Beverage Breakdown

Posted On January 8, 2015

Re-posted from The Missoula Independent, Jan. 8th, 2015

Nearly two years have passed since Montana brewers and tavern owners clashed over a legislative proposal to radically reform the state’s craft beer industry. House Bill 616, referred to by some as the “brewery killing bill,” would have forced breweries to either purchase a retail license or restrict the amount of beer sold in taprooms. The bill failed in committee, and from its ashes rose a new Alcohol Beverage Coalition aimed at finding compromise among the players in Montana’s alcohol industry ahead of the 2015 Legislature.Whatever unity those players may have established began to fall apart months ago as the Montana Beer and Wine Distributors Association grew increasingly troubled with the coalition’s direction. Kristi Blazer, the association’s executive director, says it became clear early on that the Montana Tavern Association and the Montana Brewers Association intended to pursue a regulatory change that would permit stacking of licenses—in other words, allowing brewers to hold a retail license and bars to hold a brewery license. Despite protests by her and others, Blazer adds, the coalition’s path seemed “pre-ordained.”

“If we were to say right now what our goal is, it’s to preserve economic fairness,” Blazer says. “We see that the stacked license bill, which is currently being proposed, will do exactly the opposite. It will give a few big players an economic advantage to the detriment of others in the system.”

The distributors publicly backed out of the coalition in December. Brian Clark, president of Kalispell-based Fun Beverage, says the association sent coalition members a letter as early as last April expressing disapproval with the stacked license approach, and reiterated the position directly during a meeting in August. He adds that the group felt withdrawing was the only way to avoid having its continued presence on the coalition misconstrued as support for the pending bill. “Anybody would prefer to have a seat at the table if there’s true negotiation and discussion than to walk away,” Clark says. “But there was no discussion or negotiation after that.”

The “vigorous opposition,” as Blazer calls it, on the part of the distributors stems from the fear that allowing businesses to stack licenses will “distort and destroy” the system of checks and balances that’s been in place for decades. Montana’s alcohol industry is split into three tiers—manufacturing, retail and distribution—and existing laws prevent any one entity from occupying more than two. Since small brewers are legally allowed to self distribute, Blazer says, stacked licenses create the potential for “vertical monopolies,” or businesses occupying all three tiers.

“Rather than wreck a whole system and throw into chaos the economic balance that currently exists, we suggest take care of the problem at its heart,” Blazer says, adding her association instead supports increasing the 10,000-barrel production cap on small brewers.

At least two brewers have also come out against license stacking: Blackfoot River Brewing in Helena and Bayern in Missoula. MTA lobbyist and coalition member John Iverson acknowledges that support wasn’t unanimous among tavern owners either, though a majority of MTA members favored the proposal.

“What’s neat about this bill relative to [HB 616] is it doesn’t require anyone to change if they choose not to,” Iverson says. “Every person that’s currently operating in the business can continue to do what they’re doing. Nobody has to change anything. It simply creates extra opportunities for brewers and extra opportunities for tavern owners that choose to exercise that opportunity.”

According to Iverson, several bar owners in the state have already expressed a desire to act on that opportunity. Frank Chounet and his wife, Melissa, purchased the Timber Bar in Big Timber last fall with the goal of one day opening a brewery as well. But under current Montana law, Chounet’s status as a bar owner forbids him from obtaining a brewery license. S ubsequently, Chounet says he’s a “big proponent” of the coalition’s stacked license proposal.

He adds he’s aware that there is a precedent for working around the current restrictions. Several breweries across Montana have undergone complex legal restructuring in order to obtain retail licenses for their taprooms. “I knew that with some long-term planning there were ways to do it, and I’d already researched and kind of come up with a plan on how to achieve that without this new legislation,” Chounet says. “It was going to be a little longer, maybe three to five years, to be able to do that.”

Those still on board with the coalition have expressed disappointment with the distributors’ decision to walk away. “We continue to try to reach out to the wholesalers to try to bring them back to the table,” says Josh Townsley, Tamarack Brewing co-owner and president of the MBA. Iverson agrees that having the distributors back at the table is a desired outcome, particularly since he sees the coalition’s work continuing beyond the current session. In his eyes, the coalition represents “a new day for alcohol regulation in Montana.” But unless the approach changes, Blazer doesn’t anticipate a reconciliation during the 2015 session.

“It doesn’t do anybody any good for us to be in there pounding our head against the wall,” she says, “because all they want to talk about is the stacked license bill.”