Wednesday, January 16, 2008

Big news in the legislature

I can't and won't take credit for finding this story, our fellow blogger, brewer and Nebraskan over at Beer Me posted this. Check it out.

This just in, courtesy of Brian Collins: LB 955 was introduced to the Nebraska Legislature on January 14. This bill amends the Nebraska Liquor Control Act to permit breweries to sell beer directly to retailers. You can read the entire (PDF) text of the bill at the Nebraska Legislature web site.

For small breweries, the three-tier system is an impediment to getting beer into the marketplace. Once a brewery reaches a certain size, it makes sense to give a third party a share of the revenue in exchange for delivering the beer, but very small operations can't afford that overhead. So I'm totally in favor of this bill. My only concern is how existing wholesaler contracts will be affected: if we already have a contract with a local wholesaler, will that prevent us from self-distributing our beer locally? If so, the bill is essentially meaningless for existing breweries.

In any case, I'll be contacting my State Senator today. If you're a Nebraska resident, you can find your Senator's contact information at nebraskalegislature.gov.

So if I read this correctly and take Rich's word on what it says this is great news and something you should be hounding your senator about to help pass. I am not sure if it has got out of committee yet but you may get lucky and find your senator on that committee. This could be great news for start up breweries and make it much easier to become successful keeping a larger chunk of the pie out the gate. It would be great if this is the start of some walls breaking down in the system too. You know the BMC crew will be pushing HARD against this so let's let our voices be heard.

9 comments:

Sledge Jr said...

Here is the letter that I sent to Sen. Gwen Howard:

Gwen-

I hope that you will consider supporting LB955 if it makes it out of committee. The difficulty of small, locally owned brewers to survive in Nebraska is evidenced by the large number of breweries that have gone out of business after attempting to survive little more than a year after opening.

If small local breweries can directly sell to retailers in Nebraska, this will help the consumer to purchase locally made beer that has not been shipped across the country (carbon footprint?). Right now, most small breweries cannot afford using the current Distributorship method.

I'm in favor of any legislation that promotes homegrown products being sold and consumed locally. It's the Green Way to live.

Nate B. said...

I sent something similar to my representative as well. I didn't focus on the green aspect as much as the potential tax revenue that could be generate from income and alcohol on several levels. I could see this as a potential for almost homebrew type setups starting up and selling to their local pub only. A pretty cool deal I think.

matsumoto said...

As I read it, it doesn't remove the second tier, it just allows breweries to hold ownership in a second tier company. I'm not certain that this is being done for the benefit of small brewers, although those that are willing and able to set up their own distributors license would see some benefit.

Maybe I'm not reading it right.

Can anybody tell me why this bill was introduced? What lobby put this into action? Who is Dierks?

It would be nice if the Monks could just cruise kegs around wherever we wanted...but it doesn't appear to me this bill allows for such a thing.

I'll need to read the existing sections, I guess...

Cheers
matt

segnid said...

Well, I found out who the senator is(from Ewing) and wrote him and email with my questions. I'm no lawyer or legislator, but I don't see that this does anything to remove the second tier. I'll be curious to see if and what the senator has to say in response to my questions. I'll share it here if there's anything to share.

Cheers
matt

Nate B. said...

Matt, I emailed the senator too as well as Zac T. as he has become somewhat familiar with the liquor control acts and such. I read it the way you read it. That still is a step in the right direction if you can get a distributors license isn't it? I know that is another expense and hoop but do you know how much and what regulatory issues would be involved. I will wait to hear back from Dierks and see what he send. My Senator agreed to put my comments on the bill if it makes it to the floor.

I am also curious what spawned this because he is not in a craft beer reach area up there in his district. There is one senator from Omaha on the committee so that would be a guy to contact. I am tracking the status of the bill, they have yet to have or schedule a meeting on it. As progress develops I will keep the blog in the loop as well.

Nate

Bull E. Vard said...

I'm a little too busy to write about this in depth but NE allowing NE brewers sell directly to retailers may be in violation to the Commerce Clause. In 2005 there was the case in MI of MI wine producers being allowed to sell directly to MI consumers was found by the Supreme Court to be a violation. TX just recently had a similar case and was found to be in violation of the Commerce Clause.

So if NE does get this passed and it turns out that it is a violation of the Commerce Clause we may start to see a movement to eliminate the 3 tiered post prohibition system that greatly reduces our choices for beer. Especially down here in KS.

Nate B. said...

Interesting comments Bull. I thought that wineries could direct sell here but I am probably wrong. I think like Matt suggested this would allow a brewery to get a distributor license. If this is a violation and it is a supreme court issue then it becomes interesting. I would love nothing more than to have that 3 tier system destroyed or severely hampered, it borders on monopoly in my mind. That is a stretch I realize but it makes it exceedingly difficult for small companies to prosper.

matsumoto said...

Nate,

It just depends on how the law and statutes are written. Currently, you can not be a producer/manufacturer (1st tier) and also hold any direct or indirect ownership in a distributor/wholesaler (2nd tier)...

This carries through all aspects of the 3-tier system in the US...meaning a producer can't own a retailer or a bar, and a wholesaler can't own a retailer or bar either. Obviously, states can regulate these things themselves, so there are different rules all over the country, but that is the basic premise of the 3-tier system. In Nebraska, that has always been the case.

You can see some exceptions, like brewpubs, for instance, but they had to be lobbied for and written in, just like Upstream did with the distillery issue recently. I believe that what they call 'farm wineries' can self distribute in Nebraska, but there is a distinction made about the requirements for a large percentage of their fermented product being grown here in Nebraska soil...

This bill would allow AB or InBev or whoever to outright own their distributors in the state. I'm not sure how much difference that would have or what the effects might be, as AB already has pretty tight control over their distributors. I assume the other large brewers use a similar system of controls.

The bill doesn't address whether the distributor would need to have a separate location or be run as things currently are run...ie physically passing the product to the dock of a distributor and doing a paperwork shuffle too. It just seems to allow beer producers ownership in the second tier.

The distributor license itself isn't that expensive, maybe a couple thousand bucks and a background check.

You can read the Nebraska LCC rules to your hearts' desire by going here: http://www.lcc.ne.gov/

Cheers
matt

Nate B. said...

Please read my most recent post on this matter.

http://nebraskabeer.blogspot.com/2008/01/after-further-review.html