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Minutes for SB511 - Committee on Federal and State Affairs
Short Title
Permitting beer and hard cider sales by microbreweries to retailers, public venues, clubs, drinking establishments, holders of temporary permits and caterers and allowing such sales at special events to consumers.
Minutes Content for Tue, Mar 5, 2024
Jason Long, Office of the Revisor of Statutes, gave an overview of the bill. He explained SB511 would allow microbrewery licensees to sell beer and hard cider directly to retailers, clubs, public venues, etc., similar to provisions currently applicable to farm wineries. Under current law, microbreweries must sell their product to a beer or wine distributor who then sells the product to the retailers, clubs, etc.. (Attachment 1)
Following a period of questions and answers, the Chairman called for proponent testimony.
Proponent Oral Testimony
Sean Willcott, Owner, Willcott Brewing, testified as a proponent of the bill. He stated he and his wife made large time and financial investments into their brewery, only to have the distributors focus all of their attention on the "big label brands". He said when local retailers would ask the distributor for their beer, they were told it was out of stock, when in fact, there were over 300 gallons of the product 1 block away from these establishments. He stated there are over 16,000 registered beer and cereal malt beverage labels registered in Kansas, and only 38 distributors. Further, only 2% of the beer gallonage of the beer reported was produced in Kansas. 98% comes from out of state. He said half of that 2% is sold on premises at the breweries, so all the bill would affect is 1% of the beer market in Kansas. He said eliminating the requirement to use a distributor is the lifeline they need, and would give him the right to represent his own product to a free market. (Attachment 2)
Brett Straight, Brand Master, Defiance Brewing, testified as a proponent of the bill. He stated the bill provides the ability for in-state microbreweries to have the option to sell direct to retail, or use distributors where it makes business sense. He said it is modeled after the existing wine industry laws in Kansas, and 41 states currently have some form of direct sales ability for the microbreweries in their state. He said distributor's sales representatives don't make any money selling anything other than the big name brands, such as Budweiser, so they don't push the microbrewery beers. He stated even though the distributor won't work at selling their beers, they still hold the rights to sell their brand, unless Defiance Brewing buys out their franchise agreement. (Attachment 3)
Brad Portenier, Founder, Kansas Territory Brewing Co., testified as a proponent of the bill. He stated he and his wife started a manufacturing business, Bradford Built, 30 years ago on the basis of providing a good product, pushing hard, and going without for awhile. He said this has been a successful strategy and their business now employs 75 people. In 2015 they started a brewery, Kansas Territory Brewing Co., applied the same principles, and found they were not able to be in charge of their business, and are not able to satisfy orders without breaking the law. He stated Bradford Built operates in a free market, capitalistic way, and has thrived. Kansas Territory Brewing Co., a multi-million dollar investment, does not, and is "dying on the vine". He said direct sales would remove the barriers holding them back. (Attachment 4)
Elizabeth Patton, Americans for Prosperity, testified as a proponent of the bill. She stated the three-tier system has been commandeered to protect fiefdoms and prohibit new industry growth. She said many breweries in the state do business within a small radius and yet there is a one-size-fits-all regulation system in place that does nothing except potentially put the microbrewery industry out of business forever. She said it is past time to update our laws, cut red tape, and allow small businesses in Kansas to not just survive, but thrive. (Attachment 5)
Proponent Written Only Testimony
Juliet Abdel, Greater Topeka Chamber (Attachment 6)
Brett Anderson, Co-Owner/Founder, Friction Brewing Company (Attachment 7)
Matt Britton, Owner, Discourse Brewing (Attachment 8)
Ken Gottschalk, President, Defiance Brewing Co. (Attachment 9)
Monica Kelly, Owner, The Lumberyard on 56 (Attachment 10)
Jake King, Owner, The Tee Box (Attachment 11)
Rod Kreie, CPA, Great Plains Biosciences Group, LLC (Attachment 12)
Luke Mahin, Co-owner, Irrigation Ales (Attachment 13)
Steve Nicholson, Owner and Head Brewer, Center Pivot Restaurant and Brewery (Attachment 14)
Jenny Russell, Director, Republic County Economic Development (Attachment 15)
Jaycen Sanderson, Head Brewer, The Green Frog Brewery and Tasting Room (Attachment 16)
Scott Schneider J.D., Kansas Craft Brewers Guild (Attachment 17)
Charles Pippin Williamson, Co-owner, Sandhills Brewing (Attachment 18)
Trevor D. Witt, President, Rackets Tap House, Inc. (Attachment 19)
Jen Anders, President/CEO, Leavenworth Lansing Chamber of Commerce (Attachment 20)
Following a period of questions and answers, the Chairman called for neutral testimony.
Neutral Oral Testimony
Debbi Beavers, Director, Alcoholic Beverage Control Division, testified as neutral on the bill. She stated the three tier system in Kansas (producer, distributor, retailer) allow the state to maintain an orderly market, and an effective and efficient mechanism to protect public health and collect taxes, and SB511 would blur the lines of this system. She said the bill could open the door to out of state microbreweries self-distributing in Kansas, and excluding out of state microbreweries would draw constitutionality challenges. (Attachment 21)
Following a period of questions and answers, the Chairman called for opponent testimony.
Opponent Oral Testimony
Jason Watkins, Kansas Beer Wholesalers Association, testified as an opponent of the bill. He stated the bill would open the door to large international brewers to control the market, and the small craft brewers would be completely locked out. He said a microbrewery is defined in Kansas as a brewery producting up to 60,000 barrels of beer a year, and 96% of beer producers produce up to 60,000 barrels of beer. So, he testified the bill would allow 96% of producers to self distribute in Kansas. He said the current rules and regulations on distributors include trade practices, how they can market, when they can pick up expired products, that they must sell to all licensees and at the same price, among others. He stated SB511 allows licensed microbreweries to act as distributors while placing none of the same rules upon them, which creates an uneven playing field. (Attachment 22)
Amy Campbell, Kansas Association of Beverage Retailers, testified as an opponent of the bill. She stated the Kansas definition of microbrewery goes far beyond the more commonly accepted definition of 15,000 barrels or less, and there is a concern over the lack of responsibilities for the distribution actions of the microbreweries. She said exceptions for microbreweries should be more narrowly structured and require non-discrimination for price and service to retailers. (Attachment 23)
Opponent Written Only Testimony
R.E. "Tuck" Duncan, Kansas Wine and Spirits Wholesalers Association (Attachment 24)
Following a period of questions and answers, the Chairman closed the hearing on SB511.
