In the comment thread to yesterday’s post, Surly Brewer Todd Haug offered some clarification about Surly’s intentions saying, “We are asking to sell pints of our beer. No back door sales, no full liquor, no packaged beer sales.” This more specific explanation is extremely helpful. Specificity is important, especially when dealing with legislation where every word counts and what is not said is often as important as what is said. Earlier statements by Surly (here and here) that were picked-up and repeated by the media said, “We can’t be licensed as a brewpub because we brew too much beer so Minnesota law currently says we can’t sell beer in the new brewery.” These statements suggested, to me at least, a much bigger goal that would have necessitated either a redefinition of “brewpub” in the statutes or a significant expansion of what is allowable as a large brewery. Either way it would have been a tricky legislative debate.
The less ambitious aim means that the law could conceivably be changed with a simple, narrowly worded statement allowing breweries to sell their own draft beer for on-site consumption at a restaurant or beer garden attached to the place of manufacture; something akin to the subsection that now allows growler sales at small breweries, except that it provides for on-sale instead of off. It would not require a change to the existing brewpub license. Because it would not require a retail license, it gets around the statute forbidding manufacturers from having an ownership stake in any entity holding such a license. Depending on how it is worded, it could still be interpreted to allow limited on-sale by other breweries in tasting rooms. It’s still a tricky legislative debate, but perhaps not quite as tricky.
My thanks to Todd for the clarification.
Todd’s clarification is also helpful in examining the arguments against Surly’s plan.
The only organization that has thus far made public statements in opposition to the plan is the Minnesota Licensed Beverage Association (MLBA). The MLBA is a business association representing the retail tier of the three-tier system; bars, restaurants, and package stores. Their website states that since 1952 they’ve “been helping licensed beverage retailers in Minnesota with educational programs and government affairs services designed to promote and protect their business.” The organization offers retailers a range of services including discounted alcohol liability insurance, alcohol server training, business development counseling, as well as tracking, information, and lobbying on legislative issues.
The MLBA was quick to oppose Surly’s plan. In a statement made to Tom Scheck of MPR News the day after Surly’s announcement, organization representative Frank Ball said:
It’s pretty simple within the parameters of the three-tier structure we have in Minnesota. The manufactures make the product, the wholesalers distribute the product and we, the retailers, sell the product to the consumer. It’s even more simple if you say it the way my retailers say it: “you make it, we’ll sell it”…you make it ‘and’ sell it, we won’t buy from you”.
The reason for the three-tier structure was to keep the integrity of the distribution of a controlled, highly regulated, commodity. Alcohol — like prescription drugs or firearms — is no ordinary commodity. In fact, alcoholic beverages are the only commercial products specifically named in the United States Constitution. Because our society recognizes the importance of controlling alcohol use and access, alcohol has always been treated differently under the law than most other products.
The manufacturers (breweries, vineyards and distilleries) supply distributors. Under the laws which created the three-tier system, each level of the system is independent of the others, ensuring accountability to the public as well as the benefits of healthy competition. By preventing tied houses (i.e. Retailers that sell the products of only one supplier), the three-tier system limits the number of retail outlets and therefore promotes moderate consumption, hence our position with the Surly matter. We want the Surly product to sell in our stores, we don’t want the manufacturer of a great beer to sell to the public, we’ll do that enthusiastically as possible.
While it is true that the current law is rooted in the manufacturer/retailer separation mandated by the three-tier system, Ball’s opening argument amounts to “this is how it is.” In a more recent statement he reiterated that argument even more explicitly saying, “This is Minnesota. These are the rules.” Simply stating that something is one way or another doesn’t amount to a convincing argument for why it should remain that way. He claims no specific benefit from maintaining the status quo, nor does he cite any possible harm that would come from changing it. He also fails to account for exceptions to the system that already exist, such as the farm winery license that allows wineries to sell product at the manufacturing facility for on or off-sale, something that goes further than what Surly is proposing.
At the end of his opening statement Ball resorts to blackmail saying, “you make it ‘and’ sell it, we won’t buy from you.” This seems to me a difficult claim to substantiate. While I admit that my intelligence is hardly comprehensive, the retailers that I have heard from all support Surly’s plan and would happily continue to sell the brewery’s products. Aside from this, blackmail is never pretty. It’s thuggish. It is not an effective way to win friends and influence people.
He next makes a historical argument that alcohol has always been treated differently. There is some truth in this statement. Alcoholic beverages have been a tightly regulated commodity going all the way back to colonial times. However, they have not always been regulated in the same way. The three-tier system wasn’t put into place until 1933. Saying that regulation has always existed isn’t a sound argument for any particular form of regulation.
In the third paragraph he makes the statement that, “Under the laws which created the three-tier system, each level of the system is independent of the others, ensuring accountability to the public as well as the benefits of healthy competition.” While this may be true of the intention of the underlying laws, many would argue that the reality of their implementation does exactly the opposite (see Arguments against the three-tier system in yesterdays post). They contend that large breweries are able to game the system to their own anti-competitive advantage and that distributors have become the ultimate decision makers on what gets to market, giving them the ability to make or break a small producer.
He further states that the three-tier system “promotes moderate consumption.” There is little evidence to support this claim. During prohibition, the time of greatest regulation of alcohol in the nation’s history, alcohol use actually rose. The Schaffer Library of Drug Policy states on their website, “National alcohol prohibition began in 1920. Apparent alcohol use fell from 1914 to 1922. It rose thereafter. By 1925, arrests for public drunkenness and similar alcohol-related offenses were already above the pre-prohibition records. Consumption by women and children increased dramatically.”
I already discussed many of Surly’s arguments in favor of the brewery plan in part one. I won’t discuss them again here. However there is one argument being made by supporters that needs to be examined; the “they do it in other states” argument.
I can already hear my mother saying, “If they were jumping off cliffs in Colorado (or Oregon, Wisconsin, etc.) would you jump off a cliff?” The fact that something can be done elsewhere is not by itself a compelling argument that it should be done here. As stated in part two, every state has the ability under the federal law to regulate how the three-tier system is implemented. Some states have an even more restrictive approach than Minnesota, such as those in which the state monopolizes both the distribution and retail tiers. The case could just as easily be made that Minnesota should adopt one of these more restrictive models. If the “other state” argument is to be used, concrete reasons must be given, be they economic, cultural, or otherwise, as to why another model is better for Minnesota than the one we currently have.
I think that some people might have taken my last two posts to be an attack on Surly or the brewery proposal. I assure you that this is not the case. I called this “calm reflection” because that’s what is. It is my attempt to think through situation and make sense of it without the hype and hyperbole that was coming from all sides. Some of my conclusions have been challenged. Great! I love a good debate. I’m willing to listen and be convinced. Where I was convinced I have made the effort to correct previous statements.
In the end, I am fully behind Surly’s cause. I find the idea exciting. I applaud their success. I think the facility will be good for craft beer not just in the state, but in the whole upper-Midwest region. I wish them luck and will do what I can to support them.
In any event, it’s going to be an interesting fight. I look forward to watching it play out.
Read Part One
Read Part Two