New bill in Madison could benefit distilleries, craft breweries

From how late a brewery or winery can remain open to what products can be sold at each establishment, Wisconsin’s alcoholic beverage industry is currently a challenging one to navigate. Many of the state’s post-Prohibition laws leave a great deal of room for interpretation, and with that, confusion.

For the last seven years, the Wisconsin Brewers Guild, the Wisconsin Distillers Guild and the Wisconsin Craft Beverage Coalition have been working to clean up these regulatory laws, and most recently, they may have come one step closer to clarity.

New legislation, which creates new guidance on alcoholic beverage producer regulations, offers consistency in bar, winery, brewery and distillery closing times and creates a new Division of Alcoholic Beverages within the Wisconsin Department of Revenue, has moved forward in the state Capitol.

The Wisconsin Assembly’s state affairs committee moved the bill forward Thursday with a 12-2 vote. It is expected to move to a full Assembly vote next week.

Central Standard Craft Distillery co-owner Evan Hughes said there have been a number of people in the alcohol industry that have been working on governmental change for the last seven years — people like alcohol producers, suppliers, distributors, the Tavern League of Wisconsin, etc. The goal of this most recent package, Hughes said, was to work together to create some universal benefits for alcoholic beverage producers.

The biggest benefit if this legislation is passed, Hughes said, is the clarity in law.

“For small businesses, it’s very hard to invest capital, hire more people, look at new opportunities when we don’t understand what’s legal, what’s not legal,” he said.

Hughes said the Wisconsin Craft Beverage Coalition, the trade association comprising the Wisconsin Winery Association, Wisconsin Brewers Guild and the Wisconsin Distillers Guild, is supportive of this bill.

Dan Katt, owner of Good City Brewing and member of the Wisconsin Brewers Guild, has been spending a lot of time working on the bill, particularly as part of the Craft Beverage Coalition.

Good City Brewing, which opened in 2016, now has four locations in Milwaukee, Wauwatosa and Mequon.

“It’ll give us a lot of flexibility as an industry and certainly addresses a lot of the old provisions that no longer make sense. In today’s world of small producers, it’ll help a lot of breweries, wineries and distilleries and even bar owners and distributors,” he said.

Katt echoed Hughes’ point that the greatest benefit of this legislation is the clarity of the law. Often times, alcohol producers in the state are faced with the confusion of multiple interpretations of alcohol policies.

The legislation also would open up business opportunities with the three tiers of producer, distributor and retailer. Katt said right now there are some extreme limitations on cross-tier ownership and business activity. For example, he is a part owner of the Century City building. Because of this, Good City cannot lease space to its distributor even though it has warehouse space.

“The way the law is written, you’re not allowed to have that type of relationship with a distributor, which is kind of weird even though it’s just real estate, so the bill also cleans up some of those things,” he said.

Additionally, the legislation provides more consumer options because breweries, wineries and distilleries would be able to obtain a liquor license and sell alcoholic products beyond what they already produce.

This would impact businesses like Hughes’ operations. Currently, Central Standard Crafthouse Kitchen & Craft Distillery in downtown Milwaukee has to produce everything needed in its cocktails. For example, the research and development team has to develop its own sweet and dry vermouth. Central Standard cannot buy any alcoholic products from a distributor because of its licensing.

If the bill passes, distilleries including Central Standard, would be able to buy other alcoholic beverages that it may not produce in house.

“I would love to make cocktails with modifiers, so really in the end, who loses is the consumer. We want to unleash more creativity, and that’s something that for the suppliers would be super impactful,” Hughes said.

Zak Koga, vice president of the Wisconsin Brewers Guild and co-founder of Madison-based Karben4 Brewing, added that just as distilleries could purchase any needed alcoholic products, breweries could also begin offering cocktails if this bill moves forward. Koga said this is huge from a consumer perspective.

Karben4 initially opened as a brewpub and was able to offer spirits at its bar. As the brewery grew, its licensing changed into a microbrewery, and with current state law, it lost the right to sell spirits.

Koga estimated it was a 10% setback in that first year of moving into a microbrewery status. Though spirits sales were often only 2-3% of overall sales, it might represent 10% of a group of people coming to the Madison-based brewery, he said.

“The outward facing version is we really want to give all of our customers what they want in our taprooms and offer full bars and clean up some of these ownership issues that come up,” Koga said.

Margaret Naczek, Milwaukee Business Journal

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