Who Said One Man Can Not Make A Difference Against The Government?

E074 - Who Said One Man Can Not Make A  Difference Against The Government?

Today I am going to tell you a happy story…or at least a story with a happy ending.  The lesson in today’s episode is how we, as conservatives, work to make things better in America.  I’ll tell you that today’s story is about economic growth and increased prosperity.  Today’s story is about overcoming legal adversity in an American manner.  Today’s story is about a beer brewer’s ambitions to set out to change the way the beer business is done in Idaho.

Recently I posted a request on my Facebook page for some happy stories I could use on my podcast.  Several folks responded and today’s episode is one of those stories.  It is from a friend of mine name Russell Mann.  Russell started a beer brewery called Bombastic Brewing in Hayden, Idaho.  Russell and I are friends from a local organization call the Innovation Collective and just recently Russell and his wife join the Coeur d’Alene Rotary Club where I am an active member.

First the Problem statement: a brewery can only sell beer that is made on their premises.  In the beer business, as I learned from Russell, there are three tiers to the industry; you have the brewery, the distributor, and the retailer.  The way it works is breweries sell to distributors and distributors sell to retailers.  Note, that is really over simplified, but for today’s episode it is good as is.

What if a small brewery or a start-up brewery wants to expand business but not make the investment in equipment?  Going back to the over simplified three tier system…that would mean the system would need to allow for a brewery to be able to sell to another brewery for the purpose of them selling to a distributor.  In the beer industry in Idaho, one brewery selling to another brewery was not allowed—but it was also not expressly disallowed.  And therein lies the beginning of our happy story for today!

Strict Alcohol Law in Idaho

Title 23 Alcoholic Beverages 
 Chapter 9 Retail Sale of Liquor By The Drink

Idaho has an interesting law when it come to the sale of alcohol; there can only be one bar for every 1,500 residents. According to the math by Thrillist, that means there are around 150 cities in Idaho that can only have a single bar in the town. For Twin Falls, with a population around 50,000, there can only be 33 bars. The law is different for convenience stores selling alcohol.

I am not going to bore you by reading the law, but there are a couple of parts in the exclusions section that I must share to help put some context to today’s episode.

Section 2 reads:  Nothing herein contained shall prohibit the issuance of a license to the owner, operator or lessee of an actual bona fide golf course whether located within or without the limits of any city, or located on premises also operated as a winery or ski resort, or to the lessee of any premises situate thereon, whether located within or without the limits of any city.

I share that part of the code because new laws are usually created because someone read the previous law and skirted the law or took advantage of some loophole.  The law goes on to define a golf course as:

a golf course shall comprise an actual bona fide golf course, which is regularly used for the playing of the game of golf, and having not less than nine (9) tees, fairways and greens laid out and used in the usual and regular manner of a golf course. Nine (9) hole courses must have a total yardage of at least one thousand (1,000) yards, and eighteen (18) hole courses must have a total yardage of at least two thousand (2,000) yards as measured by totaling the tee-to-green distance of all holes. The course must be planted in grass except that it may provide artificial tee mats.

We can read between the lines I figure that some enterprising entrepreneurs figured a way to setup a Golf Course / Bar & Grill and use miniature golf as the standard.  So, Idaho updated the law.  But wait…it gets better!

Idaho had to spell out what a Ski Resort was…again, the law reads:

a ski resort shall comprise real property of not less than ten (10) acres in size, exclusive of the terrain used for skiing…they go on to define the building types, and then…for the purpose of this section, a ski resort may also be defined as a downhill ski area, open to the public, comprising real property of not less than two hundred fifty (250) skiable acres, operating two (2) or more chairlifts with a vertical lift of one thousand (1,000) feet or more, and capable of transporting a minimum of one thousand eight hundred (1,800) skiers per hour.

The law goes on like that for a few more pages highlight definitions of the businesses who are excluded from this law…I can only imagine the license inspector who visited the mini golf course, Bar & grill…But officer, the law said excluded Golf Courses!

OK, Back to my friend Russell as the story gets a little deeper, you see at the time of forming his business, Russell read through the Idaho laws covering brewing beer and it did not clarify if contract brewing was allowed, but as I noted earlier, it didn’t forbid it either.  Taking a leap of faith (and being an enterprising entrepreneur), Russell started his business with hopes that the law would catch up to the idea.

I feel the need to explain a little about the brewery business from an economic standpoint.

A brewery that ships 100,000 barrels of beer employ 140 people to make said beer.  Six brewers that ship 15,000 barrels of beer employ a total of 250 people.  Put another way, small breweries employe 60% more people than the big breweries.  These numbers come from the Beer Economist called Watson as reported by Craft Brewing Business.  Yes, Watson is a real person and yes he really is an economist for the beer industry.

So the question went back to Watson to verify the following statement, “Craft breweries provide a greater economic impact by staying small and local versus scaling up and pursuing large volume growth because a greater number of small, successful breweries creates more jobs.”  

Here is what Watson replied:

I’d actually disagree with the “greater economic impact” — the impact of craft brewers isn’t that different than the impact of large brewers in terms of the retail dollar value to total impact

What craft breweries do is create a different type of economic impact that is more locally focused and more generally dispersed. Large breweries create huge impacts, but those impacts are very concentrated in particular places, and lots of the impact “leaks” outside of where production occurs since profits, re-investments, etc., are often re-directed elsewhere. Craft brewers are going to have an impact that tends to stay more local, and because there are 7,000+, that impact is much more finely distributed all around the country.

In addition, craft breweries are much more labor intensive, so you’re getting a lot more total jobs for the same impact.

OK, Why is all this important, I mean Ed why are we talking so much about beer?

Going back to our golf course, bar, and grill example from earlier, Russell ran headlong into the Idaho law that just said no.  They didn’t really give much of a reason why they wouldn’t issue a license.  Russell tried really hard to get an explanation of how contract brewing was a violation of Idaho law…but he wasn’t really getting anywhere.

Right about here is where a progressive liberal might start burning down buildings or forming sit-ins, blocking traffic, and starting riots…but as conservatives, we think a bit differently.  Rather than trying to use a cudgel to get our way, we find ways to change the law.  And that is exactly what Russell did.

Russell joined the Idaho Brewers United Organization.  Here is what the IBU website says about their organization:

Idaho Brewers United is a non-profit 501(c)6 trade organization founded in 2012 and is dedicated to the craft beer industry in Idaho. Our efforts are focused on the following areas:

Legislative/Regulatory: To give craft brewers a unified voice in addressing all issues, governmental or other, which affect the regulation of our industry.

Education: To provide opportunities for members to further their brewing knowledge and to educate the consumer about Idaho’s craft beer industry, and to encourage responsible, moderate consumption.

Promotion: To promote its members and their products to other brewers, suppliers, legislators, tourists and the general public. 

IBU membership includes Idaho craft breweries, breweries-in-planning, associated-industry businesses and craft beer enthusiasts. Members of IBU make-up a dynamic and connected community who support, protect, and promote the craft beer industry across the state and beyond. 

When Russell reached out to the organization to talk about how to update Idaho law to allow contract brewing, the organization helped Russell form a legislative committee to lobby congress.  They hired professional lobbyists, they crafted language, and then did something rather unique…rather than taking their new language to the capitol to fight for inclusion, they went instead to the enforcement branch of the government to get input on the language.

Again, in those rare cases when liberals do try to change the law, they don’t spend the time to get buy-in from the people impacted or required to enforce the law.  Looking at a big example that will be facing all of America in 2021, The Green New Deal.  The first stab at implementing the Green New Deal is the Hero’s Act passed by the US House of Representatives.  The Hero’s Act is meant to help the American economic weather the coronavirus epidemic, but reading through the 2300 some pages of text you find a lot of Green New Deal language.  We’ve covered many of the oddities of this economic stimulus bill that is really an environmental movement in disguise…But I digress.  The point I am making here is Congress, currently run by Democrats, did not go out and seek buy-in from the American constituents, nor did they seek buy-in from those who will be required to enforce the new law…they just produced 2300+ pages of law and passed it.  

In the real world where Conservatives live, we work together to find common ground and in my interview with Russell in preparation for this story the term common ground must have been mentioned a dozen or more times.

I went through almost three years worth of Facebook posts by the IBU and found this question and comment on the law:

S1078, a bill to define contract brewing, has been signed by Governor Little!
 March 25, 2019

Can you explain the impact of this bill?

The IBU wrote:

Idaho law leaves a lot up to interpretation and contract brewing wasn't in any of the code. We chose to write a bill to define contract brewing so the ability to contract brew was not up to interpretation. Under a contract brewing arrangement, one licensed brewery can produce brew for another licensed brewery. This is great for small brewers who want to brew more but either can't fit any more tanks in their space or would prefer not to invest in more equipment. It's great for brewers who have excess capacity because they can now brew for someone else and use their existing equipment to it's full capabilities. Win/win all around!

During the process of discovery, Russell and his committee found some issues that were unique to beer and likely to create some additional and unforeseen issues in the tax law.  As I understand it, any brewed beverage with an alcohol content in excess of 5% is taxed as a wine.  You can imagine that a new law allowing contract brewing of a product that could contain taxing assessment from two different IRS regulations could case not only a bookkeeping nightmare, but also some angst between the beer and wine industries.

I won’t bore you with the negational details, but here again is a point where the difference between progressive and conservative is plainly visible.  Going back to the Heritage Foundations “Three Big Differences Between Conservatives and Progressives”:

Conservatives ask: “What can I do for myself, my family, my community, and my fellow citizens?”

Progressives ask: “What is unfair?” “What am I owed?” “What has offended me today?” “What must my country do for me?”

The traditional American ethic of achievement gives way to the progressive ethic of aggrievement.

As opposed to a variety of individuals making up one American community, progressives seek to place individuals in a variety of competing communities. The first creates unity. The second, identity politics.

So far this story sounds more selfish than community focused…after all is is about a business man who wanted to change the law so he could maximize profits from his business…right?  Well, let’s see what else this change in law allowed…and I’ll frame this from the point of view of business during times of a pandemic.  This story comes from KIVI TV

Made in Idaho: Common Goal at Western Collective

GARDEN CITY, Idaho — The coronavirus pandemic has changed life for us all, but some things remain. People still want a good beer and it's even better when that good beer is for a good cause.

Western Collective is a brewery member of the trade group Idaho Brewers United, which represents the state's beer makers. Idaho Brewers United partnered with Western Collective to create a common goal, as in Common Goal beer, a name given to the drink created by Western Collective.

"The whole reason we made this beer is because of COVID as a response directly to not being able to fundraise through beer festivals and doing other things for the guild," said Cary Prewitt, owner of Western Collective.

The guild supports brewers around the state through education or changes in legislation and all the money raised through Common Goal goes directly to IBU. The money in turn helps out all breweries, but especially smaller start-ups. The beer is described as fruity, not bitter and clean and crisp.

"It's a good tasty IPA made with a lot of Idaho ingredients, which we like," said Sheila Francis, executive director of Idaho Brewers United.

Idaho's beer-making community is pretty close-knit, what is good for one is good for all.

"We all have the same goal, all the brewers may be in competition in a way," said Francis. "They're all in it together, they like to work together and this is one example of that."

And this first taste of a partnership may not be the last.

"This is the first beer brewed specifically for the guild," said Prewitt. "We worked with breweries around the state to come up with a recipe and had all the ingredients donated to us, which was awesome and all are Idaho sourced as well."

You can find Common Goal at Albertsons and Whole Foods. The beer is also available to-go at Western Collective on 33rd Street in Garden City and at both Boise Co-op locations and Brewers Heaven.

Again, when people work together, solutions to BIG problems can be found.  Because of the contract brewing law, now breweries can ban together to raise money for a good cause…in this case to help businesses who are struggling with the coronavirus pandemic.  But how big of an impact is COVID-19 having on the craft breweries?

NPR:  What Beer Sales Tell Us About The Recession

Here is a quote from an NPR story titled What Beer Sales Tell Us About The Recession.

"You know, we didn't really see craft or imports or super premium lose share in the last recession," he says. That's because, he says, the recession didn't inflict as much pain on the class of people who tend to drink Session IPAs, artisanal Porters, Belgian Lambics and Saison pale ales. Likewise, in this pandemic and recession, craft beer drinkers are more likely to have the luxury of working remotely, keeping their jobs and spending a few extra bucks on beverages with flavor.

Yet, craft breweries are still struggling. The surge of beer sales in stores is driven by the shutdown of bars, restaurants, clubs and sporting venues. And while craft beer might still be doing well in stores, craft breweries, Watson says, get about 40% of their sales from draft beer. With bars, restaurants and their breweries closed, the kegs haven't been flowing. Corporate breweries, meanwhile, "get more like 10% of their revenue from draft beer" and only about 20% from drinking in bars, restaurants, and other public venues, Watson says. "So the shutdown has hit the smallest brews the hardest."

What does it mean for a small business when they can contract out their brewing process?  It can make the difference between staying in business or going out of business.  Considering craft beers generates $29.3 billion and now accounts for 25% of the $116 billion U.S. beer market…Russells crazy idea to start a beer brewing company by contract out his beer receipts doesn’t seem so crazy after all.

When conservatives see a problem…we work together to fix it.  We don’t carry signs and take to the streets.  We roll up our sleeves and get to work.  Now I think it is time for a beer…but not just any beer, a Bombastic Craft Beer!