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.