Thursday, June 23, 2011

A More Partisan Plea For Pity

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Late Yesterday the State Journal reported that a group of 15 Democrats have sent their own letter to the Governor requesting that he veto the legislation formerly known as Motion 414.

This has become an interesting issue in that nobody seems to have any clue what Governor Walker will do. Ostensibly, he has two choices: veto, or not veto. But there's quite a bit of subtext under each decision.

If he vetoes it, he will be directly snubbing some of his largest donors (MillerCoors, etc.). On the other hand, if he vetoes it he could score a rare public image win at a critical time with the pending recall elections of his own party and his own soon-to-be-pending recall.

If Governor Walker does not veto it, he would be indicating to his state that the best way to get his attention is to pay up; Wisconsin is not really "Open for Business" but "Up for Sale". On the other hand, he and his henchmen don't seem to have a problem with this. Money is money. And if the last few state election cycles have proven anything it's that "money wins". If Governor Walker wants to become anything other than ex-Governor Walker he's going to need as much money as he can get.

But by crossing out this hastily passed, poorly written, non-negotiated, impactful legislation he would indicate that we have at least a passing belief in the Democratic system. That our small businesses are just as important as our big businesses [ed note: MillerCoors is not actually a Wisconsin company anymore - it moved to Chicago a few years back though it does still have some breweries/employees here]. Finally, by vetoing it he would indicate that he's not entirely deaf to the pleas of his legislators and citizenry.

Wednesday, June 22, 2011

Government Support for Craft Beer

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The US Senate has set up a Small Brewers Caucus to discuss issues related to small breweries.

The Caucus is a bi-partisan effort and was led by Max Baucus (D-Montana) and Mike Crapo (R-Idaho). Which is interesting because Idaho isn't exactly Beervana (it is home to craft beer raw material producers); though Montana's craft beer scene is booming.

It is not clear yet who the members of the Senate Small Brewers Caucus are, but I hope that Senators Herb Kohl and Ron Johnson will consider joining the effort on behalf of the small brewers here in Wisconsin.

The House has a Small Brewers Caucus as well. The only Wisconsin Representative that is involved with this caucus is, unsurprisingly, Tammy Baldwin (D-Madison). If you are a brewery maybe it might behoove you to encourage your Representative to get involved with this Caucus.

I'm not aware of any such caucuses in the Wisconsin State Legislature.

Finally, I've been asked by a number of brewers whether I think joining the Wisconsin Brewer's [sic] Guild is worth their time and effort. My advice has mostly been non-committal; but I would suggest those thinking about joining consider what benefit the Brewers Guild provides that they wouldn't otherwise enjoy.

In other words, there is a big free-rider problem for the Brewers Guild - it undertakes action on behalf of its members that will benefit non-members. For example, whether Brewery X joins the Guild or not, the Guild will still undertake Lobbying efforts that will benefit Brewery X. Thus, should Brewery X spend money to receive a benefit it would receive without spending the money? Maybe. Maybe not.

So, what specific benefit does membership in the Guild provide for Brewery X? This post is not going to outline those, though the Guild's website outlines some of the benefits, namely: "lobbying", "meetings", "link to your website." If the dues and administrative hassle are worth that benefit to you, then, yes, you should join. Or at least talk to a member and other brewers about whether the benefit is worth it to them.*

* For the record, I've spoken with a number of brewers who have answered both affirmatively and negatively. So, ask around.

Tuesday, June 21, 2011

To Governorn Walker, From Everyone That Doesn't Work for MillerCoors or the Distributors

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I found in my inbox yesterday a bipartisan letter to Governor Walker regarding the recent MillerCoors/Distributors Legislation hastily written into this past week's budget.

Written by Senators Glenn Grothman (R - West Bend) and Pam Galloway (R - Wausau) and supported by Senator Robert Jauch (D - Poplar), and Representatives Evan Wynn (R - Whitewater), and Brett Hulsey (D - Madison), among others, the letter represents the clearest indication possible that craft brewers are not to be trifled with.

Following is the Press Release and Full Text of the Letter.

---------PRESS RELEASE---------

Request for Veto of Craft Brewer Provision

Legislators ask Governor Walker for partial veto of craft beer provision in budget

Madison: Today a bipartisan group of legislators led by Senators Glenn Grothman (R-West Bend) and Pam Galloway (R-Wausau) asked Governor Walker to veto a controversial provision in the state budget that restricts craft brewers’ ability to wholesale other brewers’ beer, own taverns, and creates uncertainty among contract brewers.

“Wisconsin is known for its breweries, and allowing small craft brewers to own their own taverns will highlight their product,” Grothman said. “This is the type of provision that should have been dealt with in a separate bill. It was complicated and the thriving craft brew industry did not participate in drafting this provision.”

“This sends the wrong message to nascent businesses like Big Bull Falls Brewery of Wausau in that it restricts possible avenues of growth. It was particularly disturbing in that it came out of the blue with no time for craft brewers to respond,” said Galloway.

Senator Robert Jauch (D-Poplar) stated: “As a member of the Joint Finance committee, I can assure the Governor we were not given adequate information before we were forced to vote on this provision.”

Representative Evan Wynn (R-Whitewater) said: "Small businesses are the leaders of Wisconsin's economic recovery, and micro-breweries are no different. They employ many Wisconsinites directly, and many more through their purchase of quality Wisconsin ingredients. Wisconsin should be moving in a business-friendly direction and not legislating more needless government regulation."

“I am concerned that at this time of economic uncertainty we are sending the wrong message to these small growing businesses,” Representative Brett Hulsey (D-Madison) added.

###

-------START LETTER-----------
June 21, 2011

Governor Scott Walker
Office of Governor Scott Walker
115 East Capitol
Madison, WI 53702

RE: Seeking a Veto of Craft Brewer Provision (Motion 414)

Dear Governor Walker,

The purpose of this letter is to request a veto of language inserted in the budget related to microbreweries and their ability to wholesale each others’ products, own their own taverns, and for contract brewers to purchase beer from other microbreweries.

There are over 60 craft brewers in Wisconsin. These small and growing businesses help define the very culture of this state. They will be greatly harmed by the new policy--a policy that should have been left
out of the budget in the first place.

We have no business punishing these small entrepreneurs. They hire Wisconsin workers, buy their natural products here, and provide millions of dollars in tourism revenue every year.

As the number of big distributors shrinks, we have to ensure that these small business people are allowed to wholesale each others’ products and grow. In addition, this budget provision will negatively affect new contract brewers by forcing them to change their business models and hurting their chances of survival. Paralyzing legitimate small businesses this way should not be the policy of a state we all want to be “Open for Business.”

Governor Walker, we know you are an advocate for the state of Wisconsin and its small businesses and we trust that you will undo the damage done by the Legislature to these hardworking businessmen and women.

Sincerely,

Glenn Grothman
State Senator

Pam Galloway
State Senator

Bob Jauch
State Senator

Evan Wynn
State Representative

Stephen Nass
State Representative

Joseph Knilans
State Representative

Brett Hulsey
State Representative

Monday, June 20, 2011

Five Gallons At A Time: Natural Carbonation

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As your brewing kung fu improves, your calculations for natural carbonation might evolve in a manner such as this:

-Use fixed volumes of sugar and water for all of your beers.
-Adjust the volume of sugar based on your desired CO2 level and beer volume.
-Improve your accuracy by calculating your sugar additions by weight instead of volume.
-Replace the mystical coefficients of various priming sugars with fermentability and solubility values.
-Include vessel headspaces in your "beer volume" because they need to be "carbonated" as well. That's why authors of homebrewing books recommend using less sugar for kegs than bottles.
-Incorporate the relationship between "volumes of CO2" and the mass of CO2 per volume of beer.
-Base your sugar calculations on the fact that a molecule of fermented glucose produces approximately two molecules of CO2.
-Account for the CO2 present in the headspaces of vessels, which depends on whether or not the vessels will be purged with CO2 (for purged vessels, I assume that headspaces have the same initial "volumes of CO2" as the beer).
-If priming with wort, krausen or beer: develop equations that calculate fermentable extract from the original gravity, pitching gravity, expected final gravity, estimated pitching alcohol content and expected final alcohol content of the priming solution. Due to the presence of alcohol, you can't calculate post-fermentation extract from gravity alone.
-Include your priming solution in your beer volume because it also needs to be carbonated.
-If priming with krausen or beer: compensate for the CO2 already present in your priming solution.

If you carbonate with a fixed volume of priming solution, you can run through a series of calculations once. However, if you prime with wort/krausen/beer or you want to make a sugar solution at a specified gravity, you'll have to iterate the calculations because you'll be solving for a variable that you need to know from the outset (priming solution volume). Here's a simplified outline of the process:

-Start with your pre-carbonated beer volume.
-Solve for your required priming solution volume and, if necessary, sugar weight.
-Repeat, but with the priming solution volume from the last step included in your initial beer volume.
-Keep repeating until your iterations converge on a single set of answers.

Spreadsheets are nice for this because you can place each variable in a row and each iteration in a separate column. For the scenarios I've been able to envision, four iterations have been enough. If you'd rather not do the math yourself, you can download my spreadsheet here. As a side note, a lot of these considerations also apply to estimating the alcohol content of a naturally-carbonated beer.

On the off-chance that you're wondering how this came about, I'm planning on brewing a lambic at this year's Madison Homebrewers and Tasters Guild Brewpalooza (click the Calendar link for event info) and blending it with future batches to make gueuze. Stop by if you're interested in watching a turbid mash being performed with the utmost incopetence, smelling two-year-old hops from J.T. Whitney's or laughing at a boil kettle as it tries to imitate a cooledship.

Thursday, June 16, 2011

Amendment 18 to AB40 - Small Brewers

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Amendment 18 submitted on June 15, 2011 by Reps. Radcliffe, Ringhand, Bewley, and Molepske Jr. Again, I haven't yet had a chance to review, but this would make significant changes to the proposed legislation covered yesterday that would basically provide a whole set of separate rules for "Small Brewers" defined as brewers under 300K barrels.

Amendment 18 to AB40 - Small Brewers

Wednesday, June 15, 2011

Budget Bill AB40 - Pages 1063 to 1085

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Here it is. The actual bill as attached to your Budget. I have not had a chance to read it yet. Any thoughts?

Brewers Budget Bill

Some Things To Think About

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While we're all just sitting around, shooting the shit, waiting for Budget stuff to resolve itself here's some good conversation fodder for that awkward silence:

Apple bans DUI Checkpoint Apps from App Store. Man, how much controversy can jam into one topic, eh? On one side: warning people where are checkpoints are allows them to avoid them. On the other side: If people know there is a checkpoint on the way home, they may not drink and drive. And at least two bonus arguments: 1) DUI Checkpoints are fundamentally flawed/unconstitutional; and, 2) Apple is caving to The Man and censoring its users, Steve Jobs would be so disappointed in ... ummm ... Steve Jobs.

MillerCoors Wants Everyone To Agree With Them. Somewhat related to Motion 414 and the CARE Act, MillerCoors released a "memo" on the "Three-Tier Doctrine" - as if this is somehow just the way it's "supposed to be", like gravity, or hydrodynamics, or Justin Bieber. Just for the record, Anheuser-Busch and Two Brothers might disagree.

What's the difference between a "Contract Brewer" and a "Gypsy Brewer" and why do hate the former and glorify the latter? Stillwater and Mikkeller are in the "we love 'em" category with The Great Taste of the Midwest firmly in the "hate 'em" category ("contract brewers" are banned from the Great Taste). Is contract brewing inherently flawed? Should we not discount a brewer just a little bit for not brewing in his own stainless?

Is BeerSmith the Best homebrew software or is it the Greatest? A free plug for my homies at BeerSmith - great, intuitive, software that is essential for the MBR brew day.

Friday, June 10, 2011

Wausau Field Trip - A Photo Journal

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O'so Brewing Company, Plover, WI

Handbuilt Keg Washer

The Walk-In Cooler/Bright Tank Storage

Ever see a mashtun jacked up on cinder blocks?

The fermenter just fits into the brewery

Red Eye Brewing Co., Wausau, WI. The big slant-y thing on the roof is the solar panels.

Head brewer Kevin Eichelberger is a big cyclist. Can you tell?

Cart Ride to Mexico - Maibock

RedEy3 - Scarlet 7 Dubbel Aged in Oak with Brettanomyces

Bull Falls Brewery, Wausau, WI. A keg-only distribution brewery.

Oatmeal Stout Aged for 45 days in Jack Daniels Barrels; served on nitrogen



Monday, June 6, 2011

Motion 414 - A Summary

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Before I get into the meat of the analysis, remember 2 things:

1. This is not legal advice. Do not rely on it. If you want legal advice, talk to a lawyer.

2. This is just a Motion; it lays out an outline of what legislation would be attached to the Budget Bill; it is not legislation and none of this is law or even potentially law; nothing certain will be known until we have the final draft of the Budget Bill so any and all of this is likely to change in some respect before it hits Governor Walker's desk.

So, with that said, here is, in very summary form, what Motion 414 says:

Convert Local Wholesaler's License to a Statewide Permit - currently Wholesale licenses are issued by a local municipality affected by the distribution area of the Wholesaler; this would make a central agency (the Department of Revenue) responsible for licensing Wholesalers. There is a really lame "grandfather" that would let Brewers keep their wholesale licenses until Jan. 1, 2013.

Wholesalers' Permits - First, it eliminate the Wholesale Permit from the grasp of the Brewer. Brewers currently hold a panoply of permits/Licenses: Brewer/Brewpub Permits, Wholesale Licenses, Warehouse Licenses, Class B Liquor Licenses, Restaurant Licenses (potentially), among others. This particular provision eliminates the Wholesale License, but other provisions will strike all of the others as well and consolidate all of these activities under the Brewer/Brewpub Permit.
-- Interestingly, this provision does contain a "grandfather clause" that eliminates the right of Wholesalers to have retail licenses; although any Wholesaler currently holding a retail license [ed note: all of them] are allowed to keep theirs.
-- This provision also happens to be the one that allows this legislation to be in the Budget Bill at all, since it establishes a state funding source ($2500/Permit, up from $25/License) and one State Employee (Wholesale Czar).
-- Finally, no wholesaler can have any ownership interest in a brewery; though any current ownership interests may be kept. There was some debate about whether Wholesalers would have to actually divest these interests and this is one area to keep an eye on for the final draft. Luckily for the Brewers, Wholesalers aren't interested in divesting; unfortunately for Brewers, MillerCoors wants to prevent their distributors from investing in small breweries.

Bona Fide Wholesalers - Perhaps the biggest change to the law, this provision would require that any Wholesaler have a warehouse facility "capable of warehousing beer" and that beer must be physically unloaded and "at rest" before delivery to retail. Who does this impact? Wholesalers that simply pick up at an account and deliver straight to retail: Contract brewers; big-box retail/wholesalers (Costco/Sam's Club); Importers - in other words, people who gain a lot of efficiencies by not having a physical location. E.g., "the competition."
- This provision requires that a wholesaler must sell and deliver beer to "at least 25 retail licenses or to other wholesalers that do not have any direct or indirect interest in each other or in the wholesaler." I have no idea what this means. I suspect you don't either. Does the 25 include retailers and wholesalers? Or, can you be a wholesaler with only 1 wholesale account and 0 retail accounts? Can you be a wholesaler with only 1 wholesale account and 10 retail accounts or do you always need at least 25 retail accounts to deliver to any retail? "Direct or indirect interest in each other" - do you know what this means? A small list of "retailers" that count as 1: All Copps/Piggly Wiggly/Kroger/etc. in the state; all Steve's Liquors in the city of Madison; any restaurant chain with common ownership - Riley's/Samba/Brickhouse or Food Fight for example; all Walmart/Walgreen/Target in the State; all TGIFridays/Appleby's/Chili's in the state; etc.

Say you are a new Contract Brewer in Madison - essentially your business is to have beer made for you according to your recipe and then you deliver, Wholesale, because your beer is new and no distributor will touch you with a 10 foot pole - and you manage to score accounts with 3 Steve's Liquors, Riley's, Brickhouse, Samba, both Woodman's, The Cooper's Tavern, Bluephies, Johnny Delmonico's, Malt House, Barriques Fitchburg, Barriques Middleton, Barriques Monroe, Vintage Brewing, Vintage Downtown, Weary Traveler, Natt Spiel, Maduro, Argus, Star Liquor, Alchemy, Dexters, and Brasserie V. You'd have your 25 retail accounts right? Not so fast, you'd only have, at most, 13 under the law because of "direct or indirect ownership interests" shared by many of these (who knows what hidden cross-ownership is out there); you'd still need at least another 12 accounts. Good luck.

Of course, you could just get 1 distributor to do that for you, but how hard do you think they are going to work to sell and market your brand new beer, assuming they would even agree to distribute you (of course, you could sign over your distribution rights in Madison, in perpetuity, for free and they'll think about adding you to their account list that gets dropped off on an account's counter by some lackey who has no idea what your beer tastes like)? Yeah. Good luck.

Class A Licenses - A bit of Wholesaler arcanity that would make it harder for holders of Class A licenses (grocery stores and liquor stores that happen to hold Wholesale Licenses) to transfer those licenses.

Brewers - Of course, this is the part you are interested in, so let's dig in:
- Brewers can no longer hold Class A (off-premise only) or Class B (on or off-premise) Licenses. It also strips away a number of other rights that  brewer currently has, like: transport between premises, provide taste samples, hold a wholesale license, or hold a restaurant license (if issued after the Great Dane bill).
- The DOR must issue Brewers Permits and "create laws authorizing all of the following activities" [ed note: WTF? I don't think the DOR can "create laws" - only a legislature can do that, if I remember my civics correctly]
-- make beer
-- bottle/package/store beer [ed note: presumably "beer manufactured on the premises" and not just any beer]
-- transport beer between brewery premises
-- deliver to wholesalers
-- retail sale (on-premise) of beer manufactured on premises
-- retail sale (off-premise) of beer manufactured on the premises
-- retail sale (on or off-premise) of beer "manufactured on another brewery premises in this state"
-- provide free taste samples on the brewery premises or at a Class A premises (grocery store)
-- sell beer at the state fair or any county fairground

It also provides that a Brewer can have up to one other off-site retail premises where any of these activities (except brewing related activity) may take place.

Next, it discusses when a Brewer may self-distribute: if they manufacture less than 300K barrels (New Glarus is 100K bbls) "provided the brewer complies with the ... laws governing restrictions on dealings ... and ... distribution restrictions on wholesalers ... including those imposed on wholesalers." Does this mean that the Brewer must comply with the Wholesaler Permit requirements (e.g., 25 min retail accts, etc.?) or does this mean that the Brewer must comply with the Subheaded Sections below entitled "Restrictions on Dealings..." and "Distribution Restrictions..."? This kind of poor draftsmanship is epidemic throughout this entire document; one can only hope that any final draft of legislation would be somewhat more clear.

The next two don't make a whole lot of sense, but bear with me:
1) A brewer may now hold a Restaurant License. This is a good thing, Breweries can have restaurants on-site. Fantastic! But the Brewery can only serve beer (or non-alcoholic drinks). Remember? Breweries can't hold Class B licenses. Want to take your wife out, or your wine-snob friend? Great, but if they don't want beer, they can't have wine, or a mixed drink with dinner. How many restaurants succeed if they only serve beer or non-alcoholic drinks? I'll give you a hint: not many.

2) A Brewer can't hold an ownership share in a Wholesaler. Except a Brewer can hold an ownership in a Wholesaler - it just has to be less than 50%. Wait? What? A Wholesaler can't own any piece of a Brewer, but a Brewer can own up to 49% of a Wholesaler (as long as it is divested within 3 years)?! That makes no sense whatsoever. Except that Miller wants to own Wholesalers, even if for only 3 years at a time. And Wholesalers want Miller's money.

Out-of-State Shippers Permits - Basically, this says that any out-of-state brewery (let's call it Anheuser Busch) cannot deliver from the out-of-state brewer to the in-state brewery premises; it must deliver to a Wholesaler, unload it, and physically come to rest at the Wholesaler. And in any event, only entities without in-state address may get "Out-of-State Shippers" Permits. And, to comply with the Commerce Clause, any out-of-state shipper brewing less than 300K bbls may self-distribute here provided they comply with all of the restrictions imposed on Wholesalers (e.g., 25 min retail accounts or don't self-distribute, etc.)

Multiple Licenses - Brewers can't. Period. If it isn't under the Brewers' License you can't do it.

Restrictions on Dealings - redefines what a "successor wholesaler" is, in other words, redefines when Wholesalers get compensated for doing a shitty job and having their brand "discontinued" by the Brewery and the distribution sent to a different Wholesaler. I'll give you a hint on how it redefines when this happens: it's not "less often." This provision also liberally states that a Wholesaler must purchase from the "primary source of supply" for a brand. Nothing actually defines what a "Primary Source of Supply" is though. So, who knows what that means? Is a brewery a Primary Source of Supply? What about another distributor? What about another distributor in another state? What is a Secondary Source of Supply (implied by the existence of a "Primary")?

Distribution Restrictions - Brewers and Out-of-State Shippers are not Wholesalers [ed note: geez, just rub it in why don't ya]. Beer must be "unloaded and at rest" prior to delivery to retail accounts (i.e., Bona Fide Wholesaler)

So, that's about it. There's some details in there, but that's a pretty decent summary of a terribly written motion that will likely become a terribly written piece of legislation. Conspicuously, it says nothing about Brewpubs. So, presumably, Brewpubs will still be able to do everything they can currently do. Unless, of course, the final draft legislation is different from the Motion. That would never happen, though, would it?

Thursday, June 2, 2011

Text of Branch Legislation - aka Motion 414

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Motion 414

Hey Barkeep! What's This Bit About The Three-Tier System?

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I've gotten a lot (a lot) of questions about the new proposed, as yet invisible, legislation regarding changes to the beer wholesale laws here in Wisconsin. Indeed, I made an off-hand comment in that regarding whether it would be entirely awful if AB had its own distributorships here in Wisconsin. In other words, what if we simply do nothing? No new legislation to try to prevent something that may or may not happen. No changes to how distribution works. No changes to how brewers licenses are structured.

Here's a sample of the comments related to this that I've gotten: "You might have already seen it, but what do you think of these arguments? http://www.milwaukeeworld.com/blog/2009/06/brewery-owned-distributorships-seen-on.html".


Written by Milwaukee-an Michael Horne in 2009, it talks about the distributor consolidation that has been going on for the better part of half a decade at this point and the jump by AB-InBev to do more self-distribution.
   Anheuser-Busch InBev, the "leading global brewer," hopes to self-distribute up to 50% of its products by consolidating and acquiring wholesalers, according to a report issued yesterday, June 24th, 2009, by London-based UBS analyst Melissa Earlam.
   That's up from the 20% share predicted when A-B and InBev merged last year, and much more than the 7% A-B InBev already distributes in the US via company-owned wholesalers.
The first thing we need to talk about is the three-tier system and how it works. Many years ago, the end of Prohibition to be exact, states came up with the idea of a three-tier system for the distribution of beer (and other alcohol) and it works like this: no tier can own or perform another tier. Tier 1 is manufacturing (breweries), Tier 2 is Distribution, and Tier 3 is retailers (liquor stores and bars, etc.); so Breweries can't distribute or sell at retail, Distributors can't brew or sell at retail, and Retailers can't brew or distribute. This is the general rule.

There are many exceptions. Indeed, one might say that there are so many exceptions that the rule is mostly a guideline at this point. Breweries can self-distribute (in WI up to 50K barrels of beer), Retailers can brew (Brewpubs and Tasting rooms), and Distributors have numerous investments in both breweries; just to name a few exceptions.

But this is the rule and it exists for any number of reasons that sound good on paper, but frankly are little else now than an artifact of the power of the distributors' lobbyists. Ostensibly the rules exist to prevent the monopolies that exist in Europe. For example, in England, craft beer is (was) virtually non-existant due to the existence of "Tied Houses" - pubs owned by breweries where only that brewery's beer is available.

With the news about the new potential legislation that would change the distribution laws here in Wisconsin, this subject has again reared its ugly head. But, frankly, I'm not quite so doom and gloom about it.

The fear is that AB-InBev would come in and have its own distributorship. To, again, quote Mr. Horne:

   A look at the A-B InBev distributor's product lineup for New York City shows just how limited -- and how corporate -- a selection of beer is available to residents of the nation's most populous city.
   In addition to the usual Bud offerings, the NYC distributor offers such craft beer-sounding products as Stone Mill Organic Pale Ale. Sounds nice and old-Vermonty, but Stone Mill is an A-B InBev product.
   How about a Kona Beer -- from Hawaii! Once you cut through all the hula nonsense, you'll find that the Kona Beer sold in New York City comes all the way from Redhook, New Hampshire.
   That's because it is produced by the Craft Brewers Alliance -- a lovely sounding organization that just happens to be 36% owned by A-B InBev. The CBA also gives us Red Hook, Goose Island and Widmer Brothers beers. [Ed Note: AB now owns Goose Island]
   The tough guys in New York City also can buy Bare Knuckle Stoutfrom its corporate-owned distributor. This beer is made by A-B InBev. How about a Winter's Bourbon Cask Ale. That sure sounds Honest-Abe authentic! Sorry! A-B InBev again.
A-B's distributor would sell AB-InBev products and others would sell their own products. I'm not sure much would change from a consumer standpoint to be honest.

I'm not sure using NYC as an example is really helpful - some of the best beer bars in the world are in NYC, not to mention Brooklyn Brewing Company - one of the largest craft brewers on the East Coast.

Choice on the shelves exists. In fact, it could potentially be better for craft beer as distributors would actually have to do some work to sell craft beer which might, shockingly, I know, result in more sales of craft beer. The reality is that if A-B came in tomorrow and purchased River City (for example), New Belgium, New Glarus, Potosi, Upland, (and their other crafts) would find another home and still get distributed. [Ed Note: I feel I can pick on River City a little because they do such a great job selling craft beer; if every Bud distributor had a similar craft portfolio and knowledge, craft beer would have little to complain about]

The writing has been on the wall for a long time now. Bud/Miller re-wrote their distribution agreements back in 2007(ish) with extraordinarily one-sided terms and said "take it or leave it". In response, those distributors started buying up craft brands. The distributors haven't been selling them very well (see the note above excepting River City, among others - I recognize that there are some great distributors out there that juggle their major-label obligations with craft beer very well), but they had them - and that was enough of an instigation to get AB and Miller to back off on the terms - distributors saw they had a viable third option.

On the other hand, if AB came in and started a new distributor and dropped River City, River City would suddenly have a lot of incentive to get out and sell more Moylans, O'So, Bear Republic and other craft brands. A great example is Chicago where Two Brothers' Distributorship that only sells craft beer is one of the best distributorships in the Chicago area.

Sure, self-distribution improves A-B's bottom line, but they also have to run a distributorship. There's a reason many craft breweries go out and find a distributor at the first available point in their growth - distribution is really hard. And, in fact, AB-InBev would have to run a lot of distributorships spread out all across the country.

Can AB-InBev run a more efficient distributorship than GenBev or Frank or River City? Maybe. InBev clearly thinks so. But, the 30% markup exists for a reason; it takes around 60-70% of that markup to run the distribution operations.

So, Bud gets a 10% discount on the store shelves? No. AB-InBev will pocket it and buy-out more breweries - is that a bad thing? Well, let's see how the Goose Island thing turns out before we rush to too harsh a judgment. Besides, AB (and Miller and Coors and Schlitz and PBR and Blatz and Busch and Beer Thirty and Minhas) is already 50% cheaper on the store shelves than craft; and guess what? People keep buying craft.

I am generally a fan of competition in the marketplace provided it actually takes place on a level playing field. And, for that, the state needs to start enforcing the laws that it has that prohibits the discounting and out-right bribery going on between BMC, the Distributors, and Retailers. The practical reality is that bars don't really even own their own tap lines (illegally paid for by the distributors with discounts) and turn over their sales to whatever distributor offers the best free stuff (also illegal).

So, I feel for the craft brewers. I'm not saying that AB-InBev owning all of its own distributorships is a good thing. Indeed, there is plenty to hate about it. There is a good chance that AB-InBev owning a distributor will really screw craft breweries and set them back a full decade for growth. But, it hardly changes the competition on the shelves, except to give AB a bigger price break than it already has; nor does it eliminate all of the hard work that craft brewers have done over the past decade to build the brand recognition and premiums that they have earned.

Of course, it's not the Craft Brewers that are pushing the changes through the Legislature, it's the Distributors. They don't want to compete with AB-InBev. It might just mean that they'd actually have to do some work.