As many of you know, the legislative session closed several weeks ago, and we ran a rather popular article about it because, despite the session being called a rather “dead session,” our craft beer industry had quite a lively time at the wake. Since then, the Crew has taken to hunting down more information on the various bills to explain them a little bit better, as well as give you, beer readers, some insider info on what they mean to our brewers, breweries, and future of our industry here in New Mexico. Recently I’ve been in communication with Rod Tweet of Second Street Brewery in Santa Fe, and Nico Ortiz, owner of Turtle Mountain Brewing Co. in Rio Rancho, about the bill they partnered on — SB238, or as it’s lovingly referred to around Second Street Brewery as “Rod’s Best Bill.”
NMDSBC: Tell us a little about SB238.
Tweet: The bill, SB238, was introduced for us by Senator Sue Wilson-Beffort. It passed through all Senate and House committees and both Senate and House floor votes at this year’s legislative session.
NMDSBC: Was there any resistance?
Tweet: There was some push-back from the distributor lobbyists early on, but that eventually dissipated. The bill is now on Governor (Susana) Martinez’s desk awaiting her signature, and then it becomes the law of the land, starting July 1. So, we are almost there, I hope.
NMDSBC: What does this particular bill do?
Tweet: In New Mexico we actually have it better than many states because as a holder of a Brewer’s License (which we have), you can also get a Wholesalers License and self-distribute, UNLESS you also have a Restaurant Beer/Wine License. Most brewpubs have the Restaurant License essentially so that they can serve wine by the glass, which is often necessary to run a successful restaurant. So us “brewpub” brewers are excepted from the ability to self-distribute, even though we do indeed have a Small Brewer’s license.
What SB238 does is it changes that, so that we brewpubs with Brewer’s Licenses and Restaurant Beer/Wine Licenses can also obtain a Wholesalers License the same as any other brewer.
NMDSBC: And what makes this really important to your business?
Tweet: We think this is really important for a lot of reasons. Brewpubs in both small town markets and larger, more competitive markets need to have the ability for brand building in their local area. For brewpubs like ourselves, of which I think there is about 14 in the state, the ability to self-distribute draft and/or package product in our local markets at relatively modest volumes is extremely valuable for brand building and visibility, and also to turn extra production capacity into cash-flow. It can also drive barrelage at the outset of an expansion, which again is helpful for cash-flow while volume ramps up to the point where the economics support statewide distribution and a larger wholesaler relationship.
It would allow us to wholesale across the state. That’s kind of big, though. There’s a place for wholesalers, certainly, but for us smaller people we want to get started with it and build up some account base and relationships, and do our own brand building in the beginning until the scale gets big enough to where it really makes sense for a wholesaler to take it on. If you’re a smaller brewpub, maybe you want to have keg accounts in your own hometown.
In addition to all that, SB238 does make some things like charitable donations much simpler, which is nice.
NMDSBC: What was it like pursuing this bill?
Tweet: This year’s legislative session was a landmark event for brewers in New Mexico, and several bills made it through the session. A huge amount of credit is due to the hard work of our Guild Director Chris Goblet, Berkeley Merchant (Abbey Beverage, Inc.) and our lobbyist, Karin (Foster), who spent countless hours down at the Roundhouse paying attention to progress, fostering and maintaining relationships, managing communication, and keeping Nico Ortiz of Turtle Mountain (my partner in pursuing SB238) and everyone else up-to-date with what was going on, which was changing day-to-day the entire session. They really got this done. It made me think, several times, that I should have paid much more attention in my high school civics class (or whichever class they taught this stuff in) than I evidently did.
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I also recently emailed Nico Ortiz a few questions to see how SB238 would affect Turtle Mountain.
NMDSBC: Can you tell us a little about your involvement with SB238 and what stake did Turtle Mountain have in it?
Ortiz: Turtle Mountain is one of the breweries that operate with both a restaurant license and a small brewer’s permit. Because state law currently prohibits any holder of a restaurant license from also holding a wholesalers license, Turtle can’t self-distribute our own beers. Rod and I, together with Chris Goblet and Berkeley Merchant, have worked for months on crafting language, meeting with other affected parties, as well as shepherding this bill, and the other bills affecting our industry, through the just-concluded 60-day session. What is at stake is our ability to join our fellow brewery brethren and self-distribute our beers locally, thereby benefiting from the local exposure and defending our territory in the process.
NMDSBC: What was the process between Rio Rancho and Santa Fe?
Ortiz: The process was all in Santa Fe. I worked with Chris, Rod, and Berkeley in drafting the proper language for the bill in advance of the session, and then it was up to Chris and Berkeley who were on the ground in Santa Fe to get the bills through. Rod and I did attend one committee meeting, but it was all Chris, Berkeley, and our lobbyist Karin who got them to the Governor’s desk.
NMDSBC: It’s been mentioned in several ways, but to clarify for our readers, what is the difference between having a Small Brewer’s License with a Restaurant Beer/Wine License, and having a Small Brewer’s License without the Restaurant Beer/Wine License?
Ortiz: Our restaurant license enables us to sell wine by the glass or bottle and to sell beers not manufactured in-house. A Small Brewer’s License allows the holder to sell beers made in-house and those from other NM breweries, but no other beers or wines. Rod and I operate brewpubs, or restaurants with in-house breweries. Most other breweries in the state use the taproom/food truck concept so they don’t need to sell other beers and wine because they don’t need to appeal to a wider variety of people.
NMDSBC: Essentially what did you hope for Turtle Mountain to gain by pushing this bill?
Ortiz: I want to be able to distribute Turtle Mountain beers to bars and restaurants in the Rio Rancho area, thereby defending our territory, gaining marketing exposure, as well as more fully utilizing the excess brewing capacity that we currently have.
NMDSBC: What will it mean to your business if you are able to self-distribute?
Ortiz: Distributing will mean a significant investment in both time and equipment to get the brewery ready to sell kegs to local accounts. We will have to acquire additional cooperage, a keg washer to clean that cooperage, and further down the line a delivery truck to deliver all the kegs. It will also increase brewery labor cost because kegs need to be cleaned, filled, delivered, lines cleaned, and paperwork filled out. What we will gain is more throughput of beer in the brewery and another revenue stream for our highest-margin product, as well as give us the off-site marketing exposure for our products that we currently only get from attending beer festivals.
NMDSBC: How important is it to your brewery’s future endeavors that this bill get passed?
Ortiz: We have no immediate plans to can or bottle our products, so this bill is not critical for our operations. But it does put us on a level playing field with the rest of the breweries in NM, so in that way it is very important. The third taproom bill that got passed might be more important in the short run to more breweries than this bill will be. We will certainly be taking advantage of the ability to distribute, however, and our future endeavors will be positively impacted by that ability.
NMDSBC: If signed, how do you imagine it will immediately affect your business? And what about long-term effects?
Ortiz: I will immediately apply for the license as soon as law allows, and we will begin distributing our beers (kegs) locally as soon as possible after that. In the short term it will lead to more costs as we purchase the equipment necessary to distribute, but over the long-term it should allow us to become more profitable as we create another revenue stream for the restaurant and more fully utilize the unused capacity we currently have in the brewery.
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It had always bothered Tweet. “We have the same brewer’s license, so why can’t we get a wholesaler’s license?” was his argument. It’s been a little over 18 years since Second Street opened, and hopefully a big change is finally in order. Thanks to Chris Goblet, Berkeley Merchant, Karin Foster, Monica Ewing, Rod Tweet, Nico Ortiz, and everyone else involved, this bill is currently sitting on Governor Susana Martinez’s desk, awaiting her signature. Let’s hope that when the time comes, she has enough ink in the pen.
Note: Governor Martinez has until this Friday, April 10, to act on bills that were passed by the 2015 legislature. Legislation not acted upon by the Governor is considered pocket vetoed. If signed by the Governor, the provisions of the bill take effect July 1, 2015.
Cross your fingers folks, and head into Second Street or Turtle Mountain. Hopefully come Friday, we’re all raising a pint to the bright future of our industry. And as always, think globally, drink locally.
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