BATTLEGROUND: ILLINOIS, AND “SAVE THE CRAFT”

This beer drama is spreading across the country like wildfire, and it gets more and more confusing wherever you go.

In Alabama, nobody can quite seem to figure out in which way Anheuser and associates are trying to screw the pooch, but at least there’s a general awareness that the pooch’s well-being is probably in question. I suppose, given the actual situation, a closer metaphor is that AB and Co. are trying to prevent laws from being passed that would abolish the pooch-screwing already going on. Yes, I think that’s the one I’ll go with.

In Illinois, on the other hand, a different sort of throwdown is underway. We’ve mentioned it a number of times on Aleheads before, but I’m going to do my best (my error-riddled best) to get all the information in one place and give you an idea of what’s going on, who’s on what side (currently), and what you can do to support craft beer in Illinois. Thankfully, I’ll have the help of Ryan Hermes, one of the founders of Guys Drinking Beer and Save the Craft.

To begin, a few bullet points:

  • A lot of people seem to not understand that CURRENT Illinois law allows breweries to self-distribute already, up to 60,000 gallons. However, this came under fire when a judge ruled that Anheuser (an out-of-state brewery) should be afforded the same treatment, and subsequently did away with self-distribution.
  • This DIRECTLY and immediately affects only a few breweries, such as Big Muddy Brewing in southern Illinois and Argus Brewery in the Chicago suburbs.
  • Other breweries in Chicago and throughout Illinois voluntarily choose to go through distributors as opposed to self-distribute, taking advantage of the greater logistical power of distributors to get their products on store shelves.

What this means is that in Illinois, under the current law, the three-tiered liquor system (producer —> distributor —> retailer) is mostly optional for craft brewers. However, if no agreement can be reached by the end of May, it’s possible this will no longer be the case.

With that said, I’ll let Ryan Hermes take it from here.

Kid Carboy Jr: What was the gist of the law before all of this got rolling? It was Anheuser trying to acquire a Chicago distributor that started it, right? Isn’t it pretty damn petty of them to target Big Muddy and Argus in saying that “everything should be equal,” regardless of size?

Hermes: In a nutshell, current Illinois law allows breweries in the state to self-distribute their beer with no barrel cap.  Anheuser Busch’s attempt to buy City Beverage, a Chicago distributor, is what triggered this.  A-B owns a stake in the company and wanted to buy out the remainder, but the Illinois Liquor Control Commission blocked the move, saying it would jeopardize the three-tier distribution system (producers, wholesalers, retailers).  A-B sued, claiming discrimination because out-of-state breweries were not allowed to self-distribute but in-state breweries could.  The federal judge agreed.

Kid Carboy Jr: Who is this judge character? Where did he come from, and how did it come to him ruling that a decision had to be reached before May 31?

Hermes: Judge Robert M. Dow Jr. was confirmed as a federal judge in 2007.  Prior to that he was a partner at Mayer Brown in Chicago and focused on communications law, according to a news release on Mayer Brown’s website.

Here is the meat and potatoes of Judge Dow’s summary judgment in this case:.

“In regard to the remedy that follows from the Court’s Commerce Clause ruling, the parties and amici agree that the Court, in the exercise of its discretion, must choose one of two alternatives: either “extension” or “nullification” of the unconstitutional in-state benefit. In the particular circumstances of this case, the Court concludes that “nullification” – that is, withdrawing self-distribution privileges from in-state brewers rather than extending those privileges to out-of-state brewers – does the “minimum damage” to the legislative and regulatory scheme under the Illinois Liquor Control Act, and thus is the appropriate remedy. Finally, because the Court’s choice of remedy rests on judgments as to the intent of the Illinois General Assembly and implicates matters of public policy as to which the General Assembly is the ultimate arbiter, the Court temporarily stays enforcement of its ruling to provide the General Assembly an opportunity to act definitively on this matter if it chooses to do so.”

Essentially, he feels it is easier to take away self-distribution rights in Illinois than to extend the opportunity to everyone.  But, he gave the legislature a shot at coming up with a remedy before his ruling would take effect. Initially the deadline was March 31st but negotiations were still taking place so he issued a stay on his ruling, extending the deadline to May 31st.  That date coincides with the end of the legislative session.

For whatever it’s worth, in 2007 when a Supreme Court case involving the shipment of wine from one state to another required states to re-write their laws, it took the major players in Illinois (distributors and Illinois wineries) a year to reach a compromise.

Kid Carboy Jr: So how then did the legislation in the bill end up changing from 50,000 or 60,000 to 7,500 barrels as the amount that could be self-distributed? Are there any brewers in Illinois besides Goose Island who currently produce more than that?

Hermes:The 60,000 barrel cap for self-distribution was in the original legislation, which was written by the Illinois Craft Brewers Guild.  The Associated Beer Distributors of Illinois took issue with that large of a number. Sources told me they were eying something in the 2,000 barrel range.  The ICBG did come down a bit during negotiations to 20,000 barrels, but that bill didn’t gain much traction.  The senate sponsor of the legislation, State Senator Donne Trotter (D-Chicago), reportedly came up with the 7,500 barrel limit on his own.  Ironically, that caused the ICBG to oppose the legislation because the barrel limit was too low but the ABDI to support it because of the lower cap.*

We don’t have exact figures for all the breweries in Illinois but it appears the only brewery that would come in over the 7,500 barrel mark is Two Brothers in Warrenville, IL.  Argus has the ability to produce upwards of 20,000 barrels but that is if they are running at full capacity.  Most of the other breweries in Illinois are operating at or under the 2,000 barrel mark.  Both Half Acre and Metropolitan in Chicago are around 2,000 barrels a year and Big Muddy in Murhphysboro is producing about 500 barrels a year.

*Carboy note: Just the idea that a bill like this could be changed so much while being debated that the people who proposed it now are against it and its former opponent is now for it make my head spin.

Kid Carboy Jr: How much will it hurt breweries like Big Muddy and Argus if some form of this bill doesn’t go through? What do you perceive as the wider effect of the bill not going through? What about breweries attempting to open in the near future that planned to self-distribute?

Hermes: Right now both breweries (Big Muddy and Argus) do a mix of self-distribution and using distributors.  Argus distributes about one-third of its beer and uses distributors for the rest.  Big Muddy distributes locally and uses distributors to get their beer north to Springfield, Champaign, Peoria and the Chicago suburbs.  Big Muddy is not a large brewery by any means.  Head brewer and founder Chuck Stuhrenberg only produces about 500 barrels a year and prior to signing on with a distributor was loading kegs in the back of his pickup truck to make deliveries. Argus is a father-son operation that was unable to get a distributor to call them back once they got their brewery up and running. So they went at it on their own to build up their brand.

Losing self-distribution rights would not only cut in to the profits of these small and family run operations, but it would also have a detrimental blow to the future of craft beer in Illinois.  Essentially it would be a step backward for the state.  I know of two prospective operations, a brewery in central Illinois (Springfield) and a brewpub in southern Illinois, whose operations hinge on the ability to self-distribute their beer.

I interviewed the woman who is starting the brewpub outside of Carbondale who laid out everything that goes in to starting a brewing operation.  We’re talking hundreds of thousands of dollars to acquire the space and equipment necessary to get a brewery up and running–and that’s before any beer is actually brewed.  Allowing small, start-up breweries and brewpubs to self-distribute their beer will allow them to market their product, get it on store shelves and on tap at bars, and eventually grow to the size where they’ll need a distributor to market their product beyond their immediate market.

It is also worth noting that brewers I have spoken to said it was almost impossible to get a distributor’s attention when they first opened their brewery because they were an unknown brand.  If someone opens a brewery and can’t get a distributor, without the right to self-distribute, they’ll be forced to shut down before they bottle that first beer. <— Carboy emphasis

Kid Carboy Jr: It doesn’t seem like AB would spend money on 15 lobbyists just for spite. What benefit do they get if they’re successful? Are they still attempting to find some way to self-distribute their own product?

According to sources I have spoken to with knowledge of the negotiations, A-B’s end game is to stop any and all legislation that allows self-distribution for craft brewers in the state or includes any sort of cap in barrels brewed to be considered a craft brewer or for self-distribution.  If A-B is successful in killing any and all legislation pushed by the Craft Brewers Guild then the federal judge’s decision to take away the self-distribution rights for Illinois breweries takes effect.  A-B would then likely appeal that decision, saying the law is too vague, in hopes of opening up self-distribution rights for everyone, regardless of size.*

There has also been talk of a southern Illinois democrat in the Illinois House pushing, at some point, a pro-A-B bill that would allow the brewing giant to self-distribute.  There is no bill number or language but lawmakers on the side of craft brewers in the state seem to think something could materialize before May 31st.

*Carboy note: Damn, that would be insidious.

Kid Carboy Jr: What kind of national precedent is being set here?

Hermes: If A-B is able to gain self-distribution rights in Illinois, then it is safe to assume that other states would follow. If A-B is able to self-distribute they will likely consolidate their number of distributors in a region or state, meaning people would lose jobs and family run businesses would be shut down.  Let me make it clear, we are not against the distributors here.  We may not see eye-to-eye on all the issues but they do provide a valuable service.  Many are family run and they are heavily involved in their communities.

Kid Carboy Jr: Do you have some sort of law background, or are you just a beer blogger? How did you start the Save the Craft movement?

Hermes: No law background, but I have a journalism background.*  I was a radio news reporter for over ten years and spent my last five years in broadcast journalism covering the Capitol for a statewide radio network and a Chicago news/talk station.

*Carboy note: me too! *Fistbump*

We started GuysDrinkingBeer.com a little over a year ago as a way to, well, talk about beer.  The three of us have unique backgrounds; myself with a broadcast journalism background, Karl writes for online sites and magazines in the Chicago area, and Andrew worked on staff for both the state House and state Senate. We started posting beer reviews, vertical tastings, cellar reviews and the like.  After the first of the year we decided we wanted to grow the site beyond reviews and start covering craft beer news in Chicago and across the state.

We started Save The Craft to keep the craft beer community in Illinois informed about this legislation.  After talking to some sources at the statehouse we found that negotiations were not going as well as some had hoped in the early going, so we felt the need to mobilize the craft beer community to get out in front of this issue and be proactive in our support instead of reactive.  Obviously we, and by we I mean craft beer drinkers, don’t have the kind of money at stake that someone starting a brewery would.  But, we do have a passion for craft beer and want to see Illinois grow and thrive as a craft beer-friendly state.

Save The Craft has also evolved since we started the campaign.  When we began the endeavor we were throwing our support behind the initial bills that were introduced and were urging others to do the same.  But things have changed since then and we have shifted to more of an educational campaign.  We’ll present the facts, without spin, and allow you to decide if you support the current legislation or oppose it–and to act accordingly.*

*Carboy note: In my eyes, that’s all one can now do when things are so confusing, the bill has been edited so thoroughly, and not even the Illinois Craft Brewers Guild is supporting it as-written any more.

Our end game is to see more locally brewed beer using locally grown ingredients on tap at bars, restaurants and on store shelves across Illinois.

——–

Well then! Think that was ridiculously long enough? An incredible thanks to Ryan of Guys Drinking Beer for explaining some of these contentious factoids. I highly recommend you go ahead and favorite the Save the Craft page, where you can follow all breaking developments in this story.

And you know, in case it wasn’t obvious, Anheuser Busch blows.

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4 comments

  1. beer-miester · · Reply

    The evil government did the same to cigars! Beware! Real nice write. Another eye opener from Kid Carboy JR….

  2. Are you people paying attention? This is the world we’re creating for ourselves. If new breweries can’t get a distributor, they’ll have to shut down before they even open. Let’s snuff out innovation and new jobs in Illinois. So some shareholders can make a buck.

    Anheuser Busch needs to be stopped. This is bullshit.

  3. […] good thing for both Sierra Nevada AND Tennessee). As for Illinois, that’s probably the most confusing situation of all. For a number of years, breweries were allowed to self-distribute in the state, but some people […]

  4. Chris Bowman · · Reply

    Keep in mind that without allowing similar (usually a combination of size and permit) out of state craft brewers/wineries the same self-distribution rights as those afforded in-state producers, the law is dead in the water no less so than if A-B lobbyists wrote it themselves. Every time a state (New York, Michigan, Washington and Illinois) has attempted to allow in-state entities rights and privileges denied out of state entities in this realm, it has been fundamentally smacked down in federal court on commerce clause grounds.

    If push comes to shove, allowing A-B (or Kendall Jackson) the right to self-distribute is by far the lesser of two evils when the alternative is allowing no one to do so and locking all into an antiquated, inefficient and unresponsive three-tier system.

    A key lobbying components should be (for republicans) that this is the free market system at work in letting entities get their goods to market as efficiently as possible with the distribution model (still regulated and licensed by the state) of their choosing and (for democrats) it is highly consumer friendly, pointing out that small California wineries that have begun to self-distribute are seeing their wines delivered to Chicago restaurants and retailers at 20% lower wholesale prices than had they come through the three tier system.

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