Minnesota's craft distillers hope to serve up new argument for expanded production - Duluth News Tribune

Microdistillers from around the state are set to travel Friday to the Capitol to make the case for allowing them to boost their production capacity and increase the size of bottles available for sale in their taprooms. And they're planning to hand lawmakers thousands of coasters signed by customers that advocate for these changes.

The House Commerce Committee on Friday is set to take up the bill, and its author says it will have a warm reception. But in the Senate, the proposal will have a tougher road, as a key gatekeeper has said stakeholders have to strike a deal before he'll hear it.

There are nearly 40 craft distilleries in Minnesota, a state that’s been slow to adapt its laws to support the growing industry, said Joel Vikre, co-owner of Duluth’s Vikre Distillery.

“In Minnesota, our laws (are) so far behind that it's really hard for us to compete against tonics from out of state,” he said.

The bill would increase bottle sales from 375 milliliters to 4.5 liters per person each day, as well as increase the production cap from 40,000 gallons to 100,000 gallons per year. When the production cap is hit, microdistilleries must close taprooms.

Sen. John Jasinski, R-Faribault, said he decided to carry the bill after owners of 10,000 Drops Craft Distillers, a microdistillery near his home, asked for his help.

A stack of signed petition coasters that are going to be presented to the Minnesota Legislature this week. The craft distilling industry has introduced legislation to lift regulations on the industry. Distillers want to increase the size of bottles they can sell in the taproom, as well as increase the number of barrels they can make before the taproom has to shut down. (Clint Austin / caustin@duluthnews.com)

The former mayor and real estate broker said he likes that microdistilleries convert old buildings for their businesses and boost tourism in small towns around the state. He also has concerns about constraints to the businesses in the state's liquor laws.

“If you have to cap that amount of sales, that’s difficult," Jasinski said. "I want to make sure businesses can use that investment, and not limit what they want to do."

Jasinski said he knew the proposal would be a challenge when he agreed to take on the bill. He's still in conversations with the Minnesota Licensed Beverage Association, labor unions and distillers about how to strike a compromise.

But Sen. Gary Dahms, R-Redwood Falls, who chairs the Senate committee where the bill would be heard, said he won't take it up until they've reached a deal.

“We have a long-standing, bipartisan tradition in the Commerce and Consumer Protection Committee of not picking winners and losers between businesses," Dahms said. "I’ve asked all parties to come to the table and work this out. We’ve seen that approach work before – it’s how we got the microbrewery deal done a few years ago. When we hear that a deal has been worked out between the players, I’m happy to consider moving the bill.”

The MLBA is uneasy about the amount of direct-to-consumer sales that could result from the proposed law.

“We just have a concern about how much product (Vikre) wants to sell to customers," said Anthony Chesak, spokesperson for MLBA.

Restrictions on bottle sizes are the primary issue for the Duluth distillery, Vikre said. Sales of larger bottles would build the small business’ brand and help generate new revenue, allowing the small business to grow.

The current level is the fourth-lowest volume limit in the nation, according to the Minnesota Distiller’s Guild.

“Tourists that come to Duluth and buy a bottle, take it home, enjoy it, then they're likely to buy a Vikre product from their liquor store or fine restaurant when they go home,” Vikre said. “That … helps us but it also ends up helping the rest of the industry.”

Rep. Jim Nash, R-Waconia, said he got involved with the bill because he felt the microdistilleries were at a competitive disadvantage. The distillers pay the same amount to produce a 375-milliliter bottle of a particular liquor as a 750-milliliter bottle, but they can only sell the smaller size onsite, cutting their potential profit.

"It’s illogical to me to restrict someone (who) has a desire to purchase simply because we don’t want them to purchase from a particular venue," Nash said. "We need to get the statute to reflect the change in consumer behaviors and consumer desires."

In previous years, the distiller’s guild introduced bills with wording to abolish the state’s three-tiered alcohol distribution system. By law, microdistilleries must use distributors to get their products on the shelves of Minnesota retailers.

It was omitted this year because, after more consideration, Vikre said they determined distributors and retailers are local partners whom they want to support.

With a smaller ask this year and showing of public support through the coasters, Vikre said they’re hopeful that the microdistillery laws will change.

“Even though in other states they're making much more radical changes, we really just want to ... get ourselves into the bottom of the mainstream,” Vikre said. “So that we can compete without ... upsetting the apple cart law.”

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Minnesota's craft distillers hope to serve up new argument for expanded production - Duluth News Tribune
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