I won’t go on (too) long about this, but it caught my attention and it galls me that an averaged-sized microbrewery in Minnesota is being kept from selling beer at its own facility by a strict reading of arcane 3-tier system rules – rules that have been modernized in half of the states without cataclysm.
I’m not in the trenches on this one. It is just an all too familiar story. I’m not from Minnesota and I’ve never even had a Surly beer. I’ve read two articles on the subject, and the quotations that follow came entirely from this piece and this other piece.
These journalists seem like good writers not prone editorializing, which is why I am writing this. Because I am outraged. All I’m going to do is repeat bits from these two pieces and add my own two cents. This is my editorial opinion.
Surly Brewing currently makes beer in Minnesota. Surly hopes to open brewpub which is costing them $20 million. This venture will contribute to the State’s coffers and commerce through permits, licenses, excise taxes, employment and employment taxes, purchasing of materials, and profit (and more taxes) paid by those who sell Surly’s beer in their networks and locations. [Ed. Who isn’t getting a slice here? It’s the distributors who want their 20-plus percent for stale-storing perfectly good beer in a warehouse while they collect graft, gratuities, or “sales incentives” from the top bidders. They’re P-O’ed that some business might have the gall to make beer and not pay them to ruin it! After all, they are entitled by law to distribute all the alcohol.]
The Board of the Minnesota Licensed Beverage Association (MLBA) appears to be run by some faction of: 1) fools, 2) pantywaists afraid of legal action by the major breweries who fund the distributorships, or 3) chicken littles that imagine an incremental change in outmoded law will result in a total collapse of beverage retailing.
Minnesota Public Radio states that the MLBA “represents Minnesota liquor retailers and wholesalers.” [Ed. Hello? What about the producers – the brewers and the distillers? Some 3-tier system when the agency in charge represents two of the three factions in this age-old farce. Who put these guys in charge and how does a brewer get fair representation?]
MLBA Executive Director Frank Ball, who earlier this week reportedly stated “We’re not opposed to any [emphasis added] of this. We want them to build a brewery. Surly has a wonderful product.” (Subtext: but we aren’t saying anything about actually selling said product.) A day later his tune was less catchy “We’re not talking about tires, batteries or accessories. This is alcohol, and it’s highly regulated. There’s a reason this law has been on the books since 1933.” [Ed. Yeah, because do-nothing bureaucrats can’t get past the bathroom mirror to modernize laws that were instituted in the wake of a) the Great Depression, b) 13 years of Prohibition, and c) lobbying by gangster-owned distribution networks].
Then we have brewery owner Omar Ansari. Seems sort of like Minnesota’s answer to Sam Calagione or Greg Koch. He has big plans for a destination brewpub that would draw big dollars to whichever city he chooses. “We’re not looking for the three-tiered system to go away. All we’re asking is to sell glasses of our own beer at our own facility.”
While Ball fights back with “You’ve got to play fair and Surly is asking for an unfair advantage. It would be one thing if they were a smaller brewer. But when you make over 3,500 barrels, you’re a pro and there are rules to follow.”
Meanwhile, other brewers in Minnesota, those without such grandiose plans, sound like 3-tier poster boys. According to Ted Marti, the president of Schell Brewing, “Our retailers are our lifeblood; they’re the reason we exist.” [Ed. No. Your customers are the reason you exist. Remember them, the people that buy your beer?] And then you have Mark Stutrud, founder of Summit Brewing. “We cannot survive without the three-tiered system.” [Ed. As lopsided as the 3-tier system is, all Ansari is seeking to do is sell beer at his location. He is not seeking a dismantling of the system. And for the record, total dismemberment of the 3-tier would likely result in Bud Light bars on every street corner like so many Starbucks. Hey how’d that happen?]
Levy states that the 3-tier “separates manufacturing, distribution and retailing in the beer business.” Not exactly true. It does not prevent a major beer manufacturer from owning a substantial piece of a distributor. Just look at all the beer delivery trucks that say “so and so distributors” on the cab door, while the entire box is paneled with A-B or Miller-Coors hype.
When the major shareholder in the distribution company and the majority of product moved by that distributor are the same mega-brewery, it takes very little effort to: a) slow-pedal the small guy who is obliged by law to contract with a distributor, of which there is often only one! and b) fail to represent their beer fairly in the market because the squeaky palm gets the grease and by other nasty tricks like removing product from retailer shelves and stealing tap positions.
A small brewery signing an obligatory contract is like a promising musician signed on with a major record label. In other words, sorry to hear that. In this day and age of diversified sales and marketing strategies, social media, and mail order beer sales, it is simply outrageous that wholesalers use their bully pulpit, puppet liquor boards, and fat wallets stuffed by the smaller brewers’ competitors to continue to throttle the commerce of small brewers by referencing corrupt rules that weren’t fair when there were only 75 breweries after Prohibition was repealed and are even more outrageous now that there are over 1800 breweries.
I venture to guess that the reason Ansari is seeking a change in the rules is the absurdity of the following scenario. Under current rules, since the brewery is producing over 3,500 barrels of beer annually (more like 10,000), they exceed Minnesota’s brewpub definition. If they wanted to sell beer at their new location they would have to contract with a distributor and pay them 20, 30, 40% for the privilege to move a keg of beer from the brewery to the taps in front. Distributors/wholesalers argue that they are entitled to cut by law. It is bad enough that when they actually move craft beer from point A to B they don’t add that kind of value worth their fees, charging this bribe for doing nothing but a paper chase is un-freakin-believable.
As the old timers say, “For crying out loud!” I am getting surly. Well, I would if I could. Until then, I’m just plain pissed.