Three-Tier System Puts 10 Barrels on Hold in Boise

10 Barrel's Boise Brewpub Building Plans

Boise Weekly reports that Bend-based 10 Barrel Brewing's much-anticipated expansion into Boise is held up in the red tape of the Three Tier System that separates brewer from wholesaler and retailer. Scheduled to open this summer with Shawn Kelso, famed brewer from Barley Browns Brewpub at the helm, 10 Barrel's brand new site plans have been held up once again thanks to an Idaho law that will keep the company from selling its own beer brewed in the Bend facility. 'Whaa?' you say. It seems that while the new brewpub will have its own brewery, it is not enough to accommodate the anticipated demand for the beer. The brewery's plan was to ship in and sell additional beer from 10 Barrel's brand new production facility in Bend, and that puts it at odds with the state's alcohol control board.


The problem comes in here with the three-tier system that is meant to prevent a brewer from being a distributor to a retailer/bar/bottleshop owner and having too much power and influence in the relationship. Essentially, the law keeps a producer from having a vertically-integrated monopoly. The basics of the system are that brewers can only sell their products to wholesale distributors, who can only sell to retailers, who in turn can only sell to consumers. In Idaho the state board does not allow 10 Barrel Brewing to hold the license to sell its beer from out of state in Idaho while also holding a license to sell its beer at retail from its own location in the state. With 10 Barrel's license to distribute, manufacture its own beer in the state, and then sell it at retail, it steps into every tier of the system. Thus, the brewpub license is not being approved. Meanwhile, 10 Barrel has already signed a 15 year lease on the brewpub space and is looking at options to get through the red tape.

Section 3 of the 21st Amendment gives states the power to regulate how alcohol is distributed, and this creates various exceptions to the three-tier system, notably the brewpub model, which allows the producer to sell its own product on site. Some states also let brewers under a certain size operate as a distributor, like Stone Brewing Co. does in San Diego, by distributing its beer as well as products brewed by others. In Oregon a brewery can self distribute its beer up to 5,000 barrels, which is considerable for a craft brewer but much too little for a successful brewery like Deschutes. The three-tier system largely benefits craft brewers, but can sometimes hurt them. For example, in Oregon, once a brewery has signed a distribution contract, it is very difficult to get out of, as the distributor must be willing to sell back the brand to the brewery or another distributor. The exception to the three-tier law in Idaho is the brewpub model, which 10 Barrel could obtain alone, but then it must only sell beer made in the state and, as stated above, the new brewery will not produce enough to do so.

So, the obvious way out of the predicament for the brewery is to sell the license to distribute its beer in Idaho to a different licensed distributor, who would resell it to the brewpub. According to Co-Owner Garrett Wales, who I talked to yesterday, "we are not, have not, and don't plan on distributing our own beer in Idaho." But he was unwilling to discuss any other specifics on the record, other than to say "We're optimistically working towards a positive outcome."

10 Barrel co-owner Garrett Wales (left) & Brewer Shawn Kelso in Boise brewpub construction

On a more positive note, new Boise brewer Shawn Kelso is brewing his first Double IPA at 10 Barrel this week, and it is a recipe he has been working on for some time. I look forward to checking out Shawn Kelso's beers in Boise sometime in the near future!

Source: Boise Weekly

2 comments:

  1. I just skimmed through the Idaho statutes and it looks like 10 Barrel could have a 3rd party (ie - friend/family or someone they trust) start up as a beer distributor. It's $300/yr and looks like as long as they follow the rules, they could then distribute their Oregon beer through that and sell to the 10 Barrel Boise operation. At least that way they're not getting screwed by a distributor and can keep the coast very minimal.

    ReplyDelete
  2. In Oregon if you only have a production brewery (not a brewpub) you can self-distribute unlimited quantities. Ninkasi only has a tasting room, not a brewpub, which allows them to self-distribute in Eugene. ABInBev just bought Western Beverage a year ago or so, they sell a bit of beer in Oregon.

    ReplyDelete

Try not to be a dick.