As Minnesota continues its move to the forefront of the craft beer industry in the United States, supporters suffered a setback in this Legislative session when efforts to repeal Minnesota’s decades old ban on Sunday off-sale liquor sales failed at the hands of special interests (liquor store lobbyists, cities with municipal liquor stores, wholesalers and the Teamsters). Even a small compromise bill allowing Minnesota’s craft breweries – 48 and counting as of the date of this writing – to sell growlers on Sunday couldn’t survive the Teamsters’ lobbying efforts (the Teamsters claimed that a distributor who they would not identify informed them that if the breweries were allowed to sell Growlers on Sundays, the distributor could renegotiate its contracts with the Teamsters, contracts which were never provided to support this dubious claim).
Why, you ask, in a state with such a rich history of beer and brewing, do we have alcohol laws that smack of the 1900’s? Well, remember that besides being home to hundreds of breweries over the years, Minnesota was also home to a gentleman by the name of Andrew Volstead. Volstead, a Republican congressman from Granite Falls in the early 1900s, is best known as the namesake of the infamous “Volstead Act”, the law which ushered in the era of Prohibition in this country. Prohibition, as we know, came to an end in 1933 with the passage of the 21st Amendment, but some remnants of the era remain embedded in our liquor laws to this day. Key among these remnants is the system of alcohol distribution colloquially known as the “three tiered system.”
In a 2008 article for Reason magazine, Radley Balko explains the genesis of the three-tiered system – which gets its name from the three “tiers” of manufacture, distribution and retail sale. Quoting California State Northridge Professor Glen Whitman, author of Strange Brew: Alcohol and Government Monopoly, Balko writes:
It was put in place largely to appease temperance activists, who still held sway in some parts of the country. Angsty prohibitionists feared what they called “tied houses,” bars that were owned by liquor producers. Before prohibition, tied houses, they said, had lured blue-collar workers in with free salted pork sandwiches on their lunch breaks. The salty meal would make the laborers thirsty, at which point they’d purchase alcohol from the bar—leading, the temperance activists said, to decreased production, drunkardness, and all-around moral decay.
Minnesota’s retailer license statute is found at Minnesota Statutes Section 340A.402, and it expressly forbids the issuance of a retailers license to “a person who has a direct or indirect interest in a manufacturer, brewer, or wholesaler.” There are, of course, exceptions to this general prohibition. For example, manufacturers who brew 20,000 barrels or less per year are permitted to sell “growlers” on site. More recently, the taproom law permits breweries to obtain a license to sell pints of beer onsite. These are, however, the exceptions.
Perhaps it is time to revisit the regulatory burdens that have existed for over a century. The craft beer movement shows no signs of abating, and last year it accounted for $5 million in wages in the State of Minnesota. Craft breweries are in expansion mode – more so, these days, than big breweries, according to the statistics, and this expansion leads to job creation. Why, then, are we placing artificial barriers on their growth? The three-tiered system – in part due to the laws governing distribution agreements which are extremely one-sided in favor of the distributor — puts money in the pocket of the wholesalers at the expense of the consumer as well as the manufacturer (i.e., the job creator). Mr. Balko’s article cites an 18%-25% markup on every glass of beer or wine thanks to the manner in which we distribute liquor.
Maybe it’s time for a change; let’s start by allowing a legal business (such as a liquor store) to open every day of the week if it chooses.