The game of politics is one filed with points and counterpoints. For 2013, the Montana Tavern Association stayed under the radar before launching an all out offensive against the craft brewing industry.
When that effort was defeated, the various alcohol industry groups spent the next 1.5 years searching for common ground in Montana’s alcohol licensing debates. In the summer of 2014 the MTA and Montana Brewers Association announced the industry groups had reached a deal, putting forth a “stacking” proposal to present to the 2015 Montana Legislature that would allow breweries to purchase retail licenses (from the open market) and bars could purchase brewery licenses (unlimited).
Except it wasn’t a deal. Even while announcing the “deal” in the summer of 2014, the MTA and MBA knew the Montana Beer and Wine Distributors Association was not on board.
This became evident during the Montana Brewers Association’s annual conference in October when the MBWDA explained how it had been left out of the coalition process once the MTA and MBA had reached agreement on their own proposed license stacking bill.
In December, the MBWDA announced it was pulling out of the “coalition” of industry members over its opposition to the license stacking proposal and instead supporting an alternative to lift the 10,000 bbl limit for on-premise sales at breweries. The MBWDA’s announcement included quotes from MBA members who prefer lifting the 10,000 bbl limit to license stacking.
Now the MBA and MTA have issued a counter-press release complete with quotes from other industry participants supporting the cleverly named “2015 Montana Brewers Act.” In it, the MBA and MTA explain they have changed the original license stacking proposal to now include a change to the 10,000 bbl limit for on-premise sales in brewery taprooms.
The bill would allow breweries producing between 10,000 and 60,000 barrels to sell beer in on-premise taprooms so long as the on-premise sales did not exceed 500 bbl per year. It appears from the press-release that the sale of growlers for off-premise consumption would not count against the 500 bbl allowance.
The press release information was accompanied by two videos, History of Montana’s Quota System and Faces of the Montana Tavern Association.
What was not included and has never been made available is the text of the MTA’s and MBA’s proposed bill.
Here is the full text of the joint press release:
Taverns, Brewers Develop Brewery Legislation
The Montana Tavern Association, the Montana Brewers Association and several other industry groups have come together to develop legislation to be introduced in the Montana Legislature to allow Montana’s craft brewing industry to grow within the current three-tier system that regulates the production, distribution, and sale of alcohol in the state.
The goal of the 2015 Montana Brewers Act is to allow microbreweries to keep their tap rooms and employees as they grow, and to provide brewers with choices about how they can grow their business. It will ensure that brewers, their businesses, and employees are not penalized for success by current artificial production limits.
“I am proud to sponsor legislation that will allow the craft brewing industry to grow and continue employing people in my district and across Montana,” Rep. Pat Noonan, D-Anaconda, said. “This bill is a common-sense solution that allows the craft brewing industry to become an even greater point of pride than it already is in our communities and our state. This bill will provide a boost to the Montana economy by providing brewers with clear paths to grow and expand their businesses, grow jobs, and produce more beer for in state and out of state distribution.”
The Montana Brewers Act resulted from the collaboration of industry members that met throughout this past interim to hammer out a brewing solution. The industry coalition was comprised of 15 members, including the Montana Brewers Association, the Montana Tavern Association, the Montana Restaurant Association, the Gaming Industry Association, the Montana Beer and Wine Distributors Association, and the state’s Alcohol Control Division.
The Montana Brewers Act is legislation that most industry members support. The Act would increase the 10,000-barrel, sample-room limit to 60,000 barrels, allowing breweries to grow beyond 10,000 barrels without closing their tap rooms and forfeiting the ability to sell their beer on premise.
Brewers exceeding 10,000 barrels will be able to operate modest tap rooms with on-premise consumption of not more than 500 barrels annually. Additionally, the bill allows brewers to co-locate a retail license, if they choose, under the brewer’s name, allowing them to sell their beer past 8 p.m. for greater retail ability.
“I am happy to have worked with our partners in the industry on this compromise bill,” said Sam Hoffmann, owner of Red Lodge Ales in Red Lodge and a member of the coalition. “Retail-focused breweries can participate in Montana’s retail system, and production breweries can continue growing without shutting down their popular tap rooms.”
And current taverns that want to get into brewing can purchase a brewers license and hold both the liquor and brewing license under the same name. To provide stability, co-located license holders are limited to holding only two additional retail licenses.
“Some of our taverns and restaurants would like the opportunity to serve their customers a beer that was crafted in-house and to transition their businesses more toward the brewpub model,” said Mike Hope President of the Montana Tavern Association. “This compromise will allow them to do just that.”
Brad Anderson, representing the Restaurant Association on the coalition and owner of Montana Buffalo Wild Wings in Montana, said, “This bill supports the three-tier system and allows all members to participate in the growth in the industry, while placing parity on the industry.”
Josh Townsley, president of the Montana Brewers Association, said, “Our goal is to give our members options. Current brewers and new entrants can continue to operate tap rooms, and are not forced to give them up as they grow. Craft brewers have developed a reputation for providing outstanding craft beer in our communities, and the local and visiting public enjoys sampling our beers at our breweries. This bill will provide needed choice for brewers to successfully grow these small main street businesses in Montana.”
The only known opposition to the proposed legislation is the Montana Beer and Wine Distributors Association, consisting of the 22 beer and wine distributors in Montana. Originally a member of the coalition of industry members who met throughout the interim, the MBWDA pulled out of the coalition in December 2014, citing concerns about how the bill would affect the integrity of the three-tier system.
Other industry members do not share this concern and point out that breweries in other states throughout the country are able to own retail licenses without disruption to the three-tier system, and that the “middle” tier is doing fine in those states.
“Our brewers want and need our distribution partners in Montana, and we’d like them back at the table,” Townsley said. “This bill will not change the fact that 97 percent of all beer sold in Montana goes through the distributors, and only 3 percent is sold directly by our brewers. To the contrary, it is likely that passage of this bill will send more beer through the distribution tier.”
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In markets like Billings and Missoula, probably Bozeman has well you have considerably more breweries than you have existing beer/wine licenses for sale. In Billings for example we have 6 breweries not affiliated with a retail license. At any given time there are typically 1 or 2 beer/wine retail licenses available on the secondary market. Currently those licenses sell in the $300K area. I’m guessing Missoula is a similar story. Assuming every brewery desires a retail license, obviously there aren’t enough available. Looks like this proposal will most likely increase the value of beer/wine licenses. Now let’s look at manufacturing (brewing) license availability for those retail license holders who desire to operate a brewery. No quota on those licenses. Seems like this is a bit slanted to the benefit of the MTA members. You allow them to own a brewery, you increase the value of retail licenses, you increase membership in the MTA while on the other hand you create more of an unlevel playing field between breweries making small startups more difficult and potentially damaging the existing breweries that can’t afford, don’t desire or can’t find a beer/wine license. It also makes the long term goal of altering the quota system much less probable and pretty much seals the fate of a possible brew pub license. Overall I don’t see this as a good thing for the big picture of breweries or Montana craft beer consumers. Dennis Himmelberger
While I agree with you in part Dennis I think there are other factors which will come into play that will limit the Taverns from benefiting as much as you propose. The number one factor being beer. Just because a Tavern buy’s a brewery licence does not guarantee that they will make good beer, and if they are making crappy beer it won’t sell. Most craft beer drinkers will not buy crappy beer even if the tavern offers it at a lower price. This brings us to the other dynamic that would come into play. People who frequent breweries for their beer are often different from those who frequent taverns. If a Tavern starts making their own beer I’m not necessarily going to go there to try it. I prefer the mellow family atmosphere that most breweries offer and I would have to be persuaded by several reputable sources that a taverns beer is worth dealing with their “hook up” environment in order to frequent it. I think the Taverns who will most benefit from this bill are the ones who will be willing to put the time and effort into making a respectable brew-pub. In order to do that they will have to hire quality brewers and buy good equipment. So if a savvy individual wants to collaborate with a tavern owner to brew beer for them (retaining rights to recipes, requiring part ownership, ect..) is this really worse then a brewer going out on their own? It may even make it viable for someone to start brewing their beer commercially than before the bill. Bottom line is the brewers will always make the beer and therefore they have a share of the power. As for the current breweries, they are really not any worse off than they were before, in fact with the limit increases they are probably better off. The Craft beer world is changing, I think eventually we will saturate the market and the breweries who will continue will be those who can make the best beer consistently and build brand loyalty. As a self professed “beer geek” I think that’s the way it ought to be. Prost! Dan Lee.
I’m reserving judgement on the bill, if only because we’ve not been allowed to see the language (which is in the sponsor’s hands for review). However, as you point out Dennis, the proposal largely provides only illusory benefits. It may benefit a few breweries in the short-run, but gives the MTA a home run in the long term: further escalation of license value and further entrenchment into the quota system.
The fact that retail licenses are limited and expensive (admittedly not everywhere, but certainly in all the populated areas) combined with the unlimited ability of any bar to get a brewery license, makes it somewhat stunning that an organization like the MBA would find this a good deal for the industry. Granted, I don’t see a lot of bars taking advantage of this opportunity, but their benefit comes largely from the reduction in competition as breweries buy retail licenses from other existing/competing retail sites.
The 500bbl limit for breweries above 10,000 bbl is just as illusory. A brewery gets to 10,000 bbl by being popular and 500bl is not enough to sustain the taproom that helped get them there. Seriously, if Big Sky could sell pints does anyone think they wouldn’t exceed 500bbl?
This is a great bill for a handful of bar owners and for brewers who can find and afford to purchase a license, but it is a bad bill for Montana and bad for consumers. Why is it bad for Montana? This state issues on-premise alcohol licenses under a quota system and that system is broken and is problematic for economic growth. There are many prospective business owners who would like to open a restaurant and serve alcohol, only to find that they can’t afford to pay for a license (http://flatheadbeacon.com/2014/10/15/liquor-license-lockdown/). That is not to say that fixing the broken quota system would be simple and could happen overnight. It would take much thought, planning and a significant amount of money to fix. But that is the direction that public policy in Montana should be moving. Instead, this bill moves in the opposite direction by entrenching the state even more into a broken quota system. Why is it a bad bill for consumers? There are a couple of reasons. First is that the bill will result in fewer choices for consumers. That is a simple matter of arithmetic. If a brewery were to buy a license the result is that the consumer would have one less choice available (where there was once a bar/restaurant and a brewery taproom there is now just one choice). But the real danger for consumers is that the bill is just one simple step away from placing restrictions on all breweries. We only have to go back to last session when the MTA tried to do exactly that. The MTA pushed HB616 which did two things. It allowed for stacking licenses and it placed a taproom restriction on breweries that did not purchase a license. This proposal contains stacking of licenses and now includes a taproom limitation that is applied to breweries that go over 10,000 bbl in production. It is not out of the question that the MTA could come back during the 2017 session with a bill to apply the taproom restriction to all breweries that do not purchase a license. Legislators should choose the bill that simply lifts the 10,000 bbl limitation to 60,000 bbl (without any taproom restriction) over this proposal. It is a simple bill whereas this proposal comes with complications and hidden consequences. And then legislators should get to work on replacing the broken quota system with something that promotes economic development and consumer choice while at the same time is fair to all current license holders. Brad Simshaw
There are too many scenarios out there that could hurt the Montana beer culture. Stacking on the surface and in the short term seems to be a great step in the right direction, but only for some. In the long run it could kill some of the things that have made Montana’s beer culture so great. Brewers in their heart of hearts just want to make the best beer possible and market it to the utmost level, as that is what most have made their lifes work and financial investment towards. A stacking bill is a compromise…and we must be careful as to what it is that we are compromising in the long term and more importantly look to protect a growing beer culture for the betterment of the entire statewide industry as a whole. Michael Uhrich
I have always been curious as to why some Montana breweries choose not to belong to the Montana Brewers Association – MBA.
I now understand.
I have advocated for a number of years that the “Gaming” aspect be transferred to a specific license that the current All beverage holders can retain. The expansion of the “Gaming” license can then be continued under the current quota system, thereby preserving their value. At that point there can then be new levels put into place.
All-Beverage – would allow the sale of all beverages purchased from properly licensed suppliers, to the general public. for On-Premise consumption and growler fills.
Beer/Wine – would allow the sale of all Beer/Wine purchased from properly licensed suppliers, to the general public. for On-Premise consumption growler fills.
Wholesaler – would allow the sale of all Beer/Wine purchased from properly licensed suppliers, to properly licensed retailers.
Retailer – would allow the sale of all Beer/Wine purchased from properly licensed Wholesalers, to the general public. for Off-Premise consumption only.
Producer – would allow the sale of all beverages produced by only the producer, to the general public. for On-Premise consumption only and growler fills.
I feel that the quota system should be abolished completely, allow free market to reign. The number of establishments will regulate themselves; you have to have a minimum number of patrons to remain viable.