In 2011 the Surly Brewing Co, to meet growing customer demand, hoped to expand their operation by opening a new multi-million dollar facility in the Twin Cities. To recoup some of the costs associated with such a significant venture, they wanted to include a restaurant and beer garden. Their goal was to sell their beer to customers at the new site. However, according to Minnesota's liquor regulatory system enforced at that time selling beer on the proposed site was illegal.
Minnesota’s alcohol governing system is known as the “Three-Tier System of Liquor Regulation.” It is long-running post-Prohibition-Era legislation that was enacted to separate the supply, distribution, and retail sale processes of the state’s liquor industry. Under the system, a brewery had to either package all the beer they made to be sold elsewhere, or sell it all on site. Suppliers could only sell to authorized distributors, distributors could only sell to licensed retailers, and retailers could only sell to the public. Before National Prohibition, the state lacked checks and balances concerning alcohol consumption, and the industry was mostly unregulated.
Enacting the “three-tier system” relieved concerns about a return to the pre-Prohibition “saloon.” It aspired to many goals, but two stood out. Forcing retail establishments to apply for licenses allowed local governments control over who could sell alcohol to consumers. It also evened the playing field behind the scenes. Suppliers were now required to work exclusively with distributors and no longer in the position to exert undue influence over retailers to sell their products. An industry that was once vertically integrated became three co-equal entities under the new system. The legislation's by-product was that there were fewer places for consumers to buy alcohol.
Surly Brewing’s business had experienced incredible growth since they began selling their product to consumers in February 2006. In early 2011 the company announced plans to build a new $20+ million facility to increase production to meet the ever-growing demand. They envisioned a “destination brewery” for customers to come and enjoy Surly products. However, because their yearly production levels were well beyond the limits of a brewpub, Minnesota’s three-tier system wouldn’t allow it. They could continue to offer free samples, but couldn’t sell their beer on-site. Surly Brewing, with the support of local legislators and a fervent fan base, began work to change the law.
Brewery owner Omar Ansari believed the effort was a potential windfall for Minnesota, and that the proposed brewery expansion would both expand Surly’s distribution and create jobs. Also, the tax revenue from additional beer sales would remain in Minnesota. He felt that a tweak to the current law would be a financial boon to the state. Ansari's plan resonated with a business-friendly Legislature. A large group of loyal social media followers also lobbied in favor of the proposal.
Senator Linda Scheid (DFL - Brooklyn Park) was the chief author of the “Taproom License bill” that laid out the changes that Surly had proposed. Scheid promoted the effort in the Senate, and Representative Jennifer Loon (IR - Eden Prairie) introduced it in the House. The goal of the bill was to change state law and allow a licensed brewery of Surly’s size to sell pints of beer on their site. While the bill had bi-partisan support, it was opposed initially by the Minnesota Liquor Beverage Association (MLBA). The group represented the interests of the state’s on-sale and off-sale alcohol facilities.
The MLBA was concerned about how the changes would impact local businesses. They felt that many locations loved the Surly product and furthermore loved selling it, but were concerned about the competitive advantage Surly would see by selling pints of their beer at the brewery. The organization believed that the integrity of the three-tier system needed to remain unchanged to maintain a competitive balance.
The legislation was amended to tackle the MLBA issues. Only breweries with a production ceiling of 250,000 barrels a year could offer a public tap-room, and each brewery was only allowed to designate one site for public sales. This essentially excluded national brands from creating taprooms in the state. The changes helped address the concerns of the MLBA, and they eventually came around to support the bill.
On May 10, 2011, the House approved the measure 127 - 0. The bill cleared the Senate on May 13th by a 60 - 0 margin. After some time in committee to resolve differences between the Senate and House bills, the governor received the legislation. Governor Mark Dayton signed an omnibus liquor bill that included the taproom license provision (aka Surly Bill) into law on May 24th. The passage of the bill made it legal for qualified licensed brewers to sell pints and growlers of its product at their brewery.
Before 2011 there were a small handful of breweries in Minnesota. However, the passage of the bill in May soon created a brewery boom in the state. According to 2017 statistics from Brewers Association, Minnesota has 112 craft breweries and an economic impact of more than a billion dollars. The first company to take advantage of the amended bill was Lift Bridge Brewery in Stillwater which opened its taproom in September 2011. Surly Brewing Co. opened their new "destination brewery" to the public in December of 2014.
Bibliography available here.
This work is licensed under a Creative Commons Attribution Non-Commercial-No Derivatives 4.0 International License.
Subscribe to Minnesota Then
Get the latest posts delivered right to your inbox