Vermont Legislature SmartTranscripts:

[Rep. Matthew Birong (Chair)]: Welcome back, everyone. It is, shortly after 01:45. We are picking up work on our alcohol omnibus bill, and, for the next block of time, we are gonna take witness testimony on, we do have a working draft on our page. So, and that is a compilation of the bills that we agreed to build into this for its first draft, last week. And so we're gonna go down the list here, in order as listed and hear from, industry stakeholders on, various provisions within this proposal. So, we'll start off with, Levi Kramer. That's alright. Yeah. Yep. Levi Kramer.

[Rep. Sandra "Sandy" Pinsonault (Member)]: You want me to sit there, Harish?

[Rep. Matthew Birong (Chair)]: Yeah. Wonderful. That is exactly where we would love it.

[Chris Kessler (Founder, Black Flannel Brewing & Distilling Company)]: Okay.

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: No one told me I was going first. Let's let's get that away. So, yeah, I was, just talking about going off script, but I think for this, portion, I'll just read read my prepared statement. First of all, thank you. Thank you for, for having me here. Thank you for taking this bill up. I do think it's very important. My name is Levi Kramer. I own and operate, Kramer and Kin, whereas microbrewery, my partners are my spouse, Christy Kramer, and my big sister, Heather Kramer. The three of us own and operate Kramer and Kin. Have a small microbrewery that's based out of North Yorfah. So, again, I already said thank you, but I'll say it again because I know your time is precious, and I appreciate this. I appreciate the effort here. I just wanna say that I'm in in support of the bill, and I'm in support of our fellow brewers, our purveyors, and, the Vermont Brewers Association. So I'm really proud to be here even if I'm a little bit

[Rep. Matthew Birong (Chair)]: of a fish out of water.

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: So so, our journey, you know, just to give you a background of who I am, it's a little different than most. So I never set out to start a craft brewery. Wasn't wasn't really what I was trying to do. Instead, I come from a farm family. I started growing hops. That seemed like the way forward. It's what I know, crops and agriculture. So we started growing hops in 2,012, and then I didn't realize how big of a decision that was actually gonna be in my life and how impactful it would be. But as we got our hop business going, on the side on nights and weekends, we started selling our selling our our hops. I wasn't a very good hop grower, but what was cool was I started going to breweries. There was a litany of breweries that supported us even though our hops were, what I'm realizing now, substandard. But I got a few brewery tours. That was kind of my back, my look into into the brewing industry. And, when I saw all the stainless and I saw what's going on and, famously, one time we were at Long Trail and and we had just dropped off a bunch of hops and they comped our meal. I was, you know, like, young twenties felt like a big deal. That's when, my wife said to me, like, why don't we make beer? And so I was like, alright. That sounds fine to me. We jumped into the hop industry with, you know, two feet without knowing what we're doing. Let's do it with beer as well. So we got educated. I went to the American Brewers Guild. They're an outfit out of Middlebury. Really happy with that. They set me up with an apprenticeship at the Vermont Pub and Brewery. From there, I joined the industry. A few years later, I became a brewer for fourteen Star. I became their head brewer. And then eventually, when the time was right, we launched our brewery. So Cramer and Kin was a small microbrewery that we, bootstrapped our three and a half barrel brewery. Three and a barrel is about a 100 gallons in our two bay garage. A lot of small brewers started like that. That's how we started. That's what we could afford. So we did. And this was in let's see. This is in 2020. I think 01/04/2020, we put our first black IPA. Kind of a great a nod to Greg Nugent, you know, Vermont Pub and Brewery where I just done my apprenticeship. So I felt like that beer was appropriate. From there, things went really well. We well, you know, there was the COVID there was COVID, which was troubling. I'm not gonna drill down on that though and and our troubles there. I'm gonna kinda keep it to once we got a little momentum. You know, I think that the journey there is more important. So, so we got through COVID. We survived it like like everybody. We suffered through it. But but once we got some momentum, and we started producing beer in in real fashion, we were produced at the most we ever produced was 300 barrels out of our two bay garage. And some of the issues that I we encountered initially was that we were too small, that we weren't a brand name, and the distributors at the time weren't really interested in picking us up. They for whatever reason, we just weren't that attracted. So we were kind of forced into self distribution. I we thought and felt like being a rural brewery in North Hero, being very beholden to the, seasonal nature of the area, that we needed something else. So we we started a distribution company, Kramer Distributing, and we started distributing our own beer. And we did that up until well, we still do it, but we we went out with real gusto for a few years until we felt like we had, a brand, and we had something that we could offer a distributor. I went back to, a distributor and said, hey. Look. We can can we will this work? Can you distribute over here? And when we started crunching the numbers and getting down to the nuts and bolts of it, we found once again it wasn't really a good fit for us. The margin that they were asking for is 40%. And for us, being a rural brewery and staff with a a tap room that just, you know, barely makes itself work, and it just it wasn't right for us. So once again, we found Kramerkin found ourselves in this middle ground where I was having a really hard time getting representation even though we had a reputable product and reputable name. So that was some of the growing pains that we we had. I'm gonna get back to my script, even though I said

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: I wasn't gonna go off script. Oh, yeah. I mean, you're doing great off script, buddy.

[Rep. Sandra "Sandy" Pinsonault (Member)]: Okay. Thank you.

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: So this part's this part's pretty important, so I do wanna get it right. So distribution. And I I really wanted to try not to be too smart today. I just wanted to try to tell my story. It, it was a lot. You know, when you distribute, there's, you know, it's the act of distributing the beer, the the logistics of getting it from a to b, you know, sales, pricing, merchandising. There's a whole litany of of challenges to becoming a distributor. That was never again like brewed beer. It was nothing I ever thought for myself. But we just found it was a become a distributor and distributor of beer and tackle all those issues, or or or not and, you know, do something else. And that wasn't really an option. So we decided to tackle those issues. And those issues were were were okay. You know, we figured out how to price our beer, and we figured out how to merchandise our beer, and we figured out how sell it. You know, walking in there and dropping off four packs is a really effective way to get somebody to buy the beer, just give it to them. The challenges of distribution and the challenges that we face, and I'm hoping something that we can address in this bill is the necessity for having a distribution company when you're my scale. You know, we have a whole second business. I'm lucky because my spouse and wife and business partner, she comes from the finance world. So she actually does have her finger on the pulse when it comes to paying taxes, when it comes to creating entities and and kind of the business piece of what we're doing. So we have a leg up. When I think of brewers and, breweries who are one person shows, I can't imagine, how that works for them. For myself, I can't imagine doing it without her. I'm when I start thinking of taxes and bobble bills and my head starts to spin,

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: and I'm just like, I'm I'm just

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: a brewer. So I can see, while we were able to overcome some of these challenges, it is a real barrier for a lot of small breweries. You know, there's there's the cost of becoming a you know, creating an entity and being a distribution company, but also the maintenance and upkeep of keeping up another company going. You know, it's, you know, separate books and it's separate taxes and it's separate payroll and it's separate and you're just doubling a lot of your effort. And as a small business, you don't really have the time and effort to divide. You're singularly focused on, in my case, growing the business, you know, making beer, making sure you have beer to put on the truck in the first place, you know, and so to get mired down on some of these other details, it's really it can be really troublesome. That's all in addition to the to the monetary cost that that you can incur. So in summary well, let me just get back on here. So what I wanted to say was, the nickels matter, you know, and I I I think it's kind of weird and befitting us. You know, we paid today, I was talking to my wife, Christy. I was like, so what have we paid for our distribution? Let's just she said she just paid $12.45 dollars Today, we paid Grammar and Ken paid that. And that's tough, because the next the next conversation we have is, are we making payroll this week? You know, it's February, this is the slowest time for us. And, and it's not a time, you know, every every nickel counts. And in summary, I I wanna close with, you know, I I believe this bill would really help. It would help small brewers, even even brewers like myself. We produced 500 barrels last year, still very small, but growing. Folks that still get caught in the middle ground, we're still it still doesn't work for to to to have a distributor represent us. And even though we have a brand now, you know, that it just it let me just figure this out. I wanna close with this bill is important. It's important because starting a small business and it's my personal belief that that small and local businesses are really the backbone of economy. And it's again, you know, I'm biased in here, but I feel like we wanna we wanna support them and help them. You know, I think back to the in the early days, growing a substandard crop, but still I was able to sell it because people wanted to support a local a local guy trying to do his thing. And I think that's for me, when I read this and I I talk with Emma about the goal and and what we're trying to do here, it really comes back to that. It's it's trying to not give an undue burden on a small business that really is fighting tooth and nail, and those those nickels really matter. And then when I think about the process that I've gone through, even though in a lot of ways, I've we've gotten over the hump, and we have a little distribution company. We have over 80 accounts now. We're in four different counties. We're by our own by and large, we're doing okay with with our distribution effort. But it was not easy. And if I didn't have my partners, I don't know if I would have done it. To to divide my focus, I don't know if I could have done So I think, it's a real challenge for small upstart breweries. And I think we have a opportunity here to do something about that. I think with that, I will say, Ben Franklin said, actually, time is money. I appreciate your time, and I'm happy to answer any questions. Thank you.

[Rep. Matthew Birong (Chair)]: Thank you. Any questions

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: for us right now?

[Kendra Knapik (President, Vermont Grape & Wine Council; Co-owner, Ellison Estate Vineyard)]: I just looked up your brewery, your artwork is really

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: Thank you. That's that's my big sister's part of it. No,

[Rep. Matthew Birong (Chair)]: with no questions now, I just want to take a second for myself and just say, I'm a food and beverage hospitality industry professional. And I came in here, this building, probably for the first time about twelve plus years ago in a situation very much like yours. So I was having a lot of deja vu watching you run through this. I know that was well delivered, it really was. So I appreciate it. And, yeah, hang out for the rest of the testimony. If any other questions come up that are relevant to you, we'll definitely ask them, but I really appreciate the perspective.

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: Thank you.

[Rep. Sandra "Sandy" Pinsonault (Member)]: And Franklin didn't drink beer, did he? Yes. He did.

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: Yeah. Didn't wine. Didn't say

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: famous Albert. The grog. I can tell you his favorite recipe for a book.

[Rep. Matthew Birong (Chair)]: You can? Let's get the grog. Well, thank you very much. Yes. No. It's really appreciated. And up next, Aaron Hill. How you doing? Good. How are

[Rep. VL Coffin IV (Member)]: you? Good.

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: My name is Aaron Hill. I live in Plainfield, Vermont. I own and operate Blackback Pub in Waterbury. We specialize in sourcing craft beer from here in Vermont nationally as well as around the globe. I've often said I've never been smart enough to be afraid of public speaking,

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: but this is, they're a little bit of

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: a different ballgame than I've been in invested in before. So you're my friends. I know it. I appreciate that. Chairperson Birong, members of the committee, thank you for your time today to testify. I I really appreciate it. I've been in the industry operating restaurants, specifically craft beer, for almost two decades now. I've also worked as a brewery sales manager, both here in Vermont and in New Hampshire, operating here in Vermont, and then also a Ford distributor here as well. So these, challenges that h six seventy two seeks to address have been present for a better part of my adult life than professional life. The The industry itself, with regards to smaller breweries entering this challenging market that has changed drastically, those costs that they have to undertake often are the same costs that larger companies have to undertake. And it's extremely limiting to them about how they enter that market and our markets and achieve access to restaurants like the one I operate now. And I've become increasingly concerned over the last decade having watched a number of distributors open and close, whether they have larger out of state support, such as Craft Beer Guild did with the Belt and Cheahan Family Company, which has a much larger umbrella, or Vermont Beard Shepherd doing what they could to try and represent small breweries and bring them to market. We are somewhat of a unique purveyor in that I really do seek out small breweries to try and represent their product in the market. Not only magnifying their marketability, but our own. I'm not going lie, that's one of the main benefits of having something new and shiny to play with, especially for consumers in this day and age. But we really do intentionally go about it trying to find quality products and represent them as stewards of the same intention that people like Levi and Chris bring to their own products. So over the last decade or so there are times where I've traveled internationally to meet with breweries and I've done a lot of that here in Vermont. One of the things that I am routinely encountering is an amazement, an amazing appreciation for Vermont craft beer, as well as how we represent our local supply chains, our food programs. There's an immense amount of appreciation for those things. There is a brewery in New Zealand that runs what they affectionately refer to as an eight zero two series of beers, and they do a different one every month. And it is such renowned there that people will travel to New Zealand from other places in the world, buy a high end travel case, and then check it and pay for it as though it was luggage on an airplane. And they will bring it back to where they come from. There is a brewery in Italy that was recently in 2025 named one of the top breweries in the world to watch in 2026. They specifically created a beer festival calling small breweries in Vermont to access their product and bring it to Italy so that they could have a beer festival celebrating Vermont beer. So this level of fame that's enjoyed by people that are struggling so routinely to, as Levi said, make payroll while delivering massive value and tax revenue for the state as part of that chain. I'm really happy that you guys are taking the time to address these concerns in h June, that have been essentially in place since the sixties. And I'm under no illusions that it's easy to do so. I imagine it's hard to get people to agree. But age six seventy two provides a practical pathway forward, in my estimation, for breweries to establish a stronger foothold in the market as they seek to grow either locally or in a larger sense across the state. And it assists distributors in having a tangible way that really shows them if there is viability in a brand. So the benefit for everybody at that level is, I think, well known in my estimation. For me, it would allow me to, for example, access a small brewery in Brandon, Vermont, Red Clover, very rarely sends any beer out of its walls. They do an amazing job representing their community, creating events, and they do one of the things that I really think is one of the main functions of both pubs and breweries is that they they create a place where it's a gathering place. It fosters a community, a community identity, And Vermont has done so well in doing that across all the things that generate value here in Vermont. Vermont's craft beer industry, may have the numbers wrong, but I I think looking at some of them, it's around $460,000,000 annually revenue. I think it can only be served to bolster that in conjunction with the tax revenue from that and also allow purveyors like myself to continue creating a value that is benchmarked here in the state nationally as well as internationally and representing those products as best we can to benefit the state in that regard. Don't worry, this is not an entire another page of testimony. I do want to address one of the key components of the bill, the 5,000 barrel limitation. So I I am understanding from having talked to some people that there is this kind of hesitancy about that number. I think a lot of breweries will find it challenging to reach that level of production, whether it be that they're distributing off-site, in house. I think even just making that much beer for some breweries will be a challenge. At a 10 barrel system, that'd be 1.3 batches a day, seven days a week. You need time to can, run payroll, all these other things, right? So I don't think it's a major challenge to flooding the marketplace, but I think what it will do is really allow some breweries to shine and really access what would tangibly make them a major market player for people like us, for distributors when they go to evaluate the fiscal nature of a brewery and whether or not it has market viability. So I think it is important that that number be there also regarding the fact that surrounding states that are enjoying a little bit of notoriety right now around craft beer, that's the minimum number that a lot of our surrounding states have. So I I think it would be a boon to us here in Vermont enjoying the position that we do to have that done. In closing, Vermont breweries and brewers, going back to Greg Noonan, have played an absolutely integral role to how the nation has begun to enjoy craft beer, and the global interest continues to grow right now. I know people from Vermont recently have traveled to China and Japan to open markets there, and continuing to access amazing breweries here is something that I'm incredibly passionate about for obvious reasons. I find it interesting that I can access beer from Franconia, Germany easier than I can from 10 miles down the road here in Vermont. Age six seventy two represents a measured thoughtful step towards these goals and to addressing a lot of the challenges that have caused complications for some breweries while they have closed due to natural causes and some distributors, others have definitely closed due to things that H672 will address. So I thank you for your time again. And if you have any questions, please. I promise to keep

[Rep. Matthew Birong (Chair)]: Okay. Any questions for our guests? No hands, your time, sir. Absolutely. And we'll definitely follow on get a thumbs up as well. Wonderful. Thank you. All right. And up next, Chris Kessler. Chris, long time no see.

[Chris Kessler (Founder, Black Flannel Brewing & Distilling Company)]: Good to see you. I'm going to, little less than eloquent than the last two speakers. I'm going to read my testimony. So I prepared that. If you don't mind, I have my laptop in front of me. That is quite alright, sir. Great. So I think there might be part of this testimony talking a little bit about licensing. So I have a handout set around just to one page that I think would be helpful. Sure. Thank you. So, my name is Chris Kessler. I'm the founder of Black Flannel Brewing and Distilling Company in Essex, Vermont. I'd like to thank Chair Birong, Vice Chair Hango, and the rest of the committee for allowing me to participate in this discussion today. Black Flame was the state's first and only brewery distillery combination. We operate an event space and a full service restaurant occupying 20,000 square feet, both indoor and outdoor. We opened during the pandemic in July 2020, but still managed to create 45 high paying jobs supporting a local community that contributes significant tax revenue to the state. I have served on the Vermont Brewers Association Government Affairs Committee for the last five years, And I've been the Vice President of the Distilled Spirits Council of Vermont for the last three and a half years. In 2022, I testified in favor of privatization of distribution of RTD canned cocktails, which passed and went into effect in July 2022. Today, I'm here in support of two alcohol bills, age six seventy two and age eight thirty two. Previous testimony and committee questions on these bills point to some confusion on the finer points of alcohol licensing and permits in Vermont. So, like to spend a few minutes discussing licenses and permits Black Flannel buys annually to effectively do business in Vermont. Referring to the handout, in the framework of the three tier system, Vermont has six license types. And sorry if this is a little rudimentary for some of you, but I think in context it makes sense. In tier one, there are suppliers. This requires a manufacturer's license. Black Flannel being a brewery and distillery, we require you to buy two. They're $285 apiece per category, so we buy two of those. The second tier, Distributors, requires a Distributors License. Annual cost $12.45 dollars We did purchase this license up till 2024. So, we had our own company doing distribution until we sold the rights of our distribution rights over to Sperryl Distributing. Vermont being a control state, of course, the state is the distributor for spirits. So, we had distributed our beer and canned cocktail products till 2024. The third tier, of course, is the retail tier. There are four license types. The first is first class for bars and restaurants to sell and serve beer and wine by the glass. That annual cost is $230 We buy one for our restaurant. Second class retail stores annual cost is $140 not applicable to our operation because that's places like beverage warehouse, for example, in Winooski. The third class is for bars and restaurants to sell and serve spirits eating cocktails. So that's basically adding the spirit component to a Class one license. That's Class three. The only annual cost is $10.95 dollars We buy one of those for our restaurant. And then, Class four is so manufacturers can do simple, low volume tastings and sell unopened packages direct to consumers. The annual cost is $70 per location, and we buy one for our Essex distillery and tasting room. We actually used to have three, but we closed down two of those locations. I'll talk a little bit more about that later. There are two permit types that I also like to mention. The Sample Event Permit allows manufacturers to serve sample tastings at an event location not covered under another license. They sell their products in closed packages to go. The event per event cost is $35 We're allowed four of those per year. Maximum span of four consecutive days for a sample event permit. This one does require the approval of municipality, because it's not covered under the license type. This permit is not relevant to Bill eight thirty two. The beverage tasting permit, however, allows manufacturers to serve sample tastings up to eight ounces per person, but not spirits, just beer, wine, RTD, chem cocktails, and it's at a second class license location. So, no direct to consumer sales are allowed under this permit. Cost is $25 We're allowed up to 48 of those per year. The venue normally stands about two to three hours. It does not require the approval of municipality. So, one is what is relevant to '32. The total annual cost for licensing and permitting for Black Flannel to effectively do business in Vermont approaches $3,500 Used to be over close to $4,700 when we were doing our own distribution. There are many other permit types, and it took many years for us to navigate laws, rules, and regulations, discover how best to operate in Vermont. So, it's very confusing. Even I get confused once in a while myself, and I have to refer to the Title VII and rules and regulations. So, moving on in support of H-six 72. For the first four years of operation, we've banned a separate company to distribute our beer and low alcohol RTD products. Given the challenges of this experience, I believe it's critical for Vermont to allow small brewers the freedom to self distribute their own manufactured products Class one, two, and three licensees. Combined with proposed Class four changes in H-eight thirty two, small brewers would then be able to solicit any Class four licensee that might wish to carry their products. When we opened in 2020, we met with three distributors, including Farrell Distributing. Two of the three wanted to distribute our product, but Farrell determined, that our brand was too young and unproven. We decided to set up our own infrastructure and licensing required to get our products to market, which required starting another business. The annual distributors license was the same required as by Farrell and Baker, two vastly larger organizations, compared to this tiny startup. Though we have the right to do so, this costly license under this costly license, we had no desire to distribute other brands. Over the next three years, we built momentum and a strong brand reputation. And in the 2023, FAROIL came back to us and expressed interest to distribute our products. We sold our beer distribution rights last summer, followed by our canned cocktail distribution rights the following spring. In 2020, if we had had the option to self distribute without building the business infrastructure and licensing required separate company, it would have been made things a lot easier and significantly less expensive, allowing us to meet our business goals much sooner. There appears to be solid support across the board for the self distribution bill. The VBA proposes to allow 5,000 barrels per year, which we believe is appropriate. Some breweries may not plan to ever produce 5,000 barrels. Others will need room for growth to support their business model without having to rely on a larger distributor's willingness to bring them on. If black flailer were looking for a distributor today, one could ask the question, would a third party distributor still be interested to take us on, given the economy, the downturn of alcohol consumption, and distributor consolidation? This is the dilemma small Vermont breweries face. If they can't find a distributor willing to take them on, they have no other way to get their product to market without incurring the costs associated with starting a new business. Something that's more costly and complicated than it needs to be. As of March, there will only be three third party distributors left in the state. Understandably, they must be very careful taking on new brands. Small breweries are being dropped from distributor portfolios, so distributors can strengthen their commitment to core performing brands. Allowing small breweries that don't have a distributor franchise agreement in place to self distribute, the ability to grow five to 5,000 barrels per year will give them a chance to grow, create more local jobs and increase tax revenue. Moving on to H832. Any category of Vermont alcohol manufacturer can set up a tasting room and purchase a Class four license. For the purposes of this conversation, I'll focus on Vermont spirits manufacturers. The cost for consumers to purchase a bottle of high proof spirits is much higher than beer or wine, giving customers the ability to try a small sample of spirit before they make a purchase decision is a responsible and effective way to ensure they will be happy with their purchase. As a holder of a Class four license, spirits manufacturers are bound by certain rules. No more than one quarter ounce of a spirit, the total of one ounce per customer, or up to four mixed drink samples containing a combined total of no more than one ounce of, of spirits. Samples can be delivered to customers with or without cost. Full bottle sales are allowed for off premise consumption in unopened containers. Class four locations must be staffed with employees of the distillery. Licensees can only sell products they manufacture, with one exception. One Class four location can currently sell up to five other manufacturers' products, and that's kind of the point of what we're trying to change today. Servers must hold appropriate alcohol server certifications given by DLL certified trainers. To reiterate, Class IV locations are only allowed to serve one ounce of spirits per person. This is one third less volume than one standard shot of spirits served at Class III licensed bars and restaurants. The one ounce class four limit mitigates the risk of over consumption while supporting direct to consumer sales. In addition, all servers are required to take the state training and hold certification, which means they are trained to identify anyone that exhibits signs of intoxication, Even if they are ordering their first drink and they exhibit signs of intoxication, servers will deny service. Failure for businesses to comply with training and certification rules put their licenses at risk. Being in a control state, distilleries have three options to get their products into the hands of consumers.

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: First is the

[Chris Kessler (Founder, Black Flannel Brewing & Distilling Company)]: eight zero two Spirit stores. Second, bars and restaurants, which are the Class one and Class three licensees. And third, direct to consumer or Class four licenses. There are less than ninety eight zero two Spirit stores compared to over 2,000 stores where beer and wine can be sold in Vermont. It takes a major investment in a sales team to solicit bars and restaurants. The direct to consumer option, which is the Class four, gives Vermont distilleries a greater chance to maintain a stable financial base of operation. With Vermont being a control state, there's unequal access, market access. Beer and wine can sell their products to 25 times more retail stores than spirits have access to. Horizon Tide raises all ships. As a camaraderie among Vermont producers, what we're asking for in H32 are two changes that will allow Vermont manufacturers across all categories to support each other in a small, intense and challenging marketplace. First, remove the limitation of only one Class four location and allow all Class four locations to sell products from other Vermont manufacturers. And second, remove limitation of at least five other manufacturers and now allow Class four locations to sell products from any other Vermont manufacturer across a category. Setting up and running a Class four location, as I mentioned, is costly and labor intensive. Being limited to carrying one Vermont manufacturer's product line, adds unnecessary restrictions to an already tough business model. Black Flannel operated three class four tasting rooms until '20 from 2020 until early twenty twenty five. We chose to close down two locations due to difficult staffing challenges and low return on investment. Through trial and error, our distilling community has discovered that Class four locations are most effective in tourist destinations. This has historically been a different demographic than eight zero two Spirit Stores. The other component of eight thirty two is the permit lead time. So, other proposed changes to, for the lead time to apply for beverage tasting permits, which previously mentioned, are different from sample event permits. Namely, tastings take place on Class II license locations. There are no direct to consumer sales, and beverage tasting permits do not require approval of municipality. We have run into situations where a Class II retailer asks us to do a tasting within a five day window, because someone dropped out last minute. The current five day lead time is left over from when all permitting was done by paper. When the DLL online portal was launched, it allowed application submissions within five days. We were impressed that permits were usually approved the same day. I think one case was actually fifteen minutes for approval. It was kind of a lot in the chair when that happened, but it was great. So the five day lead time window, though, is now enforced on the portal, and the ability to submit an application within the five day window disappeared, leading to this request. DLO's implementation and effective use of the online portal illustrates their continued support of Vermont alcohol beverage manufacturers, Vermont businesses, and economic growth in general. This commitment helps everybody move at the speed of business. We understand there will be circumstances preventing one business day approval, but reducing this requirement to one business day will give manufacturers a better chance to support last minute requests from class two retail stores that benefit from in person taste. Thank you for your time. Happy to answer any questions.

[Rep. Matthew Birong (Chair)]: It's like an over we got does anybody have any direct questions right now? We do have a couple of more folks to speak with. So why don't we hold questions till the end? We'll have time for everyone to come up. But, no, thank you, Chris. We'll definitely chat with you on these pieces for sure. Yeah. Alright. Up next, Kendra. How are you, Kendra?

[Rep. Sandra "Sandy" Pinsonault (Member)]: Good. How are you? Not bad. This is a machine or

[Kendra Knapik (President, Vermont Grape & Wine Council; Co-owner, Ellison Estate Vineyard)]: Hot seat here. So first off, thank you all for being here and listening to testimony. I am gonna be speaking to H647. Thank you, Chairperson Birong and whole committee, and thank you, Representative Boyden, for introducing this bill for us. Really appreciate it. So my name is Kendra Nabek. I am the president of the Vermont Grape and Wine Council, which is our professional organization for wine growers in the state of Vermont. I am also the director of operations and the co owner slash founder of Ellison Estate Vineyard. Just to give you background of what I do, Ellison Estate Vineyard is a 50 acre farm in Grand Isle. We have about 14.5 acres under vine. We also, we manage a flock of about 40 sheep. We're practicing regenerative agriculture. And currently our winery space is actually in Stowe, so we produce our wine in Stowe, even though we grow the grapes in Grand Isle. That also echoes kind of the stories that have been told about small family business, kind of bootstrapping, a startup. I'm actually a veterinary oncologist. That's my background. I think you all met my husband a couple of weeks ago, Rob Knapik, who wears a couple of other hats as well. So currently our production, we're pretty small, but one of the larger producers in Vermont. We produce around 1,200 cases of wine a year. We operate in our tasting room in Stowe. We have a first class license. We have a seasonal tasting room on our farm in Grand Isle, which we operate under a fourth class license. That will come into play here as I discuss this bill. We have plans to grow our production. We just planted another four acres to closer to 2,000 to 2,500 cases a year. I think that I can offer, I know this bill has already been presented to you a couple of weeks ago, and I don't want to get lost in the details. I can offer perspective as the president of the Vermont Grape and Wine Council as far as the greater wine industry in Vermont. I'm happy to answer any questions on that. And also the owner of a fairly new winery and vineyard, which the spill will directly affect. I think it's important to point out that most wine producers in Vermont are farmers too. So many of us don't have the luxury of having our farm, our tasting room and our winery necessarily in the same location due to many of us kind of starting bootstrapping our operations and also just kind of the rural geographical nature of our state. So basically, this bill that has been presented to you represents two small changes that the whole goal is to give producers more flexibility to sell our value added agricultural product. The Vermont wine industry is really still in its infancy as far as And we really are trying to make it easier for producers to showcase and sell their product if it's gonna grow. As the law currently stands, there are limitations that producers are feeling and we are looking for more sustainable business models in our rural setting to grow this industry and also to achieve parity with the brewers, which are currently allowed to have two first class licenses associated with manufacturing facilities. We are looking to do this in a controlled and regulated way, obviously, and supported by the state. Vermont wine, I think, could be an important agricultural based value added product for the state, as well as significantly increased tourism in our state. And we really want to set producers up for success. And that is kind of the background behind why we're asking for these changes within this bill. We'd love to see Vermont wine flourish in the way, for instance, that the wine industry in the Finger Lakes region in New York has flourished. I think it can be a really important part of our economy here. I also want to see it flourish in the way that craft beer has flourished in the state as well. And so these are the reasons that we're seeking these small changes. The Vermont Grape and Wine Council has existed for over twenty years, but in the last couple of years, we've had some increased participation and activity. And we're really just looking to help our members out to establish more successful businesses. And we'd love to see this industry flourish. We'd love to help grow tourism. We'd love to help elevate the food and beverage industry in Vermont. Yeah, really just supporting Vermont wine and its establishment into a viable industry will hopefully help ensure the sustainability of Vermont agricultural lands. There's a changing landscape there. And I think we're just trying to kind of get a foothold. Growing rural businesses, as you know, is not easy. And so that's the reason why we're asking for all this. So again, I'm happy to answer specific questions. I know you guys have gone over this in testimony a couple of weeks ago. But that's what I'm

[Rep. Matthew Birong (Chair)]: here for. Yeah. Like I said before, I think we're going hold the questions.

[Rep. Sandra "Sandy" Pinsonault (Member)]: We can't finish sharing. Absolutely.

[Rep. Matthew Birong (Chair)]: So thank you very much. Like, yeah, please.

[Kendra Knapik (President, Vermont Grape & Wine Council; Co-owner, Ellison Estate Vineyard)]: And I know, Deirdre Heaken, who's the vice president of Vermont Green Bond Council, is all queued up. So thank you again for your time.

[Chris Kessler (Founder, Black Flannel Brewing & Distilling Company)]: Yes. Of course.

[Rep. Matthew Birong (Chair)]: How you doing, Deirdre?

[Deirdre Heeken (Co-proprietor, Domaine La Garagista; VP, Vermont Grape & Wine Council)]: I'm good. Thank you. Can everybody hear me? Yes, we're good. Okay, I just want to first say thank you, Representative Birong and members of the committee for giving me the opportunity to speak today. I'll start by introducing myself. I'm Deirdre Heeken, as Kendra said, co proprietor with my husband of Domaine La Garagista, which is a farm and winery here. I am a farmer and a winemaker. We farm our vineyards generatively and have production and tasting spaces in both Windsor and Addison Counties. We farm 11 acres of vines and practice like Kendra rotational grazing with sheep. We began planting and farming vines in 2007 and our first vintage was in 2010. And as Kendra also mentioned, I'm the VP of the Vermont Grape and Wine Council. I'm going to be speaking as she was specifically to 8647. And as Kendra provided a more broad overview and our request parity with the Brewers Association, I'm going take the opportunity to focus more on details of how this legislation can impact the Vermont winery by sharing with you how it could impact my business specifically and in my ability to give back to the state positively. Firstly, I just want to say that in the wine industry, it is really crucial for wineries to have flexibility and as many opportunities as they can to interact directly with their customer base, whether that's local or touristic. It is extra important for Vermont wineries to be able to do so as we are a new wine region with lesser known regional grape varieties, and we need to create multiple occasions to educate, communicate, and to share our Vermont stories through the experience of the wine. From a tourism standpoint, the more we could provide that draws the visitor to Vermont, the more they will lodge and dine and experience here. And if the Vermont wine industry is allowed to grow properly and intentionally, Vermont wine could continue to increase its draw for visitors outside the state and the revenue that they can generate here. My husband and I have been lucky enough to grow our business in both Windsor and Addison Counties and to have production spaces and tasting spaces in both locations, and we've been able to do that to grow positively here in Vermont in that way for over the last almost twenty years. Our tasting spaces are in very rural locations, as Kendra was mentioning that many of us are in these rural spots. And because of that, we have to offer experiences that are a destination for our customers. We currently can pour four two ounce tastes in both tastes of our tasting spaces. This is great for a first time visitor. It's a way to introduce people to our wines, to have them have an opportunity to taste a few things. We currently only have the one first class license, which is by legislation, that allows us to pour by the glass in only one of these spaces. And we've seen firsthand how this affects how our customer interacts with us in these two different scenarios. In the tasting space where we have the ability to pour by the glass, we see that first time customer return more consistently to enjoy a glass with us. They're willing to make the trek out to the tasting room to have this experience more frequently. Here in Barnard, they have to go up 1,600 feet on a dirt road to find us, it's important for them to have a reason to want to come see us. We're able to develop and deepen our community relationship with them and spend more time communicating about Vermont wine and sharing our story, and the story of Vermont food and beverage culture when they get to come see us more frequently, when they want to come and see more frequently. It also of course improves our economic sustainability. In the tasting space where we can only pour the tasting flight, we see customers come for a first time, they enjoy their experience, and then in the best case scenario, we'll see them in six months when they think maybe our wine flight has changed, they might decide to come then, or we might see them even a year later, again for the same reason, they might feel that, oh, their flight has changed or vintages have changed, so it's a good time to check them out. But more often than not, we see that we don't actually see them again. Because when you come to taste a flight, it feels like more of a one time experience, especially if they have to make the effort to come out to a rural area. Enjoying a glass of wine in a tasting space is a really different immersive experience than in tasting through a flight, which is really more of an introductory experience. We do have the ability to get a special event permit for each time we open, which allows us to pour glass, but this has proven to be really, really inconvenient and unsustainable process. In both of our locations, a special events permit must be approved by the select board and the select board meets really infrequently, maybe once or twice a month. I'm a farmer first and I must focus on my farming responsibilities over everything else. Our tasting rooms are only open a few times a month because we need as much flexibility as possible in order to keep up with our farming, and we need that flexibility when we decide when we can be open. Also, because we are so rural, we're not in a position to be open all the time. It doesn't make any sense economically in these locations. And so we're often deciding to be open only a week in advance because of our farming schedule. And we don't have a tasting room staff, we don't have a staff, we're bootstrapping it like everybody else. It's my husband and myself from working in the vineyards, to in the tasting room, to doing the sales and marketing, to running and being in the tasting room when we are open. It's really next to impossible to be able to plan far enough in advance to take advantage of these select board meetings, and often we actually miss the opportunity to request a special events permit, and we have to wait until the next month where we run again into the same problem. If I try to pick dates ahead of time and hope for the best, I have to pay for each permit, And often that date we've chosen ends up being a bad date because we have to address something else that's become emergent in the field, and we lose that date, and we lose the money spent for the permit. It would be infinitely more sustainable for us to be able to have a second first class license that allows us to open our tasting room at the most beneficial time and to offer our customers a more in-depth destination experience that they will return to again and again over time. I'd like to just finish by also saying how important it is to just get Vermont wines and glasses for consumers to enjoy as a way to celebrate Vermont agriculture and culture. As both Kendra and I have mentioned, we are a fledgling region still in need of educating our audience, whether that is local or touristic. In the state, we do have some support from restaurants and wine bars who carry Vermont wines, specifically on their bottle lists, but very rarely do they appear on glass lists. So there is nowhere else for people to experience Vermont wines by the glass except in a tasting room with a first class license. This goes a long way to promoting not only the wine and the winery, of Vermont agriculture, of Vermont food culture, and of Vermont story. Thank you. And I think I guess we're open for questions now.

[Rep. Matthew Birong (Chair)]: Yes. So any questions from the committee for the folks that presented from the industry before we go over to Commissioner No.

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: Okay. Presentation.

[Rep. Matthew Birong (Chair)]: If you want to stick with us, please feel free. And with that, Commissioner Knight.

[Wendy Knight (Commissioner, Vermont Department of Liquor and Lottery)]: Good afternoon. Good

[Rep. Matthew Birong (Chair)]: to see you again.

[Wendy Knight (Commissioner, Vermont Department of Liquor and Lottery)]: Nice to see you all again. My name is Wendy Knight, Commissioner

[Rep. Sandra "Sandy" Pinsonault (Member)]: of the Department of Liquor and Lottery. It's late in

[Wendy Knight (Commissioner, Vermont Department of Liquor and Lottery)]: the day, I will be brief. I first want to thank the Vermont manufacturers for being here, our licensees. Appreciate all the work you do for growing the economy and making Vermont an amazing place to come visit. So I know you're all very busy, I appreciate you being here. So very quickly, for full transparency, the Vermont Grape and Wine Council used to be my client twenty years ago. I also represented Eden Ciders twenty years ago and Vermont Spirits Company in Queechee. And I had a craft beer store in the Adirondacks. So I have no favorites. I love it all. And I'm now running the eight zero two Spirits network.

[Rep. Matthew Birong (Chair)]: Of the points or so.

[Wendy Knight (Commissioner, Vermont Department of Liquor and Lottery)]: So, obviously, the department looks at proposed changes through the lens of, does it grow the economy? Does it support, Vermont businesses? And if and and does it not negatively impact public safety? I know there's a lot of double negatives in there, but grow the economy, support Vermont businesses, no negative public safety, and we're all about supporting it. And so that's what I see generally here. We already talked about technical corrections. The one thing I would just remind the committee that we were requesting that you strike the liquor liability mandate. It is the recommendation from DFR and DLL that we not require that liquor liability insurance. I will move on to the I don't know if I have all the names, but the self distribution, GERS 672, I believe. This is fine. We're supportive of this. This is actually something I spoke to a couple of years ago. Well, maybe more than a couple of years ago when I first started at the department. I had some conversations with some nano breweries that were recommending this. Clearly, we know that the consolidation of the wholesale tier in Vermont makes it even more challenging right now for the craft, brewers. So we don't have a position on that volume to 5,000 barrels, but in general, this makes sense, and we're supportive of that. I will move on to H 647. This is the what Deirdre and Kendra just spoke about. It's the additional tasting room location. It's the ability for the wineries to have another, outlet not near their manufacturing, where it's, a full pour. We call it a full pour. So more than just a sample. And I think you heard Deirdre eloquently talk about why that's important. We want people to enjoy Vermont products. So that's fine. We have no problem with this at all. The H832, this is what Chris spoke about. Again, in general, we have been talking with the stakeholders and the manufacturers about expanding the number of fourth class licenses. That's, again, a manufacturer can have a fourth class license that's either for a tasting room or a farmer's market permit. So we think that it makes sense, because when we expand tasting room options, we help the manufacturers grow. They add jobs. They hire people. They pay corporate taxes. They give people an experience. They bring tourists up here. When you're buying a bottle from eight zero two Spirit store, that's a transaction. Right? You're just going in to buy a bottle of a Vermont manufacturer. When you go to a tasting room, that's an experience. And, you know, people go, they mingle, they have parties, they sample, they buy. And so they're very two different experiences. We don't see the tasting rooms competing with an eight zero two spirit store. The only caveat I would say is that over the last two years, you've heard me talk about we're expanding the number of eight zero two SPIRITS kiosk stores and tourist area. And a kiosk store sells primarily Vermont products and the top 50 products. So we just want to make sure that by expanding tasting rooms for manufacturers, we're not setting up a shadow eight zero two Spirits kiosk store, for example. So, I think we'll have some specific language that would make sense. We would like to propose some language changes just to make sure that there's some parameters so that doesn't happen. But in general, like we've said, a tasting room is an experience. Native to spirit stories, a transaction. The one thing I think, I don't know whether I'm looking at old language, but I think we want to be clear that it's Vermont manufacturers. A fourth class license belongs to a Vermont manufacturer. So if you're going to expand the number of tasting rooms, we want to promote Vermont products and Vermont manufacturers. So I think we want to be clear about that. And like I said, I think we'll have specific language about When we talk about Vermont manufacturers at those tasting rooms, it could be cider, RTD, wine, beer, spirits. All of that creates a good tasting experience at a tasting room. But because we are a control state and we sell spirits only at eight zero two spirit stores, we just want to navigate that. So I'll have some specific language to suggest. And we've been talking with the spirits manufacturers about that. And then the only other, and I think, Lucy, you know this, it's one business day. Yeah. So that's what I have. Thank you.

[Rep. Matthew Birong (Chair)]: Is that a handrail pooper or just a waggle of a pen? Sometimes

[Wendy Knight (Commissioner, Vermont Department of Liquor and Lottery)]: it depends on the size of the kiosk model. So it's either the top 50 products or the top 100. Yes. Correct. So the way a kiosk model is, sometimes it's like four shelves. We just opened a kiosk store in Killington. So it has four shelves, primarily Vermont products, and then it has some other top selling products. And they only sell to walk in customers. They don't sell to licensees. No, no, no. So you either sell to a walk in customer, right? You walk in like you and me, walking to a store, or you sell to an on premise licensee, like Matt's Whole Place bar, restaurant, door.

[Rep. Sandra "Sandy" Pinsonault (Member)]: All right.

[Rep. Matthew Birong (Chair)]: What's that? I think so. Any questions for the commissioner? I mean, we'll discuss some, like, refined language Yeah. Like this, and we have a couple of other considerations floating around as well. Now I just You're welcome. Now I just wanted to see if the committee had any questions from any of the stakeholder groups in here.

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: Any of the words on the page?

[Rep. VL Coffin IV (Member)]: Yes. It's rep Coffin. One just and I believe it was for distribute on the distribution, with the we were talking about the 5,000 barrels. And I I think it was you that was talking about it for, if for a distributor to wanna take on another a smaller brewer Mhmm. Do you have a limit you look at what they're doing, like, when they're getting close to that 5,000 barrels, or is it or do you take them ones that are smaller? So, just to add a little bit of clarity to

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: certain I now operate on a restaurant. I worked as a sales manager for a distributor. My understanding at the time, I was lucky enough to be educated by some pretty important and powerful people in the industry nationally, and the criteria that the 5,000 barrels, if I'm perceiving your question correctly, the criteria that the 5,000 barrels would allow to be generated would be not only what the brewery's presence is in the market, but their individual products as well. Those breweries internally would be able to determine which ones would be best represented in the market, and then the distributors would have a better way to do it than they do now, which is where they compare what the brewery makes against what the industry seems to be selling, and it really doesn't give understanding to the quality of the individual products that that brewery might get sent. So they might have a fantastic lager, but the distributor is going to say, We don't want it, I don't care about it, we're not bringing it to market. Make a million barrels of IPA, because we know we can sell it. And then eventually what ends up happening is it butts up against other distribution radiuses, maybe with products that are comparable, it presents challenges. And so that barrel element will really assist a lot of facets of being able to determine what the best way to go to market is, and I think it's been referenced several times these rural communities, they have a small employee basis and protecting those ones by ensuring that these products are sustainable. It's just a waterfall benefit. Does that

[Rep. Sandra "Sandy" Pinsonault (Member)]: answer your question?

[Rep. VL Coffin IV (Member)]: It does, yeah, because I was just trying to for the 5,000 barrels and that for smaller brewers for smaller brewers

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: Yeah.

[Rep. VL Coffin IV (Member)]: That even if they'll never get to that 5,000 barrels, it'll allow them to save the cost and distribute themselves

[Aaron Hill (Owner, Blackback Pub, Waterbury)]: out. A 100%, and then they can make a decision about do they want to stay with a distribution radius of x or make a jump, for lack of a better term, natural causes will determine a lot of that growth or contraction, but I think Chris is also excited to see.

[Chris Kessler (Founder, Black Flannel Brewing & Distilling Company)]: Mr. Gaffer. Sorry. No, I can tell you from our experience, we're actually not even quite at a thousand merit. So the decision for Merrill to take us on, there were a lot of different facets of that decision, what type of products that we produced that fit well within that craft portfolio, the quality of our brand in the marketplace, and it fit well at the time that they took us on with their portfolio, and it fit well with our business nation to get to a wide audience statewide. I think the 5,000 barrel limit is really more about, I think they might say a thousand or 2,000 is more appropriate, you know, as a limit, but what happens if somebody grows to 1,000 to 2,000 barrels and wants to grow to 5,000 barrels or beyond, but they don't fit within what the distributor needs, within their portfolio. So essentially, if you have a 1,000 barrel cap, you're limiting the ability for that brewery to grow. So it's just an artificial ceiling at that point. So I think the 5,000 barrel, you know, I think was it 25% of breweries in the state of Vermont and nationally are 1,000 barrels or less. So 75% are 1,000 barrels or less. But anyway, yeah, I think it's I don't know numbers quite right, but I think it's just we want to give people a small group of chance to grow, relying on the willingness of the three players in the state to take them on.

[Rep. VL Coffin IV (Member)]: I That's kind of what I was getting at, that 5,000 would allow for growth that may or may not get hit, but the growth would be there. Right.

[Rep. Matthew Birong (Chair)]: All right. Thank you. I I gotta wrap this up.

[Rep. Sandra "Sandy" Pinsonault (Member)]: I just wanted to thank Chris for this, because this is like, it's really puts it in layman's terms. We can really understand. I mean, I was a town clerk for twenty one years, and I'm looking at oh my gosh, the price of plastic lift the license went up, and then I have divide that by two, because half of that goes to this wealthy. But at least it's so much easier to try to explain to somebody the differences. I really appreciate that. Thank you.

[Rep. Matthew Birong (Chair)]: Any other questions for our guests right now until we pick this up? It'll probably early next week, we'll talk about this some more. Seeing no hands. All right. All right, committee decisions here. We did take a little while ago. Do we want to take a break for a few minutes and come back to talk about the budget letter or just kind

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: of push you on the

[Rep. Matthew Birong (Chair)]: budget letter?

[Kendra Knapik (President, Vermont Grape & Wine Council; Co-owner, Ellison Estate Vineyard)]: I'd rather take a break.

[Rep. Sandra "Sandy" Pinsonault (Member)]: Cool. Ten minutes?

[Levi Kramer (Owner, Kramer & Kin Microbrewery)]: Yep. No worries. Okay. Great. Until 03:00, and

[Rep. Matthew Birong (Chair)]: then we'll come back to talk about everybody. Reset the