Breckenridge Brewery hopes to expand the law and its business

Breckenridge Brewery is running out of time.

Two years ago, the brewpub was making 31,000 barrels of beer annually — which was more than it had produced in two decades of Colorado history. But by the end of 2012, thanks to the explosive growth of the craft-beer industry nationwide and demand for Breckenridge beers in particular, the brewery will have made nearly twice that much in a year.

That's good news for the company, but it also pushes Breckenridge right up against a state law that prohibits brewpubs — businesses that operate breweries and restaurants — from making more than 60,000 barrels of beer per year; other big breweries in Colorado are either classified as manufacturers or wholesalers. To keep up with demand for Avalanche Ale, Lucky U IPA, Vanilla Porter and Breckenridge's other beers — which could reach 80,000 barrels in 2012 — the brewery realized earlier this year that it would either need to change the law, build a second brewery in another state, or figure out a way to restructure its operations.

Breckenridge fans at the Kalamath location raise their glasses to more beer capacity.
Mark Manger
Breckenridge fans at the Kalamath location raise their glasses to more beer capacity.

The first option failed in the Colorado Legislature, and the second is tough to swallow for a Colorado-based company. That left Breckenridge focused on the third.

Last Friday, the Colorado Department of Revenue approved a complicated plan that would allow Breckenridge to continue to grow in this state by using a provision known as an "alternating proprietorship." But the details of that plan are unwieldy, so the company still plans to fight the brewpub cap in the legislature, even though roadblocks there last spring left brewpub management confused and disappointed.

"We encountered unexpected and surprising opposition, opposition that I am still trying to make sense of," says Ed Cerkovnik, the president of Breckenridge-Wynkoop LLC. "It got caught up in when we take this back to legislators, we are going to do our homework and put ourselves in the best position to be successful."

Breckenridge-Wynkoop certainly knows about success. In January 2011, Wynkoop Brewing, a mini-empire that got its start with the Wynkoop Brewing Company, the oldest brewpub in the state, and Breckenridge, which has the third-oldest brewpub, merged their financial operations under one umbrella company. Together they now own four operating brewpubs and nine restaurants, most of them beer-themed.

In April, that holding company floated a bill in the state legislature that would have increased the brewpub cap to 300,000 barrels per year. It seemed like a shoo-in. After all, the homegrown craft-beer industry generated $446 million last year and creates 5,800 jobs for the state economy, according to a recent study by the Colorado Brewers Guild. And one of the Wynkoop's founders just happens to be governor of Colorado today.

The company was so optimistic, in fact, that it began moving forward on a plan to build a new, 125,000-square-foot brewery, tasting room, restaurant and visitors' center on ten acres in the metro area. The estimated $15 million project would have enabled the company to make 100,000 barrels of beer per year from the outset. But Breckenridge-Wynkoop didn't count on the level of opposition it found at the Statehouse. Not only did megabrewers MillerCoors and Anheuser-Busch line up against the bill, but Breckenridge also faced resistance from a local restaurant group and, surprisingly, from two craft-beer colleagues, Odell Brewing and New Belgium, which is the largest craft brewer in Colorado and the third-largest in the country.

"We felt that it would be better to craft legislation that would be accurate and work for more members rather than serve one member," New Belgium owner Kim Jordan says via e-mail. "I am happy to work on legislation for next year that would allow brewpubs and breweries to have both brewpub and brewery licenses. Or that would do away with the brewpub/brewery designations all together."

Removing the cap would "give the brewpubs an advantage that New Belgium or Budweiser or MillerCoors don't have," adds Steve Findley, director of the Colorado Beer Distributors Association. "To change it all just for one brewpub would be unfair. We love Breckenridge; we distribute their beer. But when you hit 60,000, you are not a small brewpub anymore."

The opposition shocked Todd Usry, the operations manager who's worked for Breckenridge since 1991. "It's hard for me to even talk about it," he says. "We are not out to take over the brewpub business in Colorado, by any stretch. You'd be hard-pressed to find a brewery in the state that has been nicer, or more about community, than us."

The House Finance Committee passed the Breckenridge bill by a 13-0 vote on April 19. But the House never brought it to a full vote — possibly because of pressure from the distributors and the other brewers, Usry suggests — and the bill died at the end of the session. As a result, an angry Cerkovnik said that Breckenridge would have to scrap its plans for a new Colorado brewery and move some of its operations — and plenty of jobs — out of state. The company quickly backed away from that position, however, and announced that it would pursue other options.

On June 1, Breckenridge-Wynkoop did just that, quietly submitting a proposal to the Department of Revenue's liquor enforcement division. Here's how it would work:

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This is good news. Demand for alcohol is up and with all the wonderful things alcohol brings to society, what we really need right now is much much more!