Monday, August 20, 2007

The Great Dane Dilemma

Politics has devolved into the serving of special interest groups. This is not an inherently bad thing. Where the problems arise are when not all interests are represented by special interest groups. In those cases, how do those not represented gain a voice? Usually, they don't. In the usual case, those not being represented are the average, uneducated (I don't mean "uneducated" as in "not smart" just one not generally informed of the details of a particular piece or series of legislation generally because one isn't aware of said legislation) every-day consumer. Take, for example, your consumption of beer (you knew it would come to that didn't you?). Well, a new special interest group looking out for joe-sixpack (not this joe sixpack, although him too, just not in his "official capacity") called has pointed out that there is some interesting legislation going down here in Wisconsin.

Generally, a consumer can purchase beer in any number of places: at a retail store, at a restaurant or bar, at a brewpub, at a bowling alley or golf course, at a sporting event, and scores of other places. All of these places are regulated in their sale of beer (and other liquors). This isn't really news. However, what you may not know is that the channels of distribution for beer are highly regulated. As a brewer I can't just sell my beer to anyone. As a brewer, absent special circumstances, I can only sell to a distributor. As a distributor, I can only sell to other distributors or retailers. As a retailer, I can only sell to consumers. This distribution paradigm applies to all breweries, including "brew pubs" which are really just breweries that are licensed to sell beer on premises through a codified exception to the general rule.

The current law only allows a brewery to have 2 "on premises" licenses (called a "Class B" license). A brewery can have up to 4 more licenses, if some "small brewer" conditions are met and the restaurants buy the beer through a distributor, not from themselves. Thus, at max a brewery can have 2 brewpubs, and 6 if it's sufficiently small and buys its own product from an independent distributor.

So, these rules set up the problem. A very successful brewery called The Great Dane has two Class B licenses, one downtown, and one in Fitchburg. They are approached by a real estate developer who would like to put a Great Dane at their trendy mall on the West side of town (Hilldale). You see the problem. Under the current laws, if The Great Dane wants to add this third license, they would have to meet the "small brewer" conditions (they don't) and they would have to buy their own beer from a distributor. So, what's a brewery to do?

Well, if you are as successful as the folks over The Great Dane, you hire a lawyer and a lobbyist and you get the rules changed. And now, making its way through the legislative process is the result of that process.

SB 224 (and AB 455) would create a fourth type of license called a "Brewpub License."** In addition to the following rules, here's the catch: a brewer can only hold a maximum of 6 Brewpub Licenses. This license would allow the brewery to do a few things:
1) manufacture up to 10,000 barrels a year across all brewpubs (as a point of reference, this is slightly less than the current total output - pre-expansion - of New Glarus Brewery)
2) bottle
3) sell growlers
4) transport this beer to any of the brewpubs owned by this brewery
5) sell bottled beer at wholesale from the 10,000 barrels and up to 1,000 additional barrels (this is very small)
6) sell other alcohol provided the relevant licenses are procured.
So, back to the top; as a consumer of beer, what does this mean for me? Well, the entire point of the original version of these rules (only 2 Class B licenses per brewery) was to prevent the likes of Miller from opening up a ton of "brewpubs" and keeping small breweries out of the market by saturating the market. Given the reformulation of these rules, it's not like it's inviting the macro-brews from opening up tons of brewpubs. Heck, Capitol Brewery is over 20,000 barrels a year and thus would be prevented from obtaining Brewpub Licenses. 10,000 barrels seems like a reasonable cap and the allowance for bottling could make Wisconsin's beer scene even more interesting (Great Dane in bottles!) Thus, this new formulation is reasonable and exciting.

My only problem is this: what happens when Great Dane has 6 locations all around Madison and some real estate developer in Milwaukee asks if they'd like to have a location at a trendy new mall going in on the North side of Milwaukee. Are they going to go back to the legislature and re-write the laws again?

** For the sake of completeness, the other three types of license: Class A (allows retail sale of beer in original packaging for consumption off premises), Class B (allow retail sale of beer for consumption on or off premises), Class C (allows retail sale of wine for consumption on premises at a restaurant).


  1. New Glarus brews around 40,000 barrels a year, not 10,000. You've neglected to mention the fact that licenses 3-6 require that the first 2 locations make at least 40% of their revenue from food - each. (Unless the bills have been amended since I attended the senate hearing.) You also neglect to mention the distributors, their lobbyists, and what I see as growing resentment towards the Great Dane by its fellow members of the Brewers' Guild. My account of the hearing and more links can be found here:

  2. palmer, thanks for your corrections. I was sure that NG was smaller than 40K barrels. If not, I stand corrected.

    But, you are correct, I didn't mention those other "requirements" only because they're rather technical distinctions and not really central to my argument. But, your point is well taken.

    As for the growing resentment in the Brewer's Guild. I can't say I'm really that surprised.


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