Tag Archives: distribution laws

One Beer Article You Need To Read And Why, 2/3/17

Being able to sell the beer you make out of your own store front, what a novel concept.  The three-tier system is the way alcohol is made, distributed, and sold in the United States.  Under the 22nd Amendment and the federal laws that govern the sale of alcohol in this country, we have suppliers, distributors, and retailers.

Except, each state is empowered to create the details of this system as it sees fit for itself.  That means states can create exceptions to this rule.  Craft beer has grown in many states because those individual states have created rules that allow brewers to own and operate their own taprooms without having to go through a distributor or retailer and self-distribute their beer to bars and bottle shops.

North Carolina and Georgia are states that are very similar in demographics and economics.  They are mirror images of each other in many ways.  In 2015, North Carolina had 161 operating breweries producing 675.469 barrels. Georgia had 45 operating breweries producing 365,015 barrels. Per Brewers Association numbers.

The reason is very simple.  North Carolina’s laws, while still antiquated in many ways, allow breweries more flexibility in selling their own beer.  North Carolina allows for taprooms and limited self-distribution.  Currently in Georgia, if you go to a brewery, they can sell you a tour of the brewery that allows you free samples of their beer, but they cannot sell you beer.

For a couple of glorious months last year Georgia brewers could sell growlers to go from their breweries, but the Department of Revenue changed their interpretation of the law that was passed allowing those sales ending that glorious experiment.

Why is it so hard for states to pass laws that allow breweries to sell directly to customers particularly across the South?  The easy answer would be, “This is the Bible Belt and conservative legislators don’t want people being able to buy alcohol all willy-nilly.”

Many of the distribution laws currently governing some states were written in the 1970s or 1980s when there were only 5 breweries in the US.  Two of those breweries (Miller and Anheuser-Busch) were so big and powerful they didn’t (and still don’t) need distributors.  So, to keep them from purchasing distributors and selling their beer themselves, legislators passed laws to make it harder for brewers to self-distribute and leave distribution contracts.

Fast-forward to 2017 and those distributors who are now in bed with those same two large brewing companies use their power in state legislatures (many of the owners are in the legislature) to protect their businesses.  In North Carolina, for instance, craft brewers can’t get the self-distribution cap raised because they can’t get the legislation out of committee because the owner of one of the largest distributors in the state sits on the committee.

Currently, I’m reading the book “Bootleggers and Baptists” about how politician use the cover of morality to hide the amoral reasons they vote the way they do.  It has been very instructive and has illuminated many of the things I’ve seen in the past couple of years as I’ve worked on this blog.

One Beer Article You Need To Read And Why, 2/2/17

Outside of the fact that they North Carolina legislature is a mess that can barely pass a budget so that the state can function on a yearly basis, the attempts of North Carolina breweries to get rid of the self-distribution cap are interesting.

I will state up front, I believe the cap to a bad idea.  It was a law instituted at a time when there were two beer companies in the US and NC was trying to force them to use distributors even though they had the means and infrastructure not to.  Fast forward to 2017, the law is now being used by distributors to force small craft breweries to sign with distributors or artificially stunt their own growth.

The distributors are holding on to every penny they can as the world changes around them.  Do you have any idea how much 25000 barrels is?  That is the current cap.  And do you know how hard it is to deliver that much beer in a year?  By the time a brewery gets to the point where they self-distribute 25000 they are pretty much running two businesses: their brewery and a logistics and delivery business. Some brewers will gladly choose not to have that second headache.  They started brewing beer just because you wanted to brew beer, not be UPS?

Forcing breweries to sign over a percentage of their profits to a third party is wrong.  Breweries should have the choice to use a distributor or not.  However, I think the percentage that would choose to sign with a distributor won’t change significantly with the change in the law.

To me, the more fascinating thing is how the craft beer industry has matured to the point where you have different segments of the business with different wants and needs.  The concerns of Olde Mecklenburg, NoDa, or Red Oak who are all right at the 25000-barrel limit are not the same as a brewery that just started 18 months ago, and is pushing it to get to 3000 barrels per year. To them, something like the amount of state and federal excise taxes is of greater immediate importance to their growth.

The bigger breweries keep playing on our romantic ideal of the cool brewer just making beer for people to enjoy. However, as craft beer matures it must be seen in part as a business that that in 2015 accounted for over $22 billion in sales.

I worked at McColl Center for Visual Arts, an artist-in-residence program, as a fund raiser for a while.  One of the things learned about art and creativity from the artists is that the most creative and successful artists were also some of the smartest business people.  Romance and business are not mutually exclusive.

In the future, a mature craft beer business won’t castigate brewers simply because they choose the smart business move.  I keep saying and I keep coming back to this:  The liquid in the glass is all that matters. As craft beer grows bigger and matures that becomes more important to remember.

Five Beer Articles You Need To Read And Why, 6/15/16

There was a bounty of good articles today.  Here are the five that I like best.

Five Beer Articles You Need To Read And Why, 2/18/16

A pattern is emerging.  American craft beer and American beer in general is going through a lot of changes.  The big beer companies are scared so they do what the overly rich do when they see a threat, the purchase and/or coopt it. At the state level, most states still have Prohibition era or post-Prohibition alcohol laws that seek to keep people from drinking alcohol instead of making sure people are able to enjoy alcohol legally and safely.

Five Beer Articles You Need To Read And Why, 12/10/15

It’s Thursday and I have a nice Earl Grey in my cup and just finished my bagel.  Let’s get into the Five Articles.