Last Call: TTB Accepts Offer for Trade Practice Violations; Freetail Founder Scott Metzger Exits Company

TTB and Elgin Beverage Agree to $325,000 Offer in Compromise

The Alcohol and Tobacco Tax and Trade Bureau (TTB) yesterday announced the acceptance of a $325,000 offer in compromise from Illinois distributor Elgin Beverage Co. for alleged violations of tied house provisions.

Elgin, based in Bartlett, about 35 miles from Chicago, distributes products from Constellation Brands, Pabst Brewing and FIFCO USA, among others.

In a press release, the TTB said Elgin had “aided and abetted another industry member in the use of a third party to pay retailers to carry and promote their products.”

The pay-to-play scheme, the TTB argued, gave Elgin an “unfair advantage” in the marketplace.

“TTB remains committed to putting an end to anti-competitive practices that hurt law-abiding businesses and prevent consumers from enjoying a wide selection of products,” the agency wrote.

Earlier this month, the TTB issued an industry circular reminding alcohol beverage companies that it was “committed to ensuring a fair and level playing field nationwide.” In that announcement, the TTB noted that it had “significantly intensified” its enforcement (which began in 2017), and that it was focused on snuffing out “exclusive outlet, tied house, commercial bribery, and consignment sale violations.”

“The high incidence of unlawful activities and deliberate concealment of such activities raise serious concerns,” the agency wrote. “These activities are of particular significance because of their nationwide occurrence and their impact on trade and fair competition.”

In May, the TTB accepted a $900,000 offer in compromise from Warsteiner Importers Agency Inc. — “the largest single offer in compromise for trade practice violations” ever accepted by the agency.

The Ohio-based company was accused of engaging in illegal tied house, commercial bribery and exclusive outlet violations committed in order to compromise a retailer’s independence from January 1, 2015, through April 19, 2018.

Freetail Brewing Founder Departs Company

Freetail Brewing’s Scott Metzger has “parted ways” with the San Antonio, Texas-based craft brewery he helped launch in 2008.

Metzer announced the move on his personal Twitter page on Thursday:

“Today I have parted ways with Freetail Brewing Co. It has been an amazing 10 years, working with some of the best and brightest folks I’ve ever known. I’m sad to not be working with them anymore, but have faith in their ability to continue the Freetail spirit and tradition. I’m looking forward to my next adventure, whatever and wherever it may be.”

Reached for comment, Metzer declined to share additional information regarding his departure.

In late 2015, the San Antonio Business Journal reported that the company had sought additional investment in order to expand.

According to a press release issued by Freetail Brewing, the company “formed a partnership with the Turner family” in 2016. Freetail did not elaborate on the nature of the relationship between the brewery and Turner Family, and it was not immediately clear what stake, if any, the Turner Family had acquired as a result of the partnership.

“We appreciate Scott’s vision and all that he has done for the craft beer business,” the Turner Family’s Jon Turner said in the release. “We wish him the best on his future endeavors. We look forward to continuing the Freetail legacy.”

Metzger, who had served on the Brewers Association’s diversity and events committees, also resigned from those positions.

Cape May Brewing to Open Distributorship in 2019

New Jersey’s Cape May Brewing will open a beer and wine distribution company in early 2019, according to a press release.

The new venture, called Cape Beverage, is led by brewery co-founders Ryan Krill, Chris Henke and Robert Krill.

The company plans to distribute Cape May Brewing products as well as a “full line of well-respected, carefully curated breweries, cideries, meaderies, and wineries in their portfolio.”

The impetus to launch a separate wholesale operation was the result of increased demand for its cranberry shandy “The Bog,” according to Cape May, which already self-distributes its products throughout “most of New Jersey.”

That beer, which had previously only been available on draft and must be pasteurized before being canned, will be contract brewed and packaged in larger quantities at New York’s F.X. Matt Brewing.

As a result, the company must comply with three-tier regulations and transport the beer back into New Jersey through a wholesaler.

“One thing of which we’ve been particularly proud [of] at CMBC is the strength of our self-distribution arm,” Ryan Krill said. “So, not only does opening a separate distributorship play into many of the things we already do well, doing so also opens a wide range of possibilities, including distributing a number of other breweries.”

BA Chief Economist: Brewery Visits are Good for Beer Industry Health

In his latest blog post, Brewers Association chief economist Bart Watson said “getting people into breweries is a good thing for the beer industry.”

His rationale? Recent Nielsen CGA data that suggests beer drinkers who visit breweries drink more beer, while those who do not visit breweries drink less.

Nielsen CGA, which polled more than 1,600 U.S. beer drinkers who had visited a brewery, brewpub or taproom during the last year, found that 29 percent of respondents were drinking more beer than a year ago. Only 21 percent of those questioned reported drinking less beer, however.

Conversely, 24 percent of more than 4,300 consumers who hadn’t visited a brewery in the last year and were also asked about their consumption habits said they were drinking more beer, while 28 percent said they were drinking less.

“Now, as someone who cares about good analysis, I won’t pretend that this means going to a brewery is causing people to drink more beer,” Watson wrote. “The causality might run the other way: people who are drinking more beer might be seeking out breweries.”

Nevertheless, Watson said all players throughout the three-tier system need to “actively try to recreate the reasons people go to breweries.”

His pitch to beer distributors, some of whom have expressed concerns about the proliferation of brewery taprooms?

“If these beer lovers are drinking a typical amount, their beer consumption is going up far more than at-the-brewery sales alone, suggesting once again that brewery visits spill out into the wider market and help build brand beer,” he wrote.

Massachusetts to Commence Recreational Cannabis Sales on November 20

The first legal recreational cannabis sales east of the Mississippi will occur next Tuesday in Massachusetts, The Boston Globe reported Friday.

In a press release, the state’s Cannabis Control Commission announced that it had approved two companies — Cultivate Holdings, LLC and New England Treatment Access, LLC – to begin selling marijuana and marijuana products.

“This signal to open retail marijuana establishments marks a major milestone for voters who approved legal, adult-use cannabis in our state,” commission chairman Steven J. Hoffman said via a press release. “To get here, licensees underwent thorough background checks, passed multiple inspections, and had their products tested, all to ensure public health and safety as this new industry gets up and running.”

It took lawmakers and regulators more than two years to finally approve cannabis sales after Massachusetts voters passed a 2016 ballot initiative making recreational cannabis legal.

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