BoCo craft brewers left wondering if they could have defeated grocery-store ballot measure

BOULDER — With the election less than three weeks away, some Boulder County craft brewers are wishing they were in the thick of a David-vs.-Goliath battle over whether full-strength beer and wine sales should be allowed in grocery stores.

Instead, they’re nervously awaiting 2019, when grocery and convenience stores can begin converting their licenses to sell low-strength 3.2-percent alcohol beer into full-strength beer licenses.

Speaking at BizWest’s CEO Roundtable on the craft-brewing industry on Wednesday, multiple local brewers said they wished they’d had the chance to fight grocery stores over a proposed ballot measure this fall, even as others felt the grocery stores’ financial resources would have been too much to overcome.

In June, Gov. John Hickenlooper signed into law Senate Bill 197, which will allow grocery-store chains to begin holding multiple liquor licenses, gradually ramping up to 20 by 2037. The bill also allows for the aforementioned conversion of 3.2 beer licenses in 2019.

S.B. 197 was originally proposed as a compromise by lawmakers as a way to stave off grocery stores’ ballot measure that would have immediately allowed grocery stores to start selling full-strength beer and wine. But craft brewers, who have long maintained that Colorado’s current laws have helped their industry thrive, worry that they’ll lose access to market with the new legislation. They believe grocery-store beer sales will drive many small liquor stores out of business, and that shelf space in grocery stores will be tough to land for small brewers. Brewers also argue that they’d successfully fought off efforts for full-strength beer sales in grocery stores numerous times in the past.

“I don’t see how it’s a compromise when it’s all going to end in the same place,” said Jeffrey Green, co-owner of Very Nice Brewing in Nederland. “I would have liked the chance to fight it. I know we don’t have as much money as the big guys, but we had the chance for a grassroots effort.”

Others weren’t so confident. Jeff Brown, president of Boulder Beer Co., said that he felt craft brewers could have won the fight at the state Legislature. But he thinks it would have been tough to get the general public to understand that such a ballot measure would have been bad for craft brewers and small independent liquor stores.

“Would it really have passed? I don’t know because it never got to the point of what the ballot language was going to be,” Brown said.

Many brewers around the state felt that the Colorado Brewers Guild didn’t do enough to weigh in on S.B. 197, leading a group of 14 — including Left Hand, Oskar Blues, New Belgium and Odell — to splinter off from the guild and start their own industry organization, Craft Beer Colorado. While multiple reports have noted that the Craft Beer Colorado breweries have reached a deal to re-unite with the guild, angst over S.B. 197 remains.

“You guys know where I stand,” Left Hand cofounder Eric Wallace said. “Our organization didn’t do its job.”

Guilding relations

The Denver Business Journal reported earlier this month that the Craft Brewers Guild and Craft Beer Colorado had “patched up their differences” and would be coming back together under the guild’s flag. That deal reportedly included an agreement that only craft breweries — based on the Brewers Association’s definition — be allowed as guild members. Many breweries had been upset that Breckenridge Brewery, recently acquired by beer giant Anheuser-Busch InBev, had previously been allowed to keep its presence on the guild board.

But when the topic of a guild truce came up Wednesday, Wallace cautioned his cohorts around the table that the less said to the media about the arrangement, the better for the industry at this point.

“I don’t think we can say anything here that’s going to further the effort right now other than what you already know and what’s already been said — other than there’s an effort underway,” Wallace said.

Blurry beer

The many recent acquisitions of popular craft breweries around the country by brewing giants such as Anheuser-Busch InBev has craft brewers facing a bit of an identity crisis. The whole craft-beer movement was built on the idea of small, independent brewers creating more-flavorful beers that giants such as ABI and MillerCoors had largely shied away from. But now those major brewers are buying craft brands and making it difficult to tell in some instances which brands are truly craft and which are owned by the big boys.

“It’s a very calculated thing that they’re doing,” said Tom Horst, owner of Crystal Springs Brewing in Louisville.

Fate Brewing owner and founder Mike Lewinski said it’s on craft brewers to inform consumers about what they’re drinking: “We all could do a better job at raising (consumer awareness) collectively and individually.”

Matt Cutter, co-founder of Upslope Brewing, said the big guys such as ABI tried creating their own craft-like brands. But when that didn’t work, they’ve gone the route of acquiring brands and “pretending they’re the locals.”

“I think they’re acting out of desperation,” Cutter said.

While that might be the case, the trend is making life tough on independent craft brewers when they’re trying to get their kegs on tap at restaurants. A brewer such as ABI can sell kegs of an acquired brand such as Goose Island to restaurants significantly cheaper than craft brewers can due to its economies of scale. It’s gotten to the point that Dave Query — owner of Big Red F Restaurant Group, which owns The Post Brewing Co. in Lafayette — said he’s even gotten resistance from his own restaurant managers about the price of beer from The Post versus ABI brands.

“What’s the story line to say my beer’s 40 percent better,” Michael Memsic, cofounder of Sanitas Brewing, said. “It’s a challenge.”

Many of the brands acquired by ABI have faced backlash from their craft-beer brethren, being branded as sellouts. But Cutter and Very Nice’s Green acknowledged that, in any other industry, getting acquired by a major corporation is considered “the pinnacle of success.”

“I think that’s because craft beer was founded on a foundation that’s the antithesis of what’s been going on with beer for decades and decades,” Cutter said.

Easy money

While many in the craft-beer industry have wondered in recent years when a saturation point will be reached, the number of new breweries sprouting up keeps soaring. Left Hand’s Wallace noted, however, that the industry’s sales growth curve is flattening out even as more and more players enter the market. He said he thinks that’s due partly to the fact that all of the buzz around the industry has made it so easy for new startups to gain investors. But eventually, that easy money and market saturation could lead to breweries failing and investors getting antsy.

“They’re pouring the money in without regard to the reality of a payback,” Wallace said.

Davin Helden, co-founder of Liquid Mechanics Brewing Co., said he thinks many people have an inaccurate perception that it’s easy to make money in brewing.

“It’s a lifestyle business if you don’t want to get into big distribution,” Helden said.

Participants in Wednesday’s CEO Roundtable on craft brewing included: Matt Cutter, cofounder, Upslope Brewing; Davin Helden, cofounder, Liquid Mechanics Brewing; Jeff Brown, president, Boulder Beer; Tom Horst, owner, Crystal Springs Brewing; Michael Mesmic, cofounder/CEO, Sanitas Brewing; Jeffrey Green, co-owner, Very Nice Brewing; Chris Malinowski, cofounder, Skeye Brewing; Mike Lewinski, owner/founder, Fate Brewing; Dave Query, chef/owner, Big Red F Restaurant Group; Eric Wallace, CEO, Left Hand Brewing. Sponsors: John DeVore, EKS&H; Mike Madden, EKS&H; Jason Pink, Berg Hill Greenleaf Ruscitti; George Berg, Berg Hill Greenleaf Ruscitti; Peter Schaub, Berg Hill Greenleaf Ruscitti. Moderator: Christopher Wood, editor/publisher, BizWest.