Budget Squeezes Craft Breweries

Wisconsin Gov. Scott Walker is scheduled to sign the state budget into law Sunday in Green Bay, but craft breweries are fighting to make sure one provision gets the veto pen.

Motion 414 prevents breweries from owning wholesale distributors. Supporters of the bill, including MillerCoors and the Wisconsin Beer Distributors Association (WBDA), say it would protect small breweries by preventing Anheauser-Busch from buying up small distributors and freezing out craft beers.

A bi-partisan group of seven lawmakers sent a letter to Gov. Walker June 21 requesting that he veto the provision.

Bill Tressler, owner of Hinterland Brewery in Green Bay and The Whistling Swan restaurant in Fish Creek, said the bill’s authors didn’t think about small brewers, who often distribute their own beer,when they wrote the bill.

In Wisconsin most beer is sold through a three-tier model, where beer is made by a producer and sold to a distributor, who then sells it to retail outlets and taverns.

The legislation prohibits craft breweries from owning their own wholesaling business, which craft brewers say could make it more difficult for a small brewer to get its beer on the shelf.

“It’s not like you can just call up a distributor to start selling your beer – you have to do a whole song and dance to woo them into carrying your product,” Tressler said. “For anybody just starting to get into the small brewery industry in the state, this is a major roadblock.”

Craft breweries like Hinterland can still sell beer in their own buildings, but Tressler echoed the sentiments of brewers around the state, including New Glarus and O’so in expressing concern about the bill. Breweries sell the majority of their beer off-site, Tressler said, making distributors key facets of their business.

“It’s not as if we are fighting to not sell through distributors – they’re an integral part of our business – but we don’t want our rights taken away,” he said. “At some point, should these big distributors decide not to represent us, we need to be able to take our own product to market.”

But Roby contends that the bill essentially levels the playing field, preventing everyone from Anheuser-Busch to New Glarus from starting a distributorship.

Furthermore, while many craft brewers in the state hold wholesaling licenses, including Hinterland, Roby said none actually use it. He defined wholesaling as selling beer other than that from a craft brewer’s own brewery. Selling beer from one’s own brewery is classified as self-distribution.

Craft breweries that produce less than 300,000 barrels per year can self-distribute without coming under any limitations, Roby said.

The largest craft brewery in the state is New Glarus Brewing Co., which produces around 100,000 barrels per year.

The WBDA met with craft brewers earlier this year to discuss the legislation, and Roby said the groups discussed adding language to the bill that would allow craft brewers to establish a cooperative. The cooperative holds a wholesaler’s license and “they can do anything they want inside the co-op,” Roby said.

While the wineries of Wisconsin inserted such language into a similar bill a year ago, Roby said the craft brewers refused.

“They rejected that because they don’t want to be regulated at all,” Roby said.

But Tressler said he and other small brewers haven’t been told how the guidelines will be enforced.

“There’s a lot to be interpreted and the state hasn’t clearly given us an answer on whether or not we have been grandfathered because we owned all of this stuff before the legislation came down,” Tressler said.

Roby called the legislation a precaution that will keep large brewers from monopolizing distribution.

“[Craft brewers] will still have access to independent distributors,” Roby said. “We know from their standpoint that the craft brewers are unhappy about these things, but we think we’re protecting them.”

By Sunday the state will know if Gov. Walker agrees.