New Minnesota brewery is surely in limbo

Thousands of beer drinkers have raised their glasses to support Surly Brewing's plan to build a $20 million facility and sell beer on the premises. But not the Minnesota Licensed Beverage Association.

The MLBA board said Wednesday that Surly's plan would "erode" a three-tiered system in Minnesota that separates manufacturing, distribution and retailing in the beer business, giving Surly an "unfair advantage," said MLBA Executive Director Frank Ball.

This was the association's second reversal on Surly's proposal in less than a week. On Tuesday, Ball said of Surly's proposal, "We're not opposed to any of this. We want them to build a brewery. Surly has a wonderful product."

But Wednesday, he adopted his stance of a week ago, when he said: "We're not talking about tires, batteries or accessories. This is alcohol, and it's highly regulated. There's a reason this law has been on the books since 1933."

Surly owner Omar Ansari would like to "tweak" the 78-year-old state law requiring breweries that produce more than 3,500 barrels a year to have another party distribute their beer.

On Monday, Sen. Linda Scheid, DFL-Brooklyn Park, introduced a bill that would allow Surly to sell glasses of its product where it's brewed. Rep. Jenifer Loon, R-Eden Prairie, will introduce a bill to the House on Thursday.

"It's curious that in half the states it's legal and somehow the system has not degenerated," Ansari said minutes after learning of the MLBA's latest stance.

Earlier he said: "We're not asking to sell cans or kegs outside the door."

Ball said owners of on- and off-sale establishments are anxious to reach a compromise with Ansari and legislators.

"You've got to play fair and Surly is asking for an unfair advantage," Ball said. "It would be one thing if they were a smaller brewer. But when you make over 3,500 barrels, you're a pro and there are rules to follow."

Big numbers online

Surly has attracted 1 million online views, 19,000 posted entries and 1,500 new friends on its Facebook page since plans for a new brewery were announced Feb. 7, according to the brewery's publicist. A new brewery with a 250-seat restaurant and bar, which would sell only Surly beer, would reportedly employ 150 and mean 85 construction jobs.

Surly has grown from an idea that blossomed in Ansari's garage in 1994 to a company that was named the nation's best brewery in 2007 by Beer Advocate magazine. It produced 3 million pints of beer (12,000 barrels) in 2010, a 32 percent increase over the previous year. Overall, Surly says, its business has increased 1,272 percent in five years, prompting the desire for a bigger brewery.

Fellow Minnesota breweries Summit and Schell's applaud Surly's meteoric rise and rock-star image. But they say the three-tiered system shouldn't be wiped away like so many peanut shells at the bar.

"Our retailers are our lifeblood; they're the reason we exist," said Ted Marti, president of the Schell Brewing Co. in New Ulm.

"We are OK with selling pints on the premises if it isn't so much a profit thing, but a way to promote our beer."

Summit founder Mark Stutrud says bluntly, "We cannot survive without the three-tiered system."

"This is fertile ground," Loon said, "but I think we can reach a compromise that satisfies all."