictions on individual breweries, while keeping breweries, taverns and distributors separate.”

Kristi Blazer, the Distributor’s Executive Director agreed, asserting that if the stacked license bill passed “the safeguards and transparency provided by the current system of independent businesses would be lost.” Blazer also stated that “the production cap alternative would be less destructive to the current system.”

“Given the choice between a stacking license and lifting the 10,000 barrel limit, I prefer lifting the barrel limit,” agreed Jürgen Knoller, CEO of Bayern Brewing, Inc. “It makes sure our product is more widely available to the general public, retailers, and distributors. It creates substantial industry growth with higher paying, quality jobs. It allows brewers, regardless of their location in the state, an equal playing field to use their taprooms as a valuable marketing tool with some retail opportunity, without having to compete with other brewers for a license within the quota system.”

We would support the brewers if they choose to increase the production cap as an alternative to the stacked license bill,” asserted Carter Mollgaard, President of the Distributor’s trade association.

Dale Markovich, CEO of Summit Beverage, indicated that the Distributors’ withdrawal from the industry group may be temporary but as long as the primary focus is on the current proposal, “it is no longer productive to remain a part of the group.”  With respect to the proposal by those remaining in the group (stacked license), Markovich emphasized that the draft of their bill would alter about 14 different provisions of Montana statutes — a major departure from Montana law.  In contrast, Blazer predicted that the alternative proposal (raising production cap) would be simple, perhaps a page in length. Blazer then gave a reminder about the current system: “if it is not broke, don’t fix it.”
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Distributors [MBWDA] continue to play an enormous role in Montana’s economy. According to a recent study done by the University of Montana Bureau of Business and Economic Research, due to the Distributors’ contributions to the economy, there are 2,048 additional jobs in the state and Montana households receive more than $120 million in income because of those jobs.

More news is sure to follow.

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