Seven Stills Brewery and Distillery is closing two of its facilities in the face of a 90-day suspension of their brewery and distillery license by the California Bureau of Alcoholic Beverage Control (ABC) over some 60 documented violations of tied-house laws.
Tied-house laws, which exist in most states, create a legal separation between alcohol manufacturers, wholesalers, and retailers/bars. The laws are meant to protect small businesses like craft brewers from being pushed out of a market by larger corporations that can "buy" their way into placement in a retail establishment, and prevent bars from being forced or bribed to carry a particular beer. The laws also have various regulations around how a brewery can market themselves, and the types of promotional gifts that can be given to a bar like neon signs and such. While Seven Stills has declined to go into details about the nature of the violations they got dinged for by the ABC, founder Tim Obert says in a statement that the brewery "has quite simply been caught and is having to pay the price for their mistakes."
Seven Stills is a unique vertical company for San Francisco, and has been from the start. Originally a backyard brewing operation started in 2012 by two UC Davis grads, Obert and Clint Potter, Seven Stills has become an ambitious and multi-faceted operation over the last several years, most notably with its late 2019 expansion to a huge new flagship brewery and distillery on Hooper Street in Mission Bay, which also serves as a taproom and restaurant. The company makes whiskey, gin, and vodka using the byproducts of craft beer, while also creating some unique craft beers in their own right.
It's unclear whether the tied-house violations had something to do with the fact that Seven Stills operates on all three tiers of the California system — brewer/distiller, wholesaler, and retailer — or if it was primarily stepping over the line when it was promoting and selling its products to other businesses.
Obert doesn't get into details, but tellingly in his release he warns other breweries that "it is illegal to provide exterior signage" to a retailer, though it is legal to give them an indoor neon sign. He also says "It is illegal for a brewery to post a laudatory comment about a bar on social media," and "It is legal for a brewery to provide promotional materials with a fair market value of $3 or less to a consumer at an event at a bar, but the brewery cannot provide these materials directly to the consumer."
Seven Stills will be able to keep its retail operation running in Mission Bay, and it's keeping open its Outer Sunset taproom as well. But, Obert says, the 90-day brewery suspension is "a huge hit to our business," and the company will now be putting its smaller Bayview brewing facility on the market, and closing the taproom it just opened in the middle of last year on 24th Street, in the former Almanac space.
Obert does say he's grateful to the ABC for their handling of the case — the company was given the option of a $10,000-per-violation fine instead of the suspension, which would have come to $600,000 and likely would have put them out business. Also, the ABC is allowing them to keep the new Hooper Street brewpub and restaurant open — they're open today, for instance, starting at noon and showing the Super Bowl both on an outdoor TV and on a 100+-inch projection TV inside.
Update: The Chronicle adds to the story saying that some of Seven Stills' ABC violations were not directly related to tied-house laws — for instance, they were dinged for offering free beer to customers who signed up for their email list. There's also some gray areas around social media, and how the original laws couldn't really have imagined the competitive craft-beer marketplace we have today in which Instagram and Twitter are vital for self-promotion — the law makes tweets from a brewery about where to buy their product illegal, for instance. The 90-day suspension will apply only to their original Bayview production facility, and won't begin until early March — before which Seven Stills is trying to produce as much beer and whiskey as possible to supply the Mission Bay location during the suspension.