Pay-To-Play Infects Chicago Beer Market,

Crain's Investigation Finds

November 22, 2010

By James Ylisela Jr. and David Sterrett and Kate MacArthur, with reporting from the Better Government Association.

The Wit Hotel in the Loop is a trendy hangout for the after-work and weekend crowd. Clubbers
dressed to the nines party year-round on its 7,000-square-foot rooftop and, 27 stories below, in the
State & Lake bar off the lobby.

The boutique hotel also is on the front line of Chicago's brutal—and at times illicit—battle over beer.

When the Wit opened in 2009, bar managers stocked State & Lake's 16 taps with an impressive
selection of microbrews, including Stone, Anderson Valley, Two Brothers and Metropolitan, a new
hometown brand.

Then, in June, most of the craft beers from smaller distributors disappeared,, replaced by 11
specialty brands carried by Chicago Beverage Systems LLC, a powerhouse distributor of Miller,
Coors and other labels.

“We don't know exactly what went down, but we used to have beer there that was selling well and
now we don't,” Tracy Hurst, co-owner of Metropolitan Brewing, a microbrewery in Ravenswood, said
at the time.

UNDERCURRENTS IN BEER WAR

What went down at the Wit is but one example of the fierce, behind-the-scenes struggle for
dominance in Chicago's $500-million-a-year beer market. The city is one of the last contested
territories for the nation's two beer giants—Anheuser-Busch InBev N.V. and MillerCoors LLC, an
affiliate of SABMiller PLC—which wage a proxy war through licensed distributors. The major
wholesalers are movers and shakers themselves: the billionaire Reyes family; Yusef and Jonathan
Jackson, sons of the Rev. Jesse Jackson; and, as of September, Warren Buffett's “favorite banker,”
Byron Trott.

' Brewers call Chicago a whores' market.'

— Deb Carey, co-owner,
New Glarus Brewing Co.

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Independent brewers say the brand-name distributors, with deep pockets and abundant supply,
often resort to pay-to-play business practices that mirror the worst of Chicago politics. Sources say
the big brewers and their wholesalers keep out the independents by offering cash, new tap systems,
free beer and other incentives to tavern owners and retailers in exchange for taps or shelf space for
mainstream brands. Some bar owners have set up separate marketing companies to take in the
cash, a monthslong Crain's investigation has found, while their taverns benefit from lower prices and
“special” discounts.

There's just one problem: Federal and state laws forbid producers and distributors from offering
money, loans or anything else “of value” to retailers to freeze out the competition, with such
exceptions as signs or ad materials under certain dollar limits. It's also unlawful for bars to accept
these gifts.

Patrons enjoy a few cold ones Thursday night at a North Side bar.

The fight between Bud and Miller helps consumers by keeping beer prices in Chicago lower than the
national average. That's good news for fans of Miller Lite and Bud Light, which together soak up half
of the city's beer sales. But pay-to-play also means fewer craft beers poured from Chicago bar
taps—the most coveted spot in any tavern—even as their national popularity grows. Consumers
drink roughly twice as much craft beer per capita in Spokane, Wash.; Charlotte, N.C., and Des
Moines as in Chicago.

The competition for tap space forces many bars to heavily favor the Anheuser-Busch distributors
and the craft beers they offer, or pick the MillerCoors distributors and their craft labels.

For fledgling, cash-strapped brewers, the practice thus can force a difficult choice: dig deep into their
pockets and play along by giving distributors discount beer or freebies that can be passed along to

2
bar owners—or effectively be shut out of the taps of the city's 3,374 businesses that serve alcohol.
(With the exception of brewers distributing their own products, only middlemen between
manufacturers and retailers can sell beer, wine and liquor at wholesale in Chicago and the rest of
Illinois, a law that dates to the repeal of Prohibition in 1933.)

“Brewers call Chicago a whores' market,” says Deb Carey, co-owner of New Glarus Brewing Co., of
New Glarus, Wis., which sold draft beer in Chicago for two years in the mid-1990s. New Glarus
pulled out, Ms. Carey says, because it didn't want to participate in illegal business practices such as
giving away beer to get bars to carry its products.

Ms. Carey says Illinoisans constantly are urging her to sell her Spotted Cow ale here again, but
she's not interested. “Everyone has a hand out and everyone wants some cash, (free) beer or a
discount,” she says. “As far as I'm concerned, it's not worth the graft and hassle.”

“Small brewers can't afford to pay to play,” she adds. “I really blame the big domestic brewers for
creating this mess.”

Jerry Glunz, general manager of Lincoln-wood-based Louis Glunz Beer Inc., says he can't afford to
pay, either. Mr. Glunz, who distributes such craft beers as Dogfish Head and Three Floyds, says he
has lost tap handles at bars because a competitor was willing to pay $10,000 per handle for only six
months.

“It really frustrates our sales people because we don't have the money to throw around,” Mr. Glunz
says. “You can't get involved with it because once you pay for a tap, the next guy will just outbid you,
and then it becomes a vicious bidding war.”

' We went around to bars and they said, "Great beer. How many
free cases can you give me?" '
— Jason Ebel, co-founder,
Two Brothers Brewing Co.

Brewers sometimes get directly involved. A former senior brewery executive says beer producers
have paid for bar equipment and repairs, passing payments through their distributors as marketing
reimbursement. “I've seen the checks cut,” he says. “Eight or nine times, I saw the parent company
stroke the money.”

A spokesman for MillerCoors says the brewer takes “pride in doing our business the right way.” He
adds: “Pay-to-play practices are illegal and are not accepted practices or behavior by MillerCoors or
its distribution network. All MillerCoors employees are trained through ethics training annually. These
practices are called out as illegal.”

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In a statement, Anheuser-Busch says it “always respects and abides by the laws in all jurisdictions
where it does business and believes its wholesalers do so as well.”

‘COMES WITH THE TERRITORY'

James Doney, president of Chicago Beverage, a subsidiary of family-owned Reyes Holdings LLC,
says his salesforce has never offered cash or free beer to bars. “We train our people hard,” he says.
“We pay them good money, and they make money by picking up new business. But we draw the line
at anything illegal.”

Taverns and restaurants often “ask for things, but we always follow the laws,” Mr. Doney says. “We
spend a lot of money on training and attorneys, and we make all of our people sign ethics
guidelines.”

Mr. Doney says smaller distributors complain about Chicago Beverage and Budweiser wholesalers
River North Sales & Service LLC and City Beverage-Illinois simply because they're big. “It comes
with the territory,” he says. “It's just like how everyone doesn't like the Yankees.”

The extent of pay-to-play in the Chicago beer market is hard to quantify. Over five months, Crain's
talked with dozens of people in the business, including brewers, distributors, bar owners and
managers, as well as former employees of bars and bar marketing companies. But they often balked
at talking on the record, fearing it would jeopardize their jobs or professional relationships.

As one bar owner who had worked for a tavern marketing company puts it: “If somebody did (talk),
they'd have a death wish. They'd never work in a bar again.”

Entrepreneurs in Action: Half Acre Beer

Chicago is a beer drinker's town - but not much of a beer maker's town. Until a few years ago the city was home to
just one commercial brewery. Gabriel Magliaro is out to change that with Half Acre Beer, his North Side startup.

Privately, they told remarkably similar stories of taverns charging brewers and distributors thousands
of dollars for tap lines, ringing up phantom parties and other events as “marketing” revenue and
accepting new tap systems or other physical improvements at no charge.

In retailing, paying stores to carry goods and underwriting marketing costs are common practices.
Food and consumer-products makers also can favor one outlet over another. But because beer is
regulated and taxed, the rules are different. Bars can get volume discounts on products they
purchase, for example, but they cannot receive discounts as an inducement to carry a brand of beer,
says Richard Haymaker, chief legal counsel for the Illinois Liquor Control Commission, the state
agency charged with enforcing the law that prohibits cash payments or freebies to taverns.

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INDEPENDENTS' PLAY

Jason Ebel blames bar owners as much as big distributors for the graft. He founded Two Brothers
Brewing Co. in Warrenville with his brother and father in 1997. Two years later, when they couldn't
persuade a major distributor to carry their beer in Chicago, they set up one of their own, Windy City
Distribution Co.

Windy City has become a favorite of independent brewers and supplied Ms. Hurst's Metropolitan
beer and many of the other small-batch beers initially offered at State & Lake.

“When we started Windy City, it was a means to an end, because there wasn't a distributor in
Chicago that wanted to touch craft beer,” Mr. Ebel says. “We went around to bars and they said,
„Great beer. How many free cases can you give me?' We just had to walk out of those accounts, set
a price and stick to it. And nobody asks us that anymore.”

STORY CONTINUES BELOW

The do-it-yourself Ebel brothers

Jim and Jason Ebel are in a privileged position in the Chicago beer market.
The brothers, along with their father, own Two Brothers Brewing Co. From the same Warrenville address, they run a
craft beer wholesaler, Windy City Distribution Co., owned by their wives.

The dual businesses give them an edge over other independent brewers, who have to woo a big wholesaler to
distribute their products to bars and retailers. In fact, Windy City has become the middleman of choice for many small
breweries, including Anderson Valley, Metropolitan and Stone.

Generally, federal and state laws forbid brewers from owning distribution companies. But Illinois and 33 other states
exempt small brewers who deliver their own output within their home state.

The brothers — Jim is a lawyer who manages the business and Jason focuses on brewing — ran into a problem
when they started distributing beer for others. At first, they owned both companies, but the Illinois Liquor Control
Commission balked at extending their license until the microbrewery created the separate firm.

Now the brothers face another regulatory hurdle. When Anheuser-Busch InBev N.V. tried to buy City Beverage-
Illinois, one of the brewer's biggest local distributors, the state blocked the deal. A U.S. District Court judge
subsequently banned all brewers from self-distributing but delayed enforcement until March. If lawmakers don't
rewrite the state's beer laws by then, Two Brothers and fellow craft brewers will have to find other distributors.

Kate MacArthur

5
Metropolitan's Ms. Hurst was among the few to speak out. When her beer got the boot at the Wit,
she posted the news on Metropolitan's Facebook page, charging that Chicago Beverage had
“arranged” a contract with the Wit to carry the company's beers and was “offering $200 incentives to
their (sales) reps to steal tap handles.”

Ms. Hurst says she based her post on what a Windy City sales rep told her. It drew comments from
friends and colleagues who spread the news on Twitter and on their personal blogs. One
Metropolitan employee, writing on her own blog, called for boycotting Chicago Beverage Systems'
beers and the State & Lake bar. “Keep going to these places,” one Facebook post read. “Order a
non-beer and tell their manager you'll not buy beer as long as they play the CBS game.”

Mr. Doney denies the allegations and says the tap change at State & Lake was just business. “This
happens all the time in Chicago, and small brewers lose accounts when someone else offers a
deal,” he says. “We had been targeting that account for a year-and-a-half. We spent a lot of time
making presentations on how they could sell more beer, and I think they are happy with how much
beer they are selling now.”

Eric Adelman, director of purchasing at State & Lake, likewise says there was nothing underhanded
about the deal, though he won't reveal the details. He says he switched beers because Chicago
Beverage offered better terms. Mr. Adelman is always open to considering new beers, he adds: “We
won't get rid of Chicago Beverage, but we might be able to throw in a few more craft beers.”

In fact, Mr. Adelman says, Chicago Beverage initially bid for all 16 taps, but he told them he needed
some “wiggle room” for beers from others. In August, Metropolitan's Krankshaft Kolsch beer
reappeared on tap at State & Lake.

Ms. Hurst has no plans to file a formal complaint with the Illinois Liquor Control Commission. “We
have an independent spirit,” she says. “We're not the type to go running to the authorities.”

Complaints are rare, and few result in agency action. In the 10 years through last May, the liquor
commission had issued 406 administrative fines for “of value” violations—state-wide. Rock Island led
the way with 52 violations, followed by 24 in Galesburg and 23 in Moline. Chicago's total for the
decade? Nine.

In one Chicago case, Snickers Bar in River North was fined $500 in 2009 for accepting a free keg
refrigerator from River North Sales & Service, according to commission documents. In another case,
the documents show, Fireside Restaurant & Lounge in Edgewater paid a $500 fine for accepting a
free kayak from a distributor to use in a drawing in which patrons had to purchase a beer to get a
raffle ticket.

“Most retailers and distributors know they aren't supposed to do this,” Mr. Haymaker says. “It's
possible that Chicago retailers are sophisticated at hiding it or distributors aren't filing complaints

6
against each other, or it may not be happening at all. Whatever the case, we are committed to
investigating any complaint on the subject.”

Beer distributors also are policed by the U.S. Treasury Department's Alcohol and Tobacco Tax and
Trade Bureau, which investigates alleged violations of the Federal Alcohol Administration Act. The
law also prohibits brewers and distributors from owning any retail outlets that sell their products. In
the city, a third watchdog, the Chicago Liquor Commission, grants liquor licenses to retailers,
enforces municipal codes and investigates underage drinking and public-nuisance complaints.

LITTLE ENFORCEMENT

John Hall, president of Chicago-based Goose Island Brewing Co., thinks authorities have higher
priorities than investigating pay-to-play in Chicago bars. “When you think about all the issues in this
state and city, I don't think people want to spend more money enforcing this when we don't have
enough money even for education,” he says.

Even if more brewers complained, the state commission lacks the muscle to enforce the law, Crain's
has found. The agency employs 24 investigators to monitor more than 28,000 retail locations selling
alcohol in Illinois.

Illinois is one of 32 states enforcing a three-tiered regulatory system, which requires major
breweries, wineries and distilleries to sell their products through wholesalers, not directly to retailers.
At least a dozen distributors are licensed to operate in Chicago. But just three control two-thirds of
the market: Chicago Beverage, part of the Reyes family's $12-billion-a-year holdings; River North,
co-owned by Yusef and Jonathan Jackson since 1998, and City Beverage-Illinois, recently acquired
by Mr. Trott, a former Goldman Sachs Group Inc. investment banker, through his Chicago-based
BDT Capital LLC. (Anheuser-Busch retains a 30% stake.)

City Beverage has “employed very strict ethics policies which our employees are subject to and
embrace; this includes compliance with all regulatory and legal requirements,” says Kathleen
McCann, senior vice-president of Detroit-based Soave Enterprises Inc., which sold its majority
interest in the wholesaler to BDT in September. “We work very hard to compete fairly without any
violations of the liquor laws in place. We win on our products and service.” Mr. Trott did not respond
to interview requests.

STORY CONTINUES BELOW

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CHICAGO'S BEER BARONS

River North Sales: Anheuser-Busch distributor

As CEO and majority owner of Budweiser distributor River North Sales & Service LLC, Yusef Jackson controls one of
the most coveted markets for the nation's largest brewer: The Chicago-based company's territory takes in Wrigley
Field, Navy Pier and the United Center. Industry executives estimate River North's annual sales at $30 million to $40
million, with volume of as much as 4 million cases of beer a year.

Still, the distributorship is under the gun. Thanks largely to Budweiser, Anheuser-Busch
commands almost half the beer market in the U.S., but in Chicago it's a distant second,
with a roughly 25% share, behind MillerCoors.

Mr. Jackson, 40, declines to comment.

His father, the Rev. Jesse Jackson, was once one of Anheuser-Busch's most nettlesome
foes. In the early 1980s, he launched a "Bud's a Dud" boycott to protest the dearth of black
distributors for the brewing giant.

The tables turned in 1997, when Yusef Jackson met August Busch IV, the future CEO of
St. Louis-based Anheuser-Busch, at a party hosted by supermarket tycoon Ron Burkle. That meeting paved the way
for Yusef and his older brother Jonathan Jackson to acquire River North the next year.

A self-described entrepreneur, Yusef Jackson has tried over the years to add media and entertainment mogul to his
résumé. He led a failed bid to buy the Chicago Sun-Times for a reported $850 million, and his Integrity Multimedia
Co. attempted to revive celebrity gossip magazine Radar.

Jonathan Jackson, 43, a director of his father's Rainbow Push Coalition, is minority owner of River North. He also is
said to invest in and manage properties for another family-owned company called River North Properties. The eldest
son, Illinois Congressman Jesse Jackson Jr., has no stake in the beer distributorship.

Kate MacArthur

City Beverage: Anheuser-Busch distributor

Byron Trott was in the right place at the right time with his recent acquisition of City Beverage-Illinois, the largest
Budweiser distributor in the state.

City Beverage's parent, Soave Distributing Inc., tried to sell the company late last year to
the domestic brewing unit of Anheuser-Busch InBev N.V., which already had a 30%
interest. But the Illinois Liquor Control Commission blocked the deal in March as a way to
maintain the state's three-tier beer industry. (Under state law, major producers must sell
beer to licensed distributors, which, in turn, are the only ones allowed to sell to bars and
other retailers.)

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A U.S. District Court judge ruled in favor of Anheuser-Busch in September, saying the law discriminated against out-
of-state brewers. But the judge denied brewers the ability to self-distribute until March to allow the Illinois Legislature
to rewrite the law.

Having committed to a sale, Soave's management felt forced to find an alternative buyer. Within weeks, it chose
Chicago-based BDT Capital Partners LLC. The private investment firm, which is run by Mr. Trott, a former Goldman
Sachs Group Inc. executive and investment adviser to Warren Buffett, bought the 70% stake Sept. 30.

Mr. Trott, who was not involved in the local beer industry before, is keeping Cecil Troutwine, City Beverage's
president, and his management team intact, industry executives say. Mr. Troutwine, 67, who got into beer
wholesaling in 1983 with an Anheuser-Busch distributorship in Blytheville, Ark., didn't return repeated calls, while
Soave referred calls to BDT Capital. BDT declines to comment.

It's no wonder Anheuser-Busch wanted City Beverage all to itself. With operations in Chicago, Arlington Heights,
Markham and Bloomington, the company controls the most-populated territory in Illinois — 10,000 square miles,
running from the Wisconsin state line to as far south as Lincoln — and ships nearly 19 million cases of beer a year.

Kate MacArthur

Chicago Beverage: MillerCoors distributor

Brothers Chris and Jude Reyes were barely old enough to legally drink when they and their father, Joseph, bought a
Schlitz distributorship in South Carolina in 1976.

Three years later, they added a Chicago distributor to create Chicago Beverage Systems LLC. Since then,
Rosemont-based Reyes Beverage Group has grown through acquisitions to 13 warehouses in nine major markets
that deliver more than 74 million cases of beer a year to more than 26,000 retail and bar customers.

Chicago Beverage is the No. 1 distributor of MillerCoors beers in the city and the largest
beer wholesaler in the Midwest. The company also supplies a variety of import and craft
beers, including Corona, Guinness, Heineken and Sierra Nevada, from a 298,000-square-
foot warehouse in West Garfield Park.

President James Doney, 55, estimates that the distributor sells just under 9 million cases
of beer to 2,500 customers, putting its Chicago-area marketshare at 10%.

Despite its size, Chicago Beverage isn't the biggest subsidiary of family-owned Reyes
Holdings LLC, Chicago's second-largest privately held company. Even larger are Reinhart
FoodService LLC, a LaCrosse, Wis.-based food and kitchen-equipment supplier and one
of Subway's largest domestic distributors, and Rosemont-based Martin-Brower Co., the biggest distributor in the
Americas for McDonald's Corp.

Reyes Holdings Co-Chairman Chris Reyes, 56, is among the most networked executives in Chicago, having served
on the board of Allstate Corp., Fortune Brands Inc., General Dynamics Corp., Tribune Co. and Wintrust Financial
Corp.

9
Jude Reyes, 55, the other co-chairman, is active in health care. He's board chairman of the Rehabilitation Institute of
Chicago and a director for NorthShore University HealthSystem, as well as the Children's Hospital Foundation of
Washington. Famously press shy, they decline to comment.

Chairman emeritus Joseph Reyes was a naval aviator in the Korean War who worked as an engineer before founding
his own companies.

Kate MacArthur

River North's Yusef Jackson declined to be interviewed for this article.

River North and City Beverage provide Budweiser and its many related brands, including Bud Light,
Michelob and Busch, as well as Labatt's, Corona and Rolling Rock. Chicago Beverage distributes
the Miller and Coors brands, including Miller Lite, along with Heineken, Corona and others.

While Budweiser is the king of beers across the U.S., with about a 50% marketshare, Miller reigns in
Chicago. MillerCoors and its many brands command half of the Chicago beer market. Anheuser-
Busch brands come in a distant second, with about a quarter, followed by various imports and
independents, such as Old Style.

The competition keeps prices low; the average price for a case of beer in the Chicago metro area is
$17.10, less than the $19.13 nationwide average, according to New York-based market trackers
Nielsen Co. Average craft beer prices are $30.51 per case nationally and $27.85 in Chicago.

As craft beers have picked up—sales shot up 16% last year, according to Nielsen—distributors have
added independent labels to their trucks. Chicago Beverage now carries Sam Adams, New Belgium
and local favorite Half-Acre, among other craft beers. River North and City Beverage distribute
popular Goose Island in its many varieties, as well as Fuller, Brown Ale and others. Nonetheless, the
upstarts claim only 5.3% of the Chicago market vs. 6.3% nationally and even more in many other big
cities.

Pay-to-play takes many forms. The most common approach, says a former sales manager for a
national brewer who asked not to be named, is for wholesalers to give away beer or pay cash for tap
lines.

Some bars and restaurants tally “of value” incentives from distributors as revenue from other
sources, former bar owners and managers tell Crain's. A bar, for example, might “swipe” a
distributor's credit card for food or a Super Bowl party without ever providing those services. Brewers
and distributors might provide retailers with menus, T-shirts or other promotional items. These
practices are also prohibited under Illinois law.

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TAP CHARGES

A craft brewer tells Crain's that Rockit Bar & Grill, with locations near Wrigley Field and in River
North, wanted to charge him $3,000 to put his beer on tap.

Arturo Gomez, president of Chicago-based Rockit Ranch Productions, owner of Rockit,

Underground and Sunda bars, insists his company has never engaged in pay-to-play practices,
including accepting money for taps. Mr. Gomez says he focuses on offering the beers his customers
want. “We always look at everything in terms of the consumer and make sure we have as well-
rounded a menu as humanly possible.”

Mr. Gomez says his bars maintain good relationships with MillerCoors and Budweiser dealers alike.
The distributors don't offer any special deals other than the usual promotions offered to all bars, he
says, adding that accounts that do well usually receive more promotions, but nothing illegal. Five of
the six beers on tap at Rockit come from River North.

Budweiser and other River North products also rule the taps at North Side bars McGee's,
Wrightwood Tap, Durkin's, Duffy's and Redmond's, all managed by Bar 1 Events. A former Bar 1
employee says the company accepts payments from distributors for sports packages, contests and
other events in return for its loyalty. The president of Bar 1 is Thomas Piazza, who owns the bars
with his brother, Philip.

The Piazza brothers and Bar 1's other directors did not respond to questions after Crain's submitted
them by e-mail at their request.

Similarly, a former employee of Four Corners Tavern Group tells Crain's that Chicago Beverage
agreed to pay Four Corners at least $30,000 to get tap space in its bars and to keep Budweiser out
for a year. Four Corners operates the Brownstone, West End, Schoolyard, Gaslight, Sidebar,
Kirkwood, Benchmark and Crossing bars on Chicago's North and Near West sides. Four Corners is
an Illinois corporation owned by Matthew Menna, and Mr. Menna is listed as an officer of several of
the bars, state records show.

Chicago Beverage-distributed beers, including Miller Lite, Coors and various craft brands, dominate
the spouts at the Four Corners bars; only one of the bars offers Bud Light on draft.

In addition to the cash, the bars received numerous free kegs throughout the year for fictitious
marketing events, the former employee says, adding that he personally “swiped” Chicago
Beverage's credit card on several occasions for the payments.

Tim Ryll, one of four directors at Four Corners, rejects those assertions. “Chicago Beverage has
brands that are incredibly popular,” he says. “Every vendor knows we're going to do what's best for

11
our customers. You say the word „free' anywhere in Chicago and you're going to have the liquor
commission on you.”

Mr. Doney of Chicago Beverage calls Four Taverns a “very good customer” and says the allegations
are false.

BUY FIVE, GET ONE

Sometimes the major brewers get directly involved. A former employee at Bar Louie, a national
chain with three locations in Chicago, tells Crain's that both MillerCoors and Anheuser-Busch paid
$1,000 per tap handle annually and threw in a free keg for every five sold. The former employee,
who asked not to be named, says Bar Louie ran the payments through a third-party marketing
company set up by its owners.

Until June, Bar Louie was owned by local restaurateurs Roger Greenfield and Theodore Kasemir
through their Restaurant Development Group. The company filed for bankruptcy protection in 2008.
Court documents describe an affiliated company, Restaurant Marketing Inc., as “a corporation
owned equally by Greenfield and Kasemir's wives, Jennifer Greenfield and Lisa Kasemir née Wolfe,
but allegedly controlled by Greenfield and Kasemir.”

The Bar Louie chain was sold to Sun Capital Partners Inc., a Boca Raton, Fla.-based private-equity
firm that owns the Smokey Bones Bar & Fire Grill chain.

Numerous calls to Messrs. Greenfield and Kasemir's company were not returned. The brewers deny
making payments to Bar Louie.

Mike Roper, who owns Michael & Louise's Hopleaf Bar in Andersonville, says large brewers and
bars have a strong incentive to keep pay-to-play alive. The bars get free beer and lower costs while
the brewers gain access to lucrative outlets. Though Hopleaf is one of the city's best-known
gastropubs, featuring 34 regional microbrews and specialty beers from Belgium on draft, a bar in
Wrigleyville will sell more draft beer on a Chicago Cubs game day than Hopleaf will sell in a month,
he says.

“Craft brewers have to compete in a marketplace that is not completely fair, and it's like athletes
having to compete against someone on steroids,” says Mr. Roper, who has been working in Chicago
bars since 1982 and says he hasn't engaged in pay-to-play. “Being with Bud or Miller gives craft
beers a better chance to get into popular bars or chain stores.” The larger distributors have more
clout, but they also can drag craft breweries into the pay-to-play world, he adds.

Greg Koch, CEO of Escondido, Calif.-based Stone Brewing Co., says Chicago is thoroughly corrupt.
Stone was selling its beers in 34 states and in such big cities as New York, Los Angeles, Houston,
Boston and Denver before deciding to give Chicago a try in April.

12
“We waited for several years to go to Chicago because we knew if we didn't want to pay to play, we
would have to wait until our reputation was strong enough to avoid it,” says Mr. Koch, whose beer
has become a favorite among local craft beer aficionados.

After selling in Chicago for six months, he says the city deserves its reputation, but adds that he'll
stay in the market. “Chicago is becoming an absolutely great beer town,” he says. “We're doing very
well.” But Mr. Koch adds that bars and liquor stores ask for money, free beer or illegal discounts “all
of the time.”

“This type of stuff goes on almost every other place,” he says, “but not to the degree that it happens
in Chicago. It seems to be part of the city's DNA.”

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