A Brew Ha Ha over proposed brewery?

Surly illustration-650.jpgSurly Brewing Company announced today that it wants to build a $20 million brewery in Minnesota. The plan includes a 60,000 square foot, two story brewery, a 250 seat restaurant, a 30 foot bar and a beer garden. Here’s part of the plan from Surly’s blog:

The brewery is good for us, and great for Surly fans, but it’ll also benefit our state by creating as many as 85 construction jobs to build it over nine months and 150 permanent Minnesota jobs, and offer a complete event center, for concerts, parties, business events, weddings, and more. Now there’s a reason to renew your vows.

The only problem is that Surly needs to change the law in order to build the brewery and have a restaurant. That’s because a law prohibits large brewers from owning a restaurant and bar for fear that they’ll sell their beer at a lower prices than other bar owners.

A lobbyist for the Minnesota Licensed Beverage Association, which represents bar owners, told me they’re against changing the law.

Liquor laws are complicated and controversial. A small proposed change in law can mean a huge fight in the Legislature. The MLBA is also a pretty powerful organization because there are bar/restaurant/package owners in every legislative district. A heavy lobbying effort can slow down or defeat any form of legislation.

No lawmaker has introduced legislation on behalf of Surly but I’m told it will come soon. Surly has also hired a well known lobbying firm to help them with their efforts.

I’ll post a more formal response from MLBA if/when they send it to me.

Update: Here’s a response from Frank Ball, with the Minnesota Licensed Beverage Association:

It’s pretty simple within the parameters of the three-tier structure we have in Minnesota. The manufactures make the product, the wholesalers distribute the product and we, the retailers, sell the product to the consumer. It’s even more simple if you say it the way my retailers say it: “you make it, we’ll sell it”…you make it ‘and’ sell it, we won’t buy from you”.

The reason for the three-tier structure was to keep the integrity of the distribution of a controlled, highly regulated, commodity. Alcohol — like prescription drugs or firearms — is no ordinary commodity. In fact, alcoholic beverages are the only commercial products specifically named in the United States Constitution. Because our society recognizes the importance of controlling alcohol use and access, alcohol has always been treated differently under the law than most other products.

The manufacturers (breweries, vineyards and distilleries) supply distributors. Under the laws which created the three-tier system, each level of the system is independent of the others, ensuring accountability to the public as well as the benefits of healthy competition. By preventing tied houses (i.e. Retailers that sell the products of only one supplier), the three-tier system limits the number of retail outlets and therefore promotes moderate consumption, hence our position with the Surly matter. We want the Surly product to sell in our stores, we don’t want the manufacturer of a great beer to sell to the public, we’ll do that enthusiastically as possible.

  • The 3-tier system is a joke. The only reason it still exists is because groups like the MLBA can afford to pay lobbyists to keep the law in place more than small breweries like Surly can.

    Anyone interested in learning the truth about the 3-tier system needs to see the documentary Beer Wars.

  • Brewcity King

    So why is it that in other states Businesses exactly like this exist?

  • Dan Peters

    The MLBA quote sounds like it could have been delivered straight from the lips of Tony Soprano.

    Fear not, MLBA, you’ll still get to reap loads of profit from marking up Surly in the liquor stores, even if I am able to buy one at the House of Surly.

  • Luke Francl

    Ball says, “you make it ‘and’ sell it, we won’t buy from you”.

    That’s the retailers’ prerogative. But if that’s the case, let the market decide if liquor stores should sell Surly, don’t forbid it by law.

    I imagine retailers will quickly find it is to their advantage to continue to stock Surly beer.

  • surlyboy

    If surly offered other companies beers and kept their beer prices realitive to distributors in their area, what would the problem be? Like how gas stations check their neighbors prices, surly could stay within a percentage of tbeir neighbors prices on a regular basis and sale prices for a week at a time. Not everyone likes full flavored beers so the competition wouldn’t be that much of a factor. BUILD IT AND GET SURLY!

  • 102ibu

    The three-tier system is severely flawed. “Preventing tied houses” is a joke. I have witnessed how the big breweries and/or their distributors illegally buy exclusivity (or something close to it) with major restaurant chains. You may have noticed I said “ILLEGAL” – they are adept at buying loyalty and don’t care if the “three tier system” says they’re not supposed to. That’s only one problem with the three tier system.

    To the distributors, retailers, and establishments: It is time for this state to emerge from the dark ages and change this law. Yes, it may affect your bottom line. I understand that is of concern to you. However, the prospects for job creation, tourism, and increased state & city tax revenues…the greater good for Minnesota… should be a higher priority than your profit margins.

    Relax… InBud-MillerCoors-Molson-whatever they’re called tomorrow will still be your bread and butter.

  • Juliana

    The philosophy, “you make it ‘and’ sell it, we won’t buy from you,” is ridiculously short-sighted. People who go to the brewery and enjoy the beer will still want to be able to buy more Surly at their liquor stores. Customers will not always have the time or desire to go to the brewery to drink Surly beer. However, when they have a good experience at the brewery, their desire to buy more Surly at their local liquor store should increase.

  • How frustrating. Here you have a successful entrepreneur wanting to invest additional time and energy into a business expansion that will produce jobs and contribute to the beverage and tourism economies of Minnesota.

    Other states fight to have business like this, offering tax incentives and the like. Why make it a battle and almost encourage them to leave? We should be doing everything we can to keep them here.

    Surly “gives a damn” not only about their own business but also the local community. I think we should return the favor.

  • Mary

    Lawmakers remember we the people voted you in and in this economy every job counts. If you turn Surly away and lose 150 jobs, We the people can vote you out of office. Remember We vote not the MLBA. I seem to remember in November we were promised more jobs. Well here you go. Now don’t blow it.

  • Doug

    “promotes moderate consumption”!?!?! That’s hilarious, nothing truly promotes moderate consumption. I’m not preaching, just saying that the 3 tier system sure as hell doesn’t do that.

    The law should be changed, along with Sunday sales. Pretty short sighted in my opinion. Might be that Surly has to go the way of Dogfish Head, brewery is seperate entity from the restaurant.

  • Eric J

    “By preventing tied houses (i.e. Retailers that sell the products of only one supplier), the three-tier system limits the number of retail outlets and therefore promotes moderate consumption, hence our position with the Surly matter.”

    So an expanded Surly brewery/restaurant/bar is going to cause a rampant increase in alcohol consumption? That’s ridiculous.

    “We want the Surly product to sell in our stores, we don’t want the manufacturer of a great beer to sell to the public, we’ll do that enthusiastically as possible.”

    Not surprisingly, it sounds like the MLBA is just looking out for themselves.

  • John

    Mr. Ball, wouldn’t both breweries and consumers be better off if your business did not exist? We don’t need you.

  • Tim

    “We want the Surly product to sell in our stores, we don’t want the manufacturer of a great beer to sell to the public, we’ll do that enthusiastically as possible.”

    This statement makes me sick. How is it appropriate to tell a creator of a product the manor in which they should share that product with the consumer? I’m pretty sure this is exactly the same theory of the mafia.

  • MinnesotaMom

    Pretty sad when a business that supports the local economy and offers jobs during financially difficult times does more to help Minnesota than its politicians. If our elected officials are too short-sighted to see the long term benefits or too interested in pandering to MLBA’s lobbyists, then its time for them to go. I guess business savvy and ingenuity is alive and well…just not “allowed” in Minnesota.

  • Tim Carlson

    I’ve worked with the MLBA on insurance related issues. Their large membership of MN restaurant owners is in part due to the insurance related incentives for joining (lower liquor liability premiums). While some good has come from the organization, they are mostly a group of backwards thinking lobbyists who are, surprise, trying to line their own pockets. They try to “protect” the MN restaurant and liquor industry by maintaining laws that do not take the consumer into count, which in turn stifles competition.

    They care more for the restaurant or liquor store, than the companies that provide the product (beer/wine/liquor makers). They ignore the fact that without breweries, wineries, and distilleries… they would not exist. Likewise, they believe that if these products could get into the hands of consumers by means other than through their members, they will not be needed anymore. As a result, they lobby for laws that keep outdated and non-progressive measures in place so that no progress is made in the industry.

    Because of the MLBA’s opposition, Surly now has one more hurdle that will need to be taken care of in this soon to be epic fight. That is convincing the restaurant and liquor store owners that this is good for them and the entire MN beer industry. This in turn will be what allows them to get passed the MLBA.

  • Blaine

    I would like the MLBA to give my any example how this has hurt anyone but the big three in California, where the law is different. My last three vacations have been to California mainly because of the laws that allow me to go to the Stone brewery and Russian River to enjoy not only their beers, but the atmosphere. There is just something special about a brewery having its own restaurant/brewpub. Stone has a huge list of other guest beers to choose from also. Care to take a guess how they get these beers delivered to there restaurant? Plus, if they think this will hurt sales at local establishments, they are plain crazy. The exposure this will give to people who have never heard of Surly, will only increase demand for it.

  • MN Retailer

    As a retailer, I can’t believe the MLBA. There will be plenty of Surly to sell in restaurants and retail. Surly just wants to grow the culture of their great craft brew and bring it to more folks. So what if they charge $1 less for taps, if they even do. I would love to see this pass as well as for other breweries in town. Sorry MLBA, you just lost my support.

  • taylor

    How can wineries like Alexis Bailly Vineyard in Hastings sell both samples of their product AND bottles and/or cases on site, but a brewery cannot under our current law?

  • matt

    If Surly gets this big they will have to go through a distributor anyway. What a joke Frank!

  • Brazzle Boykins

    Why don’t we just bestow upon the distributors the sobriquet they’ve earned: Dons.

  • matt


    E-mail Frank with your thoughts. I bet he won’t take the time to read your comments on the article.

  • Jon

    “The facility would enable Surly to produce as many as 25 million pints of beer per year, more than eight times as much beer as it produced last year”

    This isn’t appealing to distributors why? Are they afraid Surly’s restaurant is going to sell all that 22 million pints without them getting a piece?

    Read more: Surly wants to build $20M brewery | Minneapolis / St. Paul Business Journal

  • Mariah

    “The philosophy, “you make it ‘and’ sell it, we won’t buy from you,” is ridiculously short-sighted. People who go to the brewery and enjoy the beer will still want to be able to buy more Surly at their liquor stores. Customers will not always have the time or desire to go to the brewery to drink Surly beer. However, when they have a good experience at the brewery, their desire to buy more Surly at their local liquor store should increase.”


    I live in Portland Oregon-Rogue, Deschutes, Bridgeport amongst many smaller breweries all operate brew-pubs where they sell their own beer. It doesn’t take a rocket scientist to understand that no individual on the hunt for a six pack would ONLY go to the Rogue Public house to purchase rogue beer because you can buy it in the super market. You go to their pub to enjoy the food, beer and atmosphere not for the sole purpose of buying beer because it somehow creates denies retailers the opportunity to sell it in stores (because it doesn’t). I lived in Minneapolis for 5 years before moving out here and upon returning for New Years Eve was told at the liquor store that Surly has been unable to keep up with demand from the area and that they were going to be out of their beer for at least another week more. I hope the best for Surly and that they get their way with this expansion because next time I come back to Minnesota I’d love to actually buy it in the store! (on a sunday would be a miracle but i’m not getting my hopes up)

  • chris m

    On top of correcting the 3-tier system, let’s help lower the state deficit by opening up retailers on Sundays, too. More revenue from taxes on sales of alcohol on an extra day of the week could be great, yet we maintain the prohibitionist/religious-era “holy” day ban.

    That’s potentially a 15% increase in revenue. No brainer.

  • Brazzle Boykins

    Absolutely, Mariah! And the flipside is also true; whatever food the brewery will serve would not supplant that of restaurants, especially those that are progressive-minded when it comes to beer. Real good food at restaurants will always demand a pairing with a top-notch beer. We’d still go to Punch, Ngon’s, The Blue Nile, Blue Door (and many others!) for the food and the desire to pair THAT food with a Surly, Summit or Schells whether those breweries had a brewpub with top-notch food or not.

  • buddydave

    What a great idea! Let’s DISCOURAGE a high-quality, nationally renowned manufacturer from EXPANDING their business, from creating more jobs, and from creating more tourism! No wonder our state’s economy is so screwed up!

  • Gerry

    What I don’t understand is why it’s so important to Surly to also have a restaurant? Surly isn’t in the business of serving food. They are in the business of making a very fine beer. That’s where they make their money. Why would a fast growing company turn down the opportunity to generate more revenue because they can’t have a bar or restaurant on their premises?

    Is there something else going on here that everyone is missing? Some sort of tax break or something by having a restaurant and bar attached?

  • Hoppyguy

    OK, so this article puts things into perspective. I still don’t understand how changing the law would affect the sales and distribution tier of the so called “three-tier” system. It will just further ignite our love for beer and will strengthen our desire for quality brew. Maybe they just need to open it up to craft brews. My experiences in Wisconsin and California were so much richer cause I could tour a brewery, grab dinner, wash it down with a pint and talk beer with other beerphiles!

  • Wait.

    So a restaurant like Granite City can have an in-house microbrewery, but a brewery can’t have an in-house restaurant?

    Yeah. Doesn’t make sense. Especially since vineyards can sell right at the source.

  • Dean

    “What I don’t understand is why it’s so important to Surly to also have a restaurant?”

    Why should they just go half way with a new brewery when they could go an extra step to make their new facility a true destination that would draw people in from around the country? They never said they would not expand if the law does not change, they just set their goals high with the best facility the could envision using a proven business model that several other ‘destination breweries’ are currently using in other states and doing well.

  • bob

    Maggie, Granite City locations do not “brew” their own beer, although they do ferment it on premises. The wort is brewed in a central facility in Iowa and trucked to the restaurants.

    As for Surly’s situation, I question whether what they are proposing is, strictly speaking, a “tied house” because they would be brewing the beer on-site. This is different from the traditional British dichotomy between tied houses and free houses, in which a “tied house” pub, typically not operated by a brewery (although sometimes owned by one and rented out to a publican to operate) has a contract with a brewery to sell that brewery’s beer (sometimes ONLY that brewery’s beer), compared to a “free house” which can choose to serve beers from any brewery and can choose to stop selling any beers it no longer wants to sell.

    But if a brewery has a tasting room/taproom with its own beer brewed on premise and perhaps also food, there isn’t the element of coercion as there is with a tied house. Brewing on premises and selling your own beer is exactly what brewpubs do; the only difference in what Surly wants to do is that it also sells packaged beer for retail distribution.

    Although three-tier does have some useful and protective purpose with respect to avoiding anti-competitive behaviour by megabrewers (but the big guys often control distributors anyway), a mandatory three-tier system makes a lot less sense as a model for comparatively smaller craft brewers, and state laws need to be reformed to reflect the realities of the craft brewing industry.

  • Mary

    What about brew pubs? This would just be a brew pub on steriods.

  • Charlie Quimby

    As a Colorado native, I remember the days when Coors was a cult beer. The Coors brewery probably drew more tourists to the state than any other man-made attraction and it also sent home people who craved the product.

    Surly is a cult (and much better) beer, and the brewer is smart to do something like this to build its following while expanding its capacity and market reach.

    Whatever beer Surly sells from its brewery will pale in comparison to the demand it’s likely to create for bars and liquor stores that feature its products.

  • Matt Flory

    This summer I visited a combination brewery/brew pub with my inlaws in Missouri. Sounds EXACTLY like the one Surly proposed.


    The Schlafly Tap Room first opened its doors in 1991 and proudly holds the distinction of being the first new brewpub in Missouri since Prohibition.

    Housed in a beautifully-restored wood and brick building on the National Historic Register, The Schlafly Tap Room enjoys a reputation as a casual, earthy place to drink, dine, listen to great live music or host a special event.

  • Justin

    Frank Ball = Tom Smykowski of Office Space:

    “Well-well look. I already told you: I deal with the god d*** customers so the engineers don’t have to. I have people skills; I am good at dealing with people. Can’t you understand that? What the hell is wrong with you people? ”

  • bob

    Matt Flory: Yes, Schlafly/The Saint-Louis Brewery is an excellent example of what Surly could do, but you posted the wrong URL for the applicable location.

    The original Taproom began as a brewpub, in the city and not far from the redeveloped Union Station. When Schlafly first started selling bottled beer, it was contract-brewed at Schell in New Ulm.

    But they later built a production brewery in sub-Urban Maplewood, which combines a fairly large craft brewery with a restaurant and taproom, called the Bottleworks.


    It is a wonderful place to enjoy a beer and a meal, and Surly would do very well to emulate this model…if Minnesota (or Wisconsin) would allow for it. We commonly associate good craft beer culture with fairly progressive states like Oregon and Washington, but, look folks, here’s one in Missouri of all places! If even a very conservative state like Missouri can do it, surely a (formerly?) progressive state like Minnesota ought to be able to make something like this possible, no?

  • yoshi

    MLBA position is as simple as the three tiered model:

    a) control who can sell alcohol

    b) ???

    c) profit!

    MLBA position that the three tiered model manages “moderation” is not found in any reputable study. Its self-serving at best – unethical at worse.

    A Surly brewpub is good for Minnesota and for its citizens.

  • Karl Bremer

    As one who suffered under the three-tiered system when trying to get a beer on the market in the mid-90s, I can assure you that Mr. Ball and his henchmen in the MLBA are full of it. The three-tiered system is a holdover from prohibition. It allowed exclusive territories to be assigned to beer distributors not unlike mob turf, and gave distributors total control over where individual beer brands would be sold. Distributors could make or break a brewery once they got them in their clutches–and still can. Distributors and the MLBA continue to operate like the mob today.

    Ball’s claim that “each level of the system is independent of the others, ensuring accountability to the public as well as the benefits of healthy competition” is laughable. The three-tiered system is anything but pro-competition. It’s time for Mr. Ball and the MLBA to pack their bags and get out of the way of Minnesota’s brewing revolution. Their abominable three-tiered system is no longer wanted nor needed–if it ever was. It’s a different beer-drinking world out there now than when Minnesota’s megabreweries were all too happy to play their game. If they want to tangle with Surly Nation, bring it on.

  • ProBeer

    Legislation was proposed two years ago that would give Minnesota Wineries a portable license for 40 days per year. This assumed they complied with local statute and regulation & the existing limits and requirements of the legislation they were working under at the winery. Basically a “Wine at the Farmers’ Market” bill. Then an 8K lb Gorilla crashed through the door and said “um, yeah, NO” MLBA needs “deregulating”

  • This is all very strange. Many other states have brewpubs, some run by larger craft breweries, that have tasting rooms and restaurants. Obviously, they’ve found ways to work within the Three-Tier System. One of which is to just sell your beer intended for the restaurant to a distributor and then buy it back (in reality or just on paper) for retail sale at the restaurant. Problem solved. Distributor makes money and brewery can sell its beer at it’s in-house restaurant to customers. It’s all legal and above board and helps control the potential price undercutting issue. If the MLBA wants to accomoddate’s Surly’s request to sell beer on premise, they certainly can within the law as I understand it. It’s just matter if they want to or not. And if not, why not? Because it seems to have little to do with the Three-Tier System.

  • AG

    This is absolutely arcane, asinine, and ridiculous. Mr. Ball, you really should be ashamed of yourself for trying to block this movement. Times change, people change, and these laws may have been relevant at one point in time. We are in a state where the weather tries to kill us, we have to drive to WI to get beer on Sundays (again, arcane laws), we can’t buy growlers of Surly anymore, and our sports teams suck. With the growth of microbrews everywhere, our competitive edge will disappear, as will some of our gems, like Surly. Try going to a liquor store on the west coast and ask the staff what they know about Surly and what they’d be willing to pay for a 4-pack.

    Seriously, think about the people that got you your job. Allow us one of the small pleasures in life (responsibly enjoying a well-crafted adult beverage) and reconsider. This could be a great move for the entire local liquor industry. Don’t be a dick. Try it once. You’d be surprised.

  • DanielG

    Someone already posted this, but here is a good email address:


    Make sure to let him know what you think about this law.

    People need to make lawmakers know what they think about this atrocity. I see big things coming out of this.

    Whatever distributor, organization, or lobbying group doesn’t support this, Surly nation won’t support them-and we will do what we can to make their lack of support a financially poor decision.

  • Chris Johnson

    Mr. Ball and the MLBA are bald-faced liars. The law which enforces the “3-tier” system is nothing but a guarantee of monopoly for distributors. Not only that, but I’ve spoken with an attorney involved in getting the current law which keeps that system in place and he candidly admitted it was all about profits for the distributors and political payback against some of their opponents. It has zero, nothing, zilch, nada to do with accountability or moderation.

  • Brandon

    Serious question here: how does Rock Bottom get around these laws? You sure as hell can buy growlers to take home, and it’s brewed on-site.

    You can also do this at Granite City (however, I think their beer is brewed off-site).

    Is it because neither of these places bottle their beer and sell to retailers?