Montana tavern owners battling with beer brewers

Posted On March 27, 2013

AP Photo/Matt Gouras

Rep. Roger Hagan introduces his bill to place limitations on the expanding retail craft brewing industry on Tuesday in Helena.

Tavern owners faced off against craft brewers at the Capitol on Tuesday, arguing that the upstart competition has been allowed to unfairly flourish with too few restrictions.

Both sides packed a state House Business and Labor Committee hearing looking at two bills.

One brought by the tavern owners, House Bill 616, would put new licensing requirements on the brewing industry. The tavern owners argue that some breweries have grown into full-scale retail establishments not envisioned by the original law that allows tasting rooms.

Another bill to study the issue, House Joint Resolution 18, was backed by brewers who said more conversation is needed to fairly reconcile differences.

Rep. Roger Hagan, R-Great Falls, said stricter restrictions are needed on the brewers. He said brewers are taking advantage of laws, revised in the late 1990s, that allowed the breweries to retail beer sell up to 48 ounces of beer a day to customers before 8 p.m.

He said that law was intended to let wholesale breweries offer a little taste to retail customers. The lawmaker argued that some breweries now sell almost all their product to customers and resemble bars.

Tavern owners testified that they enjoy selling locally made beers to customers. They argued that unfair retail competition from the breweries, however, is limiting the availability of such beers for the retail bars.

Hagan’s bill would require many retail breweries to buy a new state license for $100,000. Wholesale operations would not need the license.

The bill received support from one large brewery, Big Sky Brewing Co. in Missoula, which said it is too large and exceeds production limits to open a tasting room under the current law. The brewery supported the way the new bill would allow it to open a tasting room with the new special license, or perhaps even buy an all-beverage license that would allow expansion perhaps into food or other businesses.

But the rest of the brewers in the state opposed the law. They argued it would stifle growth in the industry.

The brewers are instead suggesting a two-year study with the aim of producing new rules that everyone can support. They said Hagan’s bill is being wrongly sold as a way to help the industry expand with new licensing rights.

Farmers who sell grain to the breweries and customers who enjoy the beer also opposed the bill.

“It was crafted by the Tavern Owners Association, and it is meant to benefit the Tavern Owners and it will crush many of the small-town mom-and-pop breweries in Montana,” said Helena attorney David Hull, who said he enjoys the breweries.

Hull argued tavern owners get a lot of extra rights with their liquor license, including the ability to sell all beverages and profit from gaming.

The breweries argued that they don’t want the rights to those businesses and enjoy the current model that limits hours and consumption. Many of the very small brewers said they have built modest retail business plans that would be jeopardized under the proposed bill.

“It is flawed in many ways and it would put us out of business,” said Rob Jarvis of Philipsburg Brewing.

The committee did not take immediate action on either bill.

Brewery Bills to be Heard Tuesday, March 26th

Posted On March 21, 2013

OPPOSE HB616:

• You support the craft beer industry in Montana and want to preserve it, and do not want to see further unwarranted restrictions.
• HB616 will limit small brewers’ access to markets and create barriers to grow their businesses.
• HB616 will kill jobs in small main street businesses in Montana, and limit market entry.
• Buying into the current quota system by purchasing licenses is not the end-all answer to how manufacturers should be treated in the alcohol code.
• HB616 comes to them without the proper consideration of all parties and that the subject is too important to make decisions without all the facts.
• Montana Distributors also oppose HB616.

SUPPORT HJ18:

• HJ18 provides a balanced, sensible approach to review the very complex licensing system in the Montana, and is preferable to HB616.
• Time is needed for all parties to look at the many alternatives to determine how brewers are treated within the licensing system.
• Such a review has never been done and could yield many beneficial recommendations to the next legislature.
• HJ18 is supported by craft beer fans around the state as the proper way to address these issues.
• HJ18 will create an opportunity for all parties including retailers, distributors,
• manufacturers, economic development, tourism, agriculture, and the public to be heard in the process.
• Montana Distributors support HJ18.

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LET YOUR VOICE BE HEARD

MBA Develops Resolution to Review Montana’s Restrictive Alcohol Control Laws

Posted On March 19, 2013

Montana Brewers Association continues to resist further limitations to Montana brewers being sought by the Montana Tavern Association in Roger Hagan’s bill LC1429. Though the language still has yet to see the light of day, recent proposals by the MTA would dictate that existing breweries could now purchase beer/wine licenses for $100,000, while at the same time barring brewers from selling their beer on premise if they manufacture over 300 barrels of beer per year without further retail restrictions. Also, new entrants to the market would not have access to these specially released licenses, and current tap room laws would be further limited by requiring all patrons to be out of the building before 8 PM. I guess they have decided that popcorn in sample rooms can stay legal.

Believing all along that there had not been the adequate discussion among the industry members, and with the help and support of Rep. Christy Clark (R-Choteau, and House Majority Whip), we have created a House Joint Resolution 18 which would create a legislative interim study regarding aspects of Montana alcohol control laws involving licensing of retailers, brewers, distributors.The alcohol control system is complex indeed, and time is needed to research these issues and the many alternatives available to the state in order to really move forward with this issue. We believe that taking time to study these complex issues will help us develop comprehensive solutions that Montanans deserve. We have come to realize that in order to bring the members of this industry to the table and have constructive discussions, we will have to do so in this more formal manner with the assistance of the legislature.

Included in HJ18 would be interests from the retailers, distributors, manufacturers, while also taking input from tourism, agriculture, economic development, and regulators. We have found immediate and excellent bipartisan support for HJ18. Furthermore, the Montana Beer and Wine Distributors Association, and the Restaurant/Retailers Association have also chosen to stand behind this interim study. You can find the language of the resolution and follow its progress through the Capital on the LAWS system here.

Currently, HJ18 has been referred to House Business and Labor Committee and is due for a hearing in the coming weeks. Please thank Rep. Christy Clark for sponsoring HJ18, and Rep. Ellie Hill (D-Missoula) for letting us use her placeholder bill request. Please call your legislators and tell them to vote YES for HJ18 and its sensible approach, and to vote NO for LC1429, the Montana Tavern Association’s 60/40 bill. Tell them that LC1429 is wrong for Montana, and HJ18 is needed to move forward. Operators are standing by to take your calls at (406) 444-4800.

Be sure to stay tuned! More important updates on both LC1429 and HJ18 will be arriving on our Facebook and in your inbox!

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Check out some great editorials in support of Montana Breweries:

Montana Craft Brewing Under Attack
– Missoulian –

Tavern Association Proposal Would Kill Local Breweries
– Billings Gazette –

If you are passionate about the future of Breweries in Montana, get involved and write an editorial in your local paper to support our wonderful industry!

Old tensions based in archaic laws

Posted On March 17, 2013

Tension between the Montana Tavern Association and Montana Brewers Association has been too common in recent legislative sessions. And this year is no different, as two bills are about to be introduced.

The tension between the two organizations has its roots in Montana’s liquor licensing laws.

During this legislative session, the main friction between taverns and breweries is focused on a bill sponsored by Roger Hagen, R-Great Falls. Hagen’s bill, which has the full support of the MTA, is expected to be introduced next week and would dramatically change the way small breweries are governed.

The main change this legislation would bring is the requirement that small breweries producing more than 300 barrels a year to be licensed through the state liquor control division, similar to a bar, if they want to sell their product in their tap room.

MTA says the bill will level the playing field between bars and brewery tap rooms, which have seen a huge increase in popularity in the last few years.

MTA’s main problem with tap rooms is that, in their opinion, they have become defacto bars, rather than just places to sell a local brewery’s product.

“The sample rooms were never supposed to be operated as bars,” said John Iverson, MTA’s lobbyist. “The sample room privilege was never designed to be used the way it is being used.”

Iverson contends that many breweries sell the vast majority of their product through their tap rooms, or sample rooms. The privilege he refers to was a 1999 law that allowed breweries to sell their beer in the tap rooms, but only between the hours of 10 a.m. and 8 p.m. Additionally, breweries can only sell 48 ounces of beer per day to an individual.

The idea with the 1999 exemption was that breweries would focus more on the production of beer and leave the serving of it largely to the taverns.

However, local breweries tapped into a need with consumers in many communities to have a place to gather for a beer that didn’t have gaming machines, hard liquor and was family friendly. Breweries in many communities have become a social hang out for people who don’t frequent bars, but still like a low-key place to socialize.

And though Iverson claims the tap rooms are being operated as taverns, Brad Simshaw from Blackfoot brewing in Helena disagrees.

For breweries, the successful business model is one that is in many ways the antithesis of a bar, Simshaw said.

The Blackfoot Brewery for example doesn’t have televisions and is well-lit and since it doesn’t have an all beverage liquor license, like a typical bar, there are no gambling machines.

And unlike a bar, Simshaw has to stop serving beer at 8 p.m. and has to keep track of how much beer he serves each patron.

If MTA’s legislation were to pass breweries, like the Blackfoot, would need to buy on premises beer sales license from the state. Like all liquor licenses, these are available on a quota system in Montana’s incorporated communities. That means the number available is based on population. By limiting the quantity, the quota system makes liquor licenses expensive in many Montana cities.

However, with the license, breweries could operate essentially like a bar – sell as much beer as they’d like and stay open as long as they’d want, Iverson said.

Under current law, breweries that produce more than 10,000 barrels a year cannot sell beer in a tap room. They can still have tap rooms, but they must provide the samples for free.

With MTA’s bill, this restriction would be lifted by requiring the on premise sales beer license. The bill actually gives breweries an opportunity for growth that currently doesn’t exist, Iverson said.

If a license isn’t available to a brewery, under the proposed legislation, the state would offer a new license for the kingly price of $100,000.

“This guarantees no brewers will be pushed out of business by this revision in law,” he said.

However, the interesting thing about MTA’s bill is that it really has nothing to do with taverns owners – the group the organization is supposed to represent. The goal of the legislation is simply to further regulate breweries, which MTA sees as the chief competition for their members.

Ultimately, MTA’s bill misses the point. The problem isn’t the lack of regulations on breweries, it’s Montana’s liquor licensing system in general.

It’s time to take a complete look at how liquor licenses are issued in Montana. The quota system for licenses is in direct opposition to the free market. It limits the availability of licenses, which then drives the cost up. In some larger Montana communities, all beverage liquor licenses can go for more than $1 million.

However, since the system has been in place since 1947, tavern owners have made substantial investments into the licenses they own. For many it’s their retirement investment.

But the difficulty in obtaining a liquor license stifles economic development by making it far too difficult to open new bars and restaurants. It also makes it necessary for the MTA to try and keep their thumb on breweries because they are trying to do whatever they can to protect the value of their licenses.

But if you step back and think about it, taverns and breweries ought to easily find ways to work together. Montana is becoming known for its small breweries and their high quality product. Owning a tavern with a line of taps from Montana brewers should be profitable business model.

There’s another bill that is getting ready to be introduced in the legislature by Christy Clark, R-Choteau, which would call for an interim committee to study the liquor licensing laws. We support the idea of an interim study and look for lawmakers and folks from both MTA and MBA to sit down and find a better way forward.

Eventually Montana needs to make liquor licenses more readily available, continue to enable and support Montana’s blossoming craft beer, wine and spirits industries, and protect the investments made by current liquor license holders.