Tuesday, March 19, 2013

Text of Montana Tavern Association Bill to Restrict Breweries Released

The text of the Montana Tavern Association's proposed bill to restrict brewery tap room sales (or force them to buy a retail license for $100,000) is now available on the Montana Legislature's website.

The bill is currently known as LC 1429 and the text is "unapproved" and subject to change until introduced to the Legislature.  [UPDATE: The bill was introduced on March 20 and is now knows as HB 616.]  Given its length and breadth, it will take time to digest, but it is clear from the outset that there are significant consequences that are not readily apparent. For example, the $100,000 license would not be available to any brewery which opens two years from the effective date of the act. Such a brewery would have to buy one on the open market.

At the bill notes, the amount of beer which may be provided "for consumption in a sample room decreases as beer production increases." But get this, "[b]eer that is sold on the premises for consumption on or off the premises is counted as beer provided in the sample room." Thus, the amount of beer that can be sold in growlers also decreases as production increases, forcing a brewery to decide whether it wants to keep more for patrons to enjoy at the brewery by suspending growler sales.

Perhaps most patronizingly, the bill would add the following language to the "purpose" section: to "provide a mechanism for a brewery to expand marketing of craft beer."

Much more commentary to come.

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

29 comments:

  1. Please people, email or call 406-444-4800 and ask your State Rep. to vote no on LC1429. This is the only way we can get this economic train wreck killed!

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  2. The bill will first go to House Business & Labor Committee. Hearing will be this Mon @ 8 or 9 AM. Your first round of contacts should go to members of that committee. I've been told that the MTA claims they have the votes to get it out of committee. So focus on Committee folks. You can find members on the Legislature's website.
    Dennis H

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  3. Patronizing, indeed. If the purpose of the bill truly is to "provide a mechanism for a brewery to expand marketing of craft beer," why weren't brewers invited to participate in the drafting process? Why weren't brewers asked what would help them "expand marketing of [their] craft beer?" Why are brewers vehemently opposed to the bill? These are rhetorical questions, of course, because this bill has nothing to do with promoting, expanding, or supporting Montana breweries. The only purpose of this bill is to curtail a highly successful industry and make further expansion next to impossible. Anyone who says otherwise is simply - to put it bluntly - lying.

    If passed in its current form, this bill will have far-reaching ramifications. For example, the $100,000 "restricted beer retailer's license" is available only to "[a] licensed brewer that operated a small brewery with a sample room on the effective date of [the] act," and, even then, only if purchased within two years. Unless a brewery like Kalispell Brewing Company gets its brewery and tap room up and running before the effective date-the date the bill is signed into law-it's SOL. And if breweries like Philispburg Brewing Company, Draught Works, or Desert Mountain can't come up with 100 grand within two years, they're also SOL. To say nothing about the additional quota system that would be created with the limited number of "restricted beer retailer's licenses," which would undoubtedly pit established breweries against new breweries, to the extent a new brewery would even be possible. And, of course, a quota system for retail licenses is the underlying problem that has us in this mess.

    To put it simply, this is a bad bill that should have been laughed out of Helena the minute it was conjured up in the collective minds of the MTA. The fact that the MTA was able to find a sponsor, let alone people who have said they will support the bill, is further proof that the pledges we hear from politicians in Helena that they are going to create jobs and support small businesses is nothing more than empty rhetoric. If the Legislature really wants to show it's behind small businesses and job creation, it will send this bill down to the fiery defeat it deserves.

    In addition to contacting committee members, I urge people to contact Governor Bullock and ask him to voice his opposition to the bill. While he has not been great about taking stands on issues until absolutely necessary, it would be great to have him say this bill is dead on arrival if passed. Maybe he could even promise to borrow Schweitzer's biggest VETO branding iron to send the message that this type of special interest, anti-jobs, anti-business, anti-consumer, anti-Montana bill will not be tolerated.

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  4. So, looking through the bill - can't find where no music or popcorn is allowed in Breweries - You guys weren't making that up were you? Look, you want to be a bar? Buck up and do what ever other Montanan that wants a bar has to do - Buy a License! Heck, Flathead Brewing must have license as they are going to sell other beer in their restaurant. Its not just bars - its other Brewerys, its Applebees, its Famous Daves and yes its Mom and Pop Bars. Play by the same rules is all they are asking.

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  5. I don't know who you mean by "you guys," but no one was fabricating the prohibitions on music, food, etc. Those restrictions were included in an earlier version that was not publicly released. Depending upon who you ask, they may or may not have been included by the sponsor without MTA approval.

    But the "play by the rules" argument doesn't fly. The breweries ARE playing by the rules. The rules were established in 1999 and the MTA has admitted the breweries comply with them.

    Plus, there isn't one set of rules that applies to retailers. If you have a restaurant beer and wine license, you can't even have a bar and can't serve alcohol unless someone also orders food. If you have an all-beverage license, you are allowed to have gambling machines, the "golden egg" of the alcohol world.

    The breweries ARE licensed to sell alcohol for on-premise consumption, but have significantly fewer rights than the bars (maximum of 48 oz. per person per day and only between 10:00 a.m. and 8:00 p.m.). Not only that, but they have to follow the same standards as everyone else (alcohol server training, no over-serving, etc. etc.)

    The "play by the rules" argument is nothing more than spin.

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  6. Alan, just to be clear, the bill does NOT prohibit live music and popcorn - as was claimed before the text became known. The "you guys" is perjorative for those screaming the loudest against this bill.

    As for playing by the rules - Yes, most breweries are playing by the rules. Agreed. But, having been in the all-bev industry for 25+ years I can assure you there are those that love to push the boundary. Personally, I haven't seen it in the brewery industry where I live, but, I work to much to go out and visit every brewery. The Breweries that I know that want to be a bar have gone out and bought a license and run a seperate entity attached to their brewery - this bill makes that easier, btw. However, apparently there are breweries that have pushed the envelope and this bill addresses that.

    You are incorrect that a "restaurant" beer and wine cannot have a bar. In fact, most DO have some form of a bar and you CAN order alcohol without food. I have personally done so. However, there is a limitation on alcohol sales, etc., If you purchased an all Bev license, then yes, you do have priviledges that other licenses do not and you paid dearly for them. But, Gambling is not the panacea you and others apparently believe it is - most machines are not operator owned for example. Alcohol sales are an important source of revenue for any operator.

    This issue is fairness. If I paid six figures for a license, do you get to do what I do for free? Am I not a citizen, too? I know regulation sucks. Tell me about it, I've jumped through the hoops for a long time. Its not fun, but its the way it is. Every State is different. Its called the 21st amendment. But, all in all, when I look around I see plenty of places to go have a beer. So, maybe its working.

    Anyway, the bottomline is this - this bill does not impact negatively Brewers that want to be Brewers. If you are a Brewer that wants to be a Bar - congratulations, this bill just made that easier. However, if you are a Brewer that just wants something for nothing - time to wake up and smell the IPA. Just mho.

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  7. In response to Anonymous, yes, I know who "you guys" are, I was merely being polite.

    I am not incorrect about restaurant beer and wine licenses. See Section 16-4-420, MCA. A restaurant beer and wine license is the official name for what most of us call a "cabaret" license. With a restaurant beer and wine license, alcohol may only be served from a service bar, not a "bar" as we typically understand it and patrons must order food in order to get alcohol. In fact, at least 65% of the restaurant's gross income must come from food sales. The law even goes so far as to say such an establishment may not imply or suggest that a patron can order alcohol without also ordering food. (Section 16-4-423, MCA.)

    You're thinking about a straight up beer and wine license which is Section 16-4-104, MCA, and has much greater flexibility.

    We do agree on several things. Yes, there are breweries which push the boundaries of the law. Conversely, I've seen plenty of bars over-serve on a regular basis. We can all point to violations throughout the system.

    We also agree it is about fairness. Why is it fair that one restaurant with a certain type of license can't have a bar, can't serve a drink without food and can't serve alcohol past 11:00 pm, while another restaurant with a different retail license can have a bar, doesn't have to serve food with the beverage and can serve until 2:00 a.m.? For obvious reasons, the price for those licenses varies significantly on the open market.

    The brewers aren't getting their right to sell alcohol for free. They jump through the hoops to meet federal and state requirements. They have significant investment in equipment. They get to sell it for on premise consumption, but only in limited quantities during limited hours and only if they stay under 10,000 bbl of annual production. If their product sucks, they can't just switch it out for someone else's. And guess what? They pay state and federal taxes on every barrel of alcohol they produce. Plus, they depend on people like you to make room on your taps to be able to sell their product once this bill forces them to enter the distribution market. As you well know, there is very limited tap space and the whole reason behind the small brewery exception was to help brewers enter the market.

    I hate that you had to pay six figures for a license. I appreciate that you had to do it if you wanted to be in the business. I understand it is our crappy quota system that created the value, but it is also causing this turf war that is spawning these discussion.

    What I'm interested in doing is finding a way to end the turf wars - not by further entrenching Montana in the same old problematic quota system in the name of "fairness" - but by creating a system that gets us out of the model we're in and on to a better way. I'm betting there's a way to do it that benefits you and the breweries.

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  8. Oh, and I forgot to add - thanks for commenting. This isn't meant to be a one way conversation. We're only going to solve these issues if we get all viewpoints around the table and work together.

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  9. This bill actually looks like a great deal for brewers. The text appears to ensure that they pay no more than $100k. The way I read it, if the you can get one on the open market for less you can. WOW! Depending on where you are that could be less than $10,000 in some markets. Most areas are $20-40k last I checked. On the low end Just being able to stay open past 8 could pay for it in a year. Brewers should jump on this opportunity.

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  10. That's a ridiculously simplistic view of the bill that ignores most of it's effects. Yes, the ability to "stack" licenses would benefit some brewers which is exactly why it was added to the bill. It creates a carrot to divide and conquer the brewing side of the equation. But if the MTA's bill was such a good deal for Montana, why are the distributor and restaurant associations opposed to it?

    And more to the point, why are so many commenters afraid to leave their real names or any identifying information? Could it be that the bias inherent in your comments would be too easily exposed?

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  11. What's so simplistic? Only tap rooms in the 6 big cities would spend any real money to buy a licence and even then it's limited to $100K. Many of these "small" breweries are in multi-million dollar facilities but claim poverty when it comes to competing with small corner bars who had to buy a license. Never heard of a tap room that it wasn't easy and common to get around the 48oz rule. The real fear here is from the brewers who see that with the new law, any bar with space could now brew. -Todd

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  12. Obvious why the distributors don't like it. More brewpubs = less deliveries. Probably the restaurants don't want additional competition. I honestly don't see how this really benefits the Tavern owners other than giving them the potential of becoming a brewpub.

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  13. Long ago Montanans decided they wanted some limit on the number of bars. If not for some limit every drunk with a few thousand dollars would be trying to start one on every corner. The sample rooms have just been a loophole exploited for money around the current system. Brewery owners are not running charitable non-profits. Several quality brewers have recognized the value of having a liquor license and have bought one but they can't under current law own both a brewery and a liquor license so they are forced to have a partner. The new law would change that so a brewery can run however they see fit, longer hours, no drink limits, wines, just their own brews etc.. A real businessman would see that the expanded model quickly justifies the expense of a license. The license prices are set on the open market based on their ability to generate revenue. Larger cities cost a few hundred thousand while smaller cities they are practically free.

    The simple fact is most made in Montana beer is by far sold in MTA bars. This may not be a convenient fact for smaller brewers trying to make their case but it belongs in the discussion. The explosion of Montana breweries happened because of the MTA members not in spite of them.

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  14. Wow. I don't even know where to begin with a comment like this last one, yet again from an anonymous source. Most Montana made beer is not sold in MTA bars. Some do a very nice job of capturing the craft beer growth by selecting a variety of taps with Montana and non-Montana craft beer. But there is zero truth to the idea that the explosion of Montana breweries happened because of the MTA members. That's a ridiculously laughable statement.

    The rest of your comments are misinformed, at best, and certainly rude and patronizing.

    Not everyone wants to purchase a $100k license (or even a cheap one) and run a bar. This bill will force a brewery that wants to stay small, say, 2000 bbls to either distribute 60% of its product or buy a retail license. Why should they be forced to do that to satisfy the MTA?

    To enter distribution, they'll either need to seek taps at local bars, or invest in canning or bottling equipment and hope local grocery stores will make space for them. Why should they be forced to do that to satisfy the MTA?

    Why are they not a "real businessman" because they don't want to become a "bar" in order to pay off the license they were forced to buy to satisfy the MTA?

    The brewery tap rooms are popular because they AREN'T typical bars. Amazingly, Montana's craft beer industry is thriving in spite of relatively restrictive laws and the MTA's efforts in further restricting them.

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  15. Alan- A "real businessman" would recognise that the existing restrictions of hours and barrels comes with an on going total cost that is more than the one time cost of a license. As I said above the price of a license is not random it parallels the money that can be made with it.

    What exactly is the physical difference between a tap room and a bar? By law a bar can be anything a tap room is and more but a tap room can only be a tap room, for a bar it's owners choice.

    As for where beer is consumed you don't have to be a math wiz to recognize that the 1000's of licensed establishments sell more beer and provide more exposure than 30 or so tap rooms. On a barrel basis the top 4 craft brewers sell 10x more than the bottom 20 and account for a proportionate claim to the economic benefit to the state. Most of those barrels are wholesale and most small breweries are also wholesaling something. Who do you claim all this wholesale beer is going to if not licensed establishments?

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  16. I can't answer your questions or even debate your arguments because I can't follow your logic and your shifting premises.

    You first claim most made in Montana beer is sold in MTA bars. Now you're making references to "wholesale" and "licenses establishments" which are something different than MTA bars.

    Plus, I can point to numerous examples where price of a license does not parallel the money that can be made with it.

    All I see are conclusory statements that aren't backed by facts.

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  17. However you want obfuscate the issue, it is clear tap rooms are not selling the majority of beer mfg in Montana. Who are you claiming is if not bars, MTA bars, licensed establishments or whatever name you please? Over half of the breweries in this state either have a "bar" license or would be able to get one for little money because of their rural nature. The rest would at worst pay $100K because they live in population centers.

    If as you stated above a brewery wants to stay small at 2000 barrels or roughly 500,000 pints. At $3.50 a pint that's $1,750,000 annually and you want us to believe that a $100K one time resellable license purchase is unfair? If those sales numbers seem a little high that may be because a significant number of that little brewery's barrels are being sold to dirty no good bars.

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  18. If calling out shifting premises and unsupported statements is obfuscation, then so be it, but I prefer to take on one idea at a time without having the pieced moved around. I take issue with your initial statement - that MTA member are responsible for the explosive growth of breweries because most Montana made beer is sold by MTA bars. One does not have a direct correlation with the other.

    Breweries are licensed establishments. They are specifically licensed to sell beer for on-premise consumption so long as they manufacture between 100 and 10,000 bbls. You're forgetting that the largest brewer in Montana distributes to 24 states, so none of that product is sold by MTA members. Quite a bit of Montana made beer is sold in grocery stores, again, none of which is sold by MTA members. And much is sold by closely affiliated licenses holders whom the MTA certainly can't count as being part of the MTA's supposed success in growing Montana's breweries.

    When bar owners in Great Falls boycott Bowser Brewing because of it's success, how does that play into it?

    I'm not particularly interested in debating who sells how much beer. What I'm interested in knowing is why is this bill the right way to go?

    The only answer that anyone can give is "fairness." Yet "fairness" in this context is being defined by one industry trade group's self-serving definition of fairness. You're making the argument that a "real businessman" would realize how benevolent the MTA is being by allowing him/her to purchase a license.

    But the question that always follows is, why should they? Not from a business or revenue standpoint, but a "why should we further complicate and perpetuate a system that isn't working very well, standpoint."

    There are better answers than HB 616.

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  19. Why should brewers buy a retail license? Why did they buy a brewer's license? Too make money. If it's all about the beer why not support HB 616 that would allow any bar to brew? Whose really afraid of competition.

    As for Bowser being boycotted, why isn't that happening to the other two breweries in the county who are at or near capacity selling to local bars? Maybe Bowser been too abrasive and has chosen his sample room over selling to bars. The bad will he has built up may come to bite him in the ass if he ever decides to grow beyond selling samples. That's the ironic part of this debate for the most part smaller and large microbreweries in Montana need bars to thrive. Only the microbreweries in big towns can make it on sample rooms alone yet the little guys in rual areas have been convinced that a free license is too onerous, so that the brewers in the big cities will not have to buy a license that actually costs money.

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  20. So many people named "anonymous" around here. I'm always amazed at the number of people who won't stand behind their comments by using their full names - can't really judge the credibility of statements when the source is unknown. I suppose that's what "Anonymous" wants.

    The $100,000 license is being offered as some sort of panacea that should have all brewers jumping on the MTA's ship. First, why should anyone believe the MTA had brewers' interests in mind when they asked for HB616? The idea that this bill is good for brewers is absurd on its face. The MTA is clearly threatened by the success Montana breweries have seen over the past 14 years and the success they will likely see in the future absent a crackdown. Shackling the brewing industry is the only reason for this bill. The MTA is savvy enough to know that it can't simply shut down the tap rooms, no doubt its preferred alternative, so it drafted a bill that it can falsely portray as a benefit to brewers. To the extent HB616 offers any benefit to brewers, the benefit is grossly outweighed by the costs to individual brewers and the industry as a whole.

    As for that $100,000 license, it is only available to breweries that have operating tap rooms on the date HB 616 is signed into law, and then only if purchased within two years. So what is the purpose of this provision? Clearly it is to make it more difficult for future breweries to come on line, as their only option for avoiding the on-premises consumption restriction would be to buy a regular retail license or (after 5 years) to try to buy a beer license from a current brewery. Of course, we've seen how well that type of quota system has worked with retail licenses. But, wait, I thought the purpose of the bill was to help brewers? Oh, yeah, that's the ever "benevolent" MTA talking, where "help" and "cripple" are synonymous.

    So, if the MTA is really interested in helping brewers, as its named and anonymous mouthpieces portray it, the MTA will no doubt support an amendment to HB 616 that requires all beer sales at retail establishments - bars, restaurants, grocery stores - to be be comprised of at least 60% Montana-made beer. I'm sorry, what's that? Oh, the MTA would oppose such an amendment because it believes "the market should decide" what beer is sold where. Oh, okay, that's right, when it comes to any provision that might restrict what its members can do, the MTA wants "the market to decide." But when anything happens that the MTA doesn't like, it runs to Big Daddy Government for help. Maybe it's finally time for the MTA and its members to really let the market decide. Or are they afraid of the results?

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  21. To me this is about freedom. It is no ones business to whom a brewery chooses to sell their product. If politicians were trying to limit bakeries to only selling 40% directly to the public the writers of that bill would be laughed out of Helena. Beer should be no different. More freedom is the answer to tough issues. I don’t agree, but understand the MTA’s point about an “unfair playing field”. They like to talk about the expense of a liquor licenses, but fail to mention that just a few miles out of the populated areas licenses are much cheaper. Isn’t that unfair? If the MTA feels there is an inequality they should fight to remove the restrictions on them not add restrictions to others. The only way to create a truly level playing field is to get rid of the quote system (like Colorado).
    I’m sure brewery would be willing to sit down and find a way to fairly reimburse those that had to unfairly purchase expensive licenses. Passing of HB616 won’t end this issue, because until there is a true level system this will coming back every session. Instead of putting a Band-Aid on a broken arm lets buckle down a fix the root of the problem.

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  22. $100,000 for a license is outrageous. A liquor license from the state costs $6000.00. Yeah, that's it. The only reason they sell on the market for $600,000 is because the MTA has written their own rules for decades in this state, to the detriment of any imaginative, innovative, ambitious entrepreneur. Other states have Chocolate and Port wine shops, cigar and single malt scotch shops, small intimate restaurants with fascinating beverages. We get highway, gas station casinos and you, Anonymous, think things are working well here?
    You can't just 'go buy one'(a full beverage license) except maybe in Wolf Point.
    Every session the MTA tries to squeeze through a bill that will crush that irritating little craft beer industry that keeps rearing it's ugly head here in MT. Last session, they tried to restrict retail stores that sold beer and wine from selling higher %alcohol beer, even though it was not higher than wine. Luckily, the scrappers got out the word in time and that bill was stopped as well.
    None of these bills benefit consumers, societal safety, state commerce, or the job market. These bills are simply the biannual rut of the MTA through the legislature. Trust me, I'm watching who votes for the MTA at the expense of the rest of us.

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  23. Not to turn this into a political rant, but I have to ask... since when is the Republican party the ones to bring forth bills that snuff out Montana small businesses? Since when do they support MORE government? Instead of burdening small breweries with crushing new legislation (when we already have the strictest laws in the West; even in comparison with Utah), why aren't they calling for reforms to scale back regulations on taverns? There are ways of solving perceived problems without stomping out a bright, promising, homegrown industry.

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  24. How exactly is a $100K license outrageous? The only reason you would buy one under HB616 is because the market price for a license in your city is higher than $100K. In most large cities they are over that amount which means instant equity. Small city or county brewers will pay half that to nothing, but even then a license isn't required until 300 barrels are sold across the bar, which is more gross sales than many bars in the state. For new brewers, after a they hit the 300 barrel limit (est $250K+ gross sales) with limited hours and 48oz limits they can plan moving up by selling more wholesale or by continuing the retail route by buying a license ,under the same ownership, at an amount set buy the quality of market they opened up in.

    The real oddity in this issue is the beer distributors association who have threatened some brewers not to support HB616 or risk losing position in the supermarkets where most sales of beer take place. The MTA wants microbreweries to join them as members/friends not crush them and have offered the easy in to compensate breweries for investing in the game as the rules were written when they made their investments. The self serving motive for the tavern owners is shoring up the current system which provides stability, adding additional options/excitement for their industry and protects their investment. The distributors however have more to gain in crushing tap rooms because they get no piece of tap room business or self distributed kegs. The big question is what are the distributors up to? Maybe they see this license change for brewers as bad for people in the business of trucking beer.

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  25. I figured I had better give my two cents since my brewery has been brought up in this conversation. I own Bowser Brewing in Great Falls and about 5 months into being open we decided to start distributing and I went around with the distributors personally to start building relationships with the bars in town. Many of the bars were pissed they could not get our beer immediately but we didn't have the money for kegs and a keg washer right away, which is why we waited 5 months to start distributing. Also when we did start distributing we wanted to keep it small at first so we weren't taking on more accounts than we could keep up with and that made some bars unhappy as well. Its not that we were denying these bars beer we just wanted to give them great service and make sure they always had our beer on tap. Now that I know we can keep up with demand I would love to have beer in every bar in town but it is hard when the bars won't give you a shot. As for the other breweries in the county, they both are simply distribution breweries, the other brewery in Great Falls doesn't have a tap room and the one in Belt has a very small one but relies mostly on distribution. So me being the odd man out the local MTA thought a boycott was the way to go. That is why I sell so much out of my tap room, not by choice, I have been forced into it by the local MTA not carrying my beer, I have talked to many of the members to see what I could do different to change their opinion about my brewery and nothing has worked so far. Luckily I have a loyal following here and Great Falls that pays the bills.

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  26. Even, Why take a crack at Front Brewery by dismissively calling them a "distribution brewery"? I believe they only have a 10 barrel system and sell their own beer so how are they that different than you other than a glass wall? They have good beer, don't finger point or name call their customers. The answer could be some grand conspiracy or the simpler answer, which is usually the right one, is that YOU did something wrong and didn't make a good first impression.

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  27. I don't think Evan was making a crack at The Front by calling them a distribution brewery. At least I didn't read it that way. The Front does distribute all of their beer - just like Tamarack, Montana Brewing Co. Red Lodge Ales, and several others - because that's the model they've chosen. I certainly don't think any less of either model, but it's a handy way to distinguish. I do appreciate that Evan is willing to publicly present his views so people can judge the credibility of his statements by knowing who is making them.

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  28. I apologize for not posting my real name. I don't have a facebook page or other cool social media stuff. I honestly don't know what any of the profile options are for identifying yourself on a post here (OK I'm over 50) but anonymous looked easiest. I posted the "ridiculously simplistic" comment on: March 22, 2013 at 9:29 PM

    Shawn Modula
    Missoula, MT

    BTW: My "agenda" is just to see Montana become the best beer producing state in the country. If I have to drink a lot of great beers made in my hometown to support it--I'll take that challenge.

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  29. Shawn,

    Thanks for dropping by and providing comments. I wish the blogging format I use provided an easier way for people to leave their names. As you've discovered, if you don't have one of the social media affiliations, you're kind of stuck picking "anonymous" and then leaving your name in the text.

    Alan.

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