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Minnesota's microdistilleries campaign to avoid becoming victims of their own success

Members of the Minnesota Distillers Guild have special coasters in their cocktail rooms for patrons to sign in support of increasing the production threshold.

Members of the Minnesota Distillers Guild have special coasters in their cocktail rooms for patrons to sign in support of increasing the production threshold. Stacy Brooks

If you’ve enjoyed an old fashioned at Tattersall or a gin and tonic at Du Nord, you have Minnesota statute 340A.22 to thank. That’s the Minnesota law that gives microdistilleries the right to operate a cocktail room at their production facility, and it’s why we get to sip cocktails at the two dozen microdistilleries scattered across the state.

But there’s a problem, and it’s in the definition of “microdistillery.” Under Minnesota law, a microdistillery is any distillery operating within the state that produces no more than 40,000 proof gallons of spirits per year (a “proof gallon” is a mixture that’s 50 percent alcohol at 60 degrees Fahrenheit, equivalent to about five or six standard 750-milliliter bottles). Once you cross that 40,000 proof gallon threshold you’re no longer a microdistillery, and you lose the right to serve drinks at your facility.

“The production cap was put in when microdistilleries were first being created, and it was a bit arbitrary,” says Mark Schiller, president of the Minnesota Distillers Guild and co-founder and CFO of Loon Liquors. “Folks were just throwing out numbers, saying ‘over 40,000 seems like a bigger operation.’ In actuality it’s much lower than the federal limit on craft distilleries, which is 100,000 proof gallons. It’s also the 11th lowest cap in the country, compared to other states with similar laws.”

“If you’re Summit or Surly, you can still operate a taproom. But if you’re at the larger end of microdistilleries, there’s this cap that doesn’t allow you to have a cocktail room,” says Schiller.

Why is this important now? Well, northeast Minneapolis’ Tattersall Distilling expects to hit Minnesota’s 40,000 proof gallon production cap in the next year or two, and other microdistilleries may follow in the coming years. Accordingly, the Minnesota Distillers Guild is pushing for an increased cap of 100,000 proof gallons, in line with the federal standard, with direct-to-consumer bottle sales limited to distilleries under 40,000 proof gallons.

Jon Kreidler, Tattersall co-founder and chief officer, explains that the company has had to slow down growth in order to keep its cocktail room open even as it releases new products, like a bottled old fashioned, designed to reach new markets.

“For every distillery in the state, their cocktail room is an integral part of their business,” Kreidler says. “It’s how you connect with customers. We view it as our marketing arm. Once we breach that [production cap], we would have to shut it down, which we have made clear we’re not going to do. We would ship production outside Minnesota, and we’re looking at a few neighboring states where it’s more favorable to do business.”

In this scenario, Tattersall would continue distilling in Minnesota, but a portion of the current production and all additional growth would shift out of state. Kriedler notes this move would have an impact on industries beyond distilling.

“We try to keep everything as local as possible,” he says. “We work with Minnesota farmers. We buy 1.5 million pounds of grain each year, 100,000 pounds of apples, we buy our barrels here. We would still source locally, but local will be in a different state. It’s frustrating to have to ship jobs and tax revenue to another state to continue to grow.”

“Microdistilleries have a dramatic impact with Minnesota agriculture,” agrees Schiller. “We’ve got the Minnesota Farmers Union behind us [and our proposed legislation], which we’re very happy to report. We have Minnesota farmers behind what we’re pushing.”

In addition to boosting the production cap, the Minnesota Distillers Guild is working to increase the state limit on direct-to-consumer bottle sales. Currently, distilleries can only sell one 375-milliliter bottle to each customer per day. 

“You can go to a brewery or winery and basically fill up your car, you can buy as much as you wish,” Schiller says. “But for a distillery, we can just give you one bottle that fits perfectly into a stocking.”

Schiller notes that Minnesota has the fourth-lowest limit in the nation when it comes to distillery bottle sales. The Guild supports an increased limit of 4.5 liters per person per day, equivalent to six standard 750-milliliter bottles. That would still keep Minnesota in the bottom third of states for limits on distillery sales—20 states and Washington D.C. have no limit whatsoever.

According to Schiller, the primary opposition to increasing direct-to-consumer bottle sales comes from liquor stores, based on the premise that increased sales at distilleries will cut into retail sales. “But in reality, if we look at what’s happening with breweries and wineries, that’s not happening. People love convenience. We love our liquor store partners—they’re a great solution when people don’t want to go to three different spots.”

The push to increase the bottle limit doesn’t apply to Tattersall, since they would forfeit bottle sales in exchange for permission to continue to operate a cocktail room. However, Kreidler notes that more favorable regulations will help Minnesota’s microdistilling industry grow, and that will benefit the state’s economy. 

“I think it’s amazing if you look at the growth in craft spirits industry, how many jobs it’s created, how much it’s aided Minnesota agriculture. To have laws in place in our state that prevent continued growth, it’s really frustrating. This is a great industry and a great job creator, and I would press people to get involved with this issue.”

The Minnesota Distillers Guild is planning to add a page to its website that will provide more information about the group’s legislative priorities and give the public a chance to get involved. Schiller also asks people to contact their state representatives and senators to let them know you support Minnesota’s microdistilleries. “We’re just trying to create this as a priority—we’re always competing with a lot of other bills that are out there.”

In addition, members of the Minnesota Distillers Guild have special coasters in their cocktail rooms that you can sign to show your support. While you’re there, why not buy one of those 375-milliliter bottles? We hear they fit perfectly into a Christmas stocking.