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Are states waging war on craft brewers?

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Wisconsin’s Motion 414 worries small brewers.

By Tim Cigelske

Two days before Wisconsin’s governor signed the state budget into law, Furthermore Brewing Co. sent out an urgent email to its customers: “Will Furthermore die at the hands of Motion 414?” owner Aran Madden wrote.

He’ll soon find out.

Days later, Governor Scott Walker signed the state budget into law without the veto of Motion 414 that Wisconsin’s craft beer community and politicians from both parties had been calling for. Now, the resulting regulation has the state’s small brewers worried that the changes will have an unintended and severe negative impacts on their businesses.

“Most craft brewers already have competitive disadvantage written into their business plans, quite literally,” Madden said. “We don’t need to have the state piling on.”

As devised, Motion 414 was apparently meant to bolster the state’s three-tier distribution system by implementing new requirements that would prevent the likes of Anheuser-Busch from buying up distributors in Wisconsin. This would protect Miller-Coors, its biggest competitor and the state’s largest brewer.

Wisconsin and other state governments regulate the distribution of alcohol through three independent tiers: manufacturers, wholesale distributors and retailers. This system was originally devised following Prohibition to protect against monopolies and provide clearly accountable sales and tax records.

Not everyone is happy with this model. In an open letter protesting Motion 414, Wisconsin’s Tyranena Brewing Co. called the system “dysfunctional,” and opponents say the motion may threaten small brewers, especially those that are licensed wholesalers, have tasting rooms or operate brew pubs.

The entire 9-page motion can be found on page 281 of the Wisconsin budget here, and commentary from the Madison Beer Review here.

Wisconsin isn’t the only state where craft beer distribution has recently become a hot-button political issue. In Texas, HB 602 and 606 would have given permission to breweries to sell beer on tours and allowed brewpubs to distribute outside their business, but the bill died in the legislature after opposition from Anheuser-Busch and some distributors.

In Wisconsin, Futhermore is a model of a craft brewery put in a perilous position due to politics. The brewery based 35 miles west of Madison in Spring Green has been known for adventurous styles of beer, including the pepper-infused Knot Stock and coffee lager Oscura.

But Madden warns that may all come to an end. Currently, Futhermore operates as a wholesaler because it brews by contract, and under new regulations it would have to sell to 25 different retail outlets–20 more than it does now. Their choices seem to be paying annual fines of $10,000 or spending even more to reconfigure how it distributes, according to Madden.

“It does seem that the end run–going the way of the budgetary rather than legislative process–makes it easy to forget who gets affected by the changes proposed,” Madden said. “And there are quite a few.”

This may also threaten tasting rooms, says Wisconsin Brewers Guild President Jeff Hamilton. In Wisconsin, tasting rooms are licensed as bars. In the past, when a bar is sold, the liquor license is sold with it. But this law prevents breweries from having a liquor license, so they are unable to sell any bar that they start, eliminating the franchising business model for expansion.

“This law removes portable assets from the breweries portfolio with the stroke of a pen,” Hamilton said.

Reaction against Motion 414 has been heard throughout the state, from Wausau’s Red Eye Brewery dumping out Miller-Coors products to conservative talk radio host Vicki McKenna and dozens of others posting in opposition to the measure on the governor’s Facebook page.

“The craft brewers are Wisconsin heritage,” McKenna wrote. “Sacrificing them is not required to help our friends at the big brewing companies.”

In an open letter to Governor Scott Walker, the Wisconsin Brewers Guild warns that the danger to breweries is real and imminent, and by extension hurts the local economy.

“Tragically, policy changes inserted into the state budget passed by the legislature will seriously impair our existing and future small breweries from meeting our goals, and will likely cause the loss of jobs here in Wisconsin,” the letter states. “Why would we want to stifle Wisconsin’s entrepreneurs by limiting the options available to them to grow their businesses?”

But in the immediate aftermath of Motion 414’s passage, it’s unclear how breweries are going to react–or survive.

Wisconsin’s craft beer drinkers, however, are helping in one of the remaining ways they know how.

“It’s more important than ever to drink local,” said Wisconsin craft beer enthusiast Mitch Jurisch.

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