Wednesday, January 16, 2013

Montana Tavern Association Takes Aim at Montana Tap Rooms

Montana doesn't have tap rooms, a point I'm reminded about by John Iverson, the new lobbyist for the Montana Tavern Association.  They have sample rooms.  That's what the law calls them.

From the MTA's perspective, they've become far too successful.  One industry representative who asked to remain anonymous describes it this way: They were supposed to be small, concrete rooms with whitewashed walls - instead, they've become the most popular bars in the state.

We've written about them many times.  There's something special about Montana's tap sample rooms. Intended or not, the tap sample room limitations (48 ounce/person/day between 10 am and 8 pm) have created family and community friendly places to gather, catch up on all the news, laugh with friends, and enjoy locally made beer straight from the source. All before 8 p.m.

That's not okay, says the MTA.  They were never intended to have pool tables, frequent live music, or otherwise be warm, comfortable and inviting places.  These amenities should be reserved for those who purchase beer/wine, or all-beverage licenses like the MTA's members. 

John readily admits Montana's breweries and their tap sample rooms are complying with the laws as they're written.  Its the spirit and intent of the law they're violating and the MTA wants to do something about it.

The MTA is pushing a bill currently in the drafting stage titled "Limit beer sold on premises of small brewery to 10% of annual production." It is identified as LC 1322.  Though the text of the bill is not yet available electronically, the title tells everything you need to know to understand it.  [Note: as of 1-17-13, the title of the bill request has changed.] The bill has been requested by Representative Jeff Welborn (R-Dillon) who, perhaps not coincidentally, does not have a brewery in his district.

Another bill in the works from Representative Ellie Boldman Hill (D-Missoula) would allow breweries to "stack" licenses. Breweries are not allowed to own all-beverage or beer/wine licenses under current law.  Representative Hill's bill would change that, allowing breweries to also purchase an all-beverage or beer/wine license. Such a license would effectively allow the brewery to eliminate the tap room limitations of 48 ounces, per person, per day, while permitting sales between 8 am and 2 am. It is not at all clear whether the MTA's bill is in cooperation with Representative Hill's bill, or in retaliation for it.

That's the model the MTA prefers because, the MTA says, it puts the breweries on a level playing field with its members.  Breweries are set up to be manufacturers who supply the taverns with product for retail sale.   Thanks to the quota limits on licenses, it also means the breweries would need to purchase existing licenses from the MTA's members if they wanted to stay in the retail game.

According to the MTA, eight (going on nine) breweries currently operate with "closely affiliated" licenses.  Think Tamarack Brewing Co.  Tamarack's Lakeside location has all the look and feel of a brew pub.  In reality, the brewery is separate from the restaurant and bar and has no tap room.  Thus, the MTA's bill would have no effect on Tamarack because 100% of the Tamarack's sales come from distribution, not tap room sales.

Because Lakeside, MT, is in a quota area with excess licenses, Tamarack's closely affiliated restaurant/bar was able to purchase its all-beverage license for $400.  Conversely, it's Missoula restaurant/bar (which does not produce beer and is in a quota area where licenses are over-allocated) paid $750,000 for its all-beverage license.  Great Northern (Whitefish), The Front (Great Falls), Montana Brewing Co. (Billings), and Lone Peak (Big Sky) are some of the others operating under this model.

Although many Montana breweries currently sell 85% to 100% of their production at the brewery, the MTA does not believe the bill will have disastrous consequences.  They have prepared numbers to show that breweries are perfectly capable of switching to a 90% distribution model, in large part because profit margins on a keg of beer are high.  The fallacy in the argument is the presumption that the market - provided by the taverns - can absorb such a switch.

Tap and shelf space is limited.  The success of Montana's tap sample rooms demonstrates the taverns are not providing an experience Montanan's want.  To this, John notes Montana's breweries will need to convince taverns to convert taps from, say, an AB-InBev product to a local product.  If they can't . . . .

Montana's breweries gained the right to sell beer for on-premise consumption during the 1999 Montana legislative session.  It was a grand compromise struck between the MTA, the breweries and others.  There were also only a handful of breweries at the time. Not even the most optimistic among us could envision the explosion in craft beer's popularity.

Fast forward to 2013.  There are 36 distinct breweries with three more under construction. Approximately two-thirds of those will be affected by this bill.  New breweries will need to think much harder about jumping in.  There is no other way to put it:  this bill is a serious game changer.

No matter how you slice it or what kind of spin you put on it, the breweries are playing by the rules they've been given.  They have made decisions and invested millions of dollars into their facilities based on the rules we can all read.  They are creating jobs, buying Montana agricultural products, and making significant contributions to Montana's economy.  If their tap sample rooms were intended to be small, concrete rooms with whitewashed walls, someone forgot to insert those provisions into the law.  Whatever compromise was reached in 1999, a brewery opening in 2013 cannot possibly be expected to follow unwritten rules it had no part in creating and can't find anywhere under the actual law. 

Yet, the MTA says it IS in the law.  That's why Montana law calls them sample rooms, not tap rooms.

During the 2011 Legislative Session, the breweries tried to shift the tap room hours to 12:00 pm to 10:00 pm.  The MTA cried foul, loudly decrying the brewers for reneging on the deal struck in 1999. Yet, when faced with the suggestion that the MTA's bill does just that, John vehemently denies it.  The bill is intended to return brewery tap sample rooms to what they were intended to be in 1999, the MTA says.

Whatever you call them, they are nevertheless sample rooms which - since 1999 - have been allowed to sell each patron 48 ounces per day between the hours of 10 am and 8 pm.

Whether any of us want to couch this bill in terms of an old compromise, the spirit of the law, the intent of the original legislation, or any other spin, it's really about one thing: competition. And as long as we're being accurate, there are no "taverns" under Montana's alcoholic beverage laws.  They are "licensed retail establishments."

It remains to be seen whether LC 1322 will be actively pursued or is being drafted to serve as a warning.  Either way, what promised to be a rather innocuous legislative session just got a lot more interesting.

For all our articles pertaining to the 2013 Montana Legislature, click here.

11 comments:

  1. To stop this nonsense, it is necessary for patrons of Montana's breweries to make their voices heard. The MTA has been around for a long time and has a powerful reputation. But its membership is limited to license owners, so it's a relatively small constituency. What the MTA has done well over the years is leverage the support of other organizations to make its power seem greater. But let's face it, a bar is a bar. People might prefer one place over another, but if a place closes or a better place comes along, most people say so be it.

    And yet people are passionate about their breweries. It's these people who need to speak up. And the sooner the better. A good place to start would be to email Jeff Welborn, the sponsor or LC1322, to let him know why his proposed bill is a bad idea. His email address is jeffwelborn@hotmail.com. Another idea: call John Iverson, the MTA's lobbyist, and let him know you will refuse to patronize MTA members if the MTA continues its attacks on Montana's breweries. Mr. Iverson's number is 406-459-3344.

    I am not advocating profanity-laced tirades, anonymous threats, or anything of the sort. Indeed, I encourage anyone who contacts these individuals to be respectful. But the more people these individuals hear from, the better. They need to understand that Montana's breweries have a powerful voice behind them, a voice more powerful than any lobbying group, that of the people.

    Do you love your local brewery? Do you love knowing you can head to any number of towns in Montana and grab a locally-made beer in a friendly atmosphere? Help Montana's breweries out by making your voice heard and put a stop to MTA's baseless attacks.

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  2. Thanks for your comments, Travis. I second your note about responding to the issues - no matter your perspective - in a respectful manner. Mr. Iverson gave me the courtesy of fully explaining his organization's position. Our discussion was friendly and included some good, spirited debate about the issues. I appreciate his willingness to contact me - even knowing many readers of Growler Fills might not agree with the MTA's approach.

    Alan.

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  3. I just contacted John Iverson about LC 1322, I have proposed that LC 1322 be amended to state that all taverns in Montana should sell 90% Montana Manufactured beer, 10% could be manufactured outside the state. I think most brewers would find this satisfactory.

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  4. Draft is now on hold, good job to all that contacted the appropriate individuals!

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  5. Indeed that is correct. I am told the bill is being shelved and will have more details soon.

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  6. Way to go, Alan and Growler Fills. Great article. Here is my $0.02. I agree it would be nice to have all segments of the industry work peacefully together, but given our archaic liquor laws, what is the chance of that happening?

    This bill might be temporarily shelved, but we craft beer fans best not forget it. Sooner or later, MTA will make a major run at what they call "unlicensed beer bars" aka "sample rooms." Instead, of course, they should be looking at what makes the taprooms so successful and then try to emulate it. A good start would be selling mostly Montana-made beer, as a few of the smart ones are starting to do.

    My concern is that many Montana brewers have abandoned their trade association, the Montana Brewers Association. Only 25 of the 39 breweries are currently members, and if we and the brewers want to win a battle with the MTA, still the strongest lobby in Montana, we had better stick together. I suggest taking the opportunity to ask all the Billings breweries, Lone Peak, Bayern, KittleHouse, Harvest Moon and Bowser why they want to be out there on their own fighting this battle instead of sticking together with their brethren and presenting a unified front when the time comes. And it will come......Bill Schneider

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  7. Bill,

    You have touched on a subject I have been quietly investigating for a while. Send me an email some time and let's talk. alan@missoulabeerweek.com.

    Alan

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  8. I am glad to see the MTA is backing off. I really feel that micrew brew lovers need to still email their State Rep. requesting that these antiquated licensing laws be changed. As it stands now the laws are for the benefit of tavern owners and limit competition. Our laws should be designed to benefit all citizens of this State. Limiting competition hurts everyone!

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  9. Hi Alan
    Please correct Bill Schneider: It's Kettlehouse - not "Kittlehouse".
    Thanks
    Tim O'Leary
    Founder
    Kettlehouse Brewing

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  10. I sent a message to the RNC. Maybe they'll talk some sense into the guy (or kick him to the other side of the aisle, at least). I agree with your interpretation of the motivations for this bill. It surely can't be a desire to limit on-site alcohol consumption or public safety concerns, as a huge brewery with, say 1 million barrels of production/year could legally sell 100,000 barrels of beer on-site per year; whereas a much smaller producer (say one producing 1000 barrels per year) would not be allowed to sell more than 100 barrels on site per year.

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  11. Tim, Kettlehouse does have a much better ring to it. I'm quite sure I don't know what a "kittle" is. Or why it would need a house.

    Alan.

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