Beer

The Crony Capitalists of Craft Beer

How independent breweries are mooching off state subsidies.

|

"Virginia is for beer lovers," Governor Terry McAuliffe (D) proclaimed at a recent press conference. He was obviously not referring to a lawsuit challenging the state's use of an antiquated "habitual drunkard" law to jail indigent citizens without due process, but rather to $3 million in corporate welfare from the state's Commonwealth Opportunity Fund that he approved to lure Bend, Oregon based Deschutes Brewing to Roanoke for the construction of their first East Coast brewery.

For those of us who follow the beer industry, the announcement stirred feelings of déjà vu. It was less than two years ago that McAuliffe was tapping a keg from San Diego's Stone Brewing and putting Virginia taxpayers on the hook for a $5 million grant to bring Stone to Richmond. That was in addition to a $1.5 million economic development grant, a $500,000 sustainability grant, and $31 million in bonds from the city to build a brewery and bistro.

North Carolina has been similarly profligate, ponying up $13 million for New Belgium and just under $5 million for Sierra Nevada to build new facilities in Asheville. Lately it seems that any large craft brewery in the western parts of the United States can successfully lobby for government handouts in the east. 

And it's not just the United States. When Stone Brewing announced that it had chosen Berlin to be the home of its first European brewery, I suspected that they were exporting more than just hoppy IPAs to the German market. Might they be bringing American-style crony capitalism with them as well? My colleagues at Mixology magazine in Berlin filed a freedom of information request and confirmed that, sure enough, the city has promised 2.3 million euros to the company if employment and investment goals were met. Stone will presumably soon lay claim to the dubious honor of being the first craft brewery to receive government subsidies on two continents.

Even the brewers one might least expect it from have accepted public assistance. Take BrewDog, the Scottish brewery that relentlessly promotes its punk credentials at every turn, from the name of their flagship "Punk IPA" to the extremely low-alcohol "Nanny State" beer they cheekily released in response to complaints that their strong beers encouraged excessive drinking. "The independent, anti-authoritarian spirit, which is punk's greatest legacy, needs to be ingrained into your entire business approach," advises BrewDog co-founder James Watt in his recent book Business for Punks, which features chapter titles like "Make banks your bitch" and "Don't waste time on bullshit business plans."

"Take a DIY approach and learn the skills you need to survive and build your business," Watt continues. "Don't depend on anyone for anything." But elsewhere in the book, Watt advises hitting up local governments for money:

As well as the obvious places, there are several other ways to get more cash, legally of course. There are very often loans, soft loans, grants, job-creation assistance, tax relief and a myriad of other types of funding available from various public bodies, business development agencies, local authorities and government organizations. This type of funding is often very tough to get and intrinsically linked to job creation but given its potential to supercharge your growth it is definitely worth the effort. Over the years we have to become experts in maximizing the amount of grant support we could get into our business. Indeed, BrewDog has only been able to grow at the speed we have due to the amazing support we have received in the form of grant funding.

Approaching government development agencies cap in hand with promises to be a job creator seems likely to clash with most conceptions of the punk identity, which may be one reason the subject didn't get its own chapter heading. (BrewDog's anti-authority stances have often been a bit opportunistic; a few years after releasing Nanny State they advocated on behalf of laws aimed at increasing the price of cheap supermarket lagers. They pitched it as a sound policy to promote responsible drinking, but forcing competitors to raise their prices was surely a pleasant bonus.)

It's easy to understand why politicians like funding breweries. They get to play with other people's money, and much like when funding a new sports arena, they get to associate themselves with a product that many voters consider fun and pleasant. But the economic benefits are dubious. If the brewery expansions make business sense, they will be built regardless (though perhaps not in the specific locations handing out the goodies). It's hard to imagine that Deschutes, which is investing $85 million in its eastward expansion, would scrap the project without $3 million from Virginia. The subsidy is just a bonus it's able to reap by being big.

And it's not as if consumers would go thirsty for beer without the government's assistance. Virginia currently boasts nearly 150 breweries. Asheville, North Carolina alone has more than a dozen. These businesses, which have been paying excise taxes for years, now see that revenue going toward much larger competitors from out-of-state.

Given the many hurdles governments place in front of beer entrepreneurs, they can be sympathetic recipients of government grants. A 2014 report from the Mercatus Center examined the barriers to entry for opening a brewery in Virginia. "We find that an entrepreneur attempting to enter the brewing market in Virginia must complete at least five procedures at the federal level, five procedures at the state level, and multiple procedures at the local level," write Matthew Mitchell and Christopher Koopman. "All of these barriers are in addition to the standard regulatory hurdles that all small businesses must surmount… This means that starting a microbrewery in the state of Virginia requires as many procedures as starting a small business in China or Venezuela, countries notorious for their excessive barriers to entry."

Lowering these barriers or making it easier for businesses to navigate them would encourage entrepreneurship across the board, rather than concentrating benefits on big breweries that cultivate political connections. When California's Lagunitas Brewing expanded to Chicago, cutting through red tape was far more important to founder and CEO Tony Magee than getting subsidies. In fact, he admirably rejected offers of cash from the city. "You start realizing you make the world around you by the decisions you make as you move through it and if I don't feel like the government should be looted [or] whored out for businesses… we don't need it," Magee told The Sun Times. "So why ask for it?"

However popular giving tax money to breweries may be, the practice is not really any different from the kinds of crony capitalism practiced by companies like Wal-Mart and Cabela's, two big box retailers notorious for negotiating tax breaks that give them advantages over their competitors. It unfairly skews the market toward big, politically connected brewers who go venue shopping for subsidies, pitting city versus city and state versus state to score the sweetest deal.

In the case of loans, it also puts public funds at risk if the business ventures don't work out, as Rhode Island found out the hard way acting as angel investor for Curt Schilling's failed video game company 38 Studios. There hasn't yet been a similar failure of a subsidized brewery expansion, but Richmond has found itself paying potentially millions extra to Stone to cover cost overruns at the city's new brewery.

Aside from the occasional grumpy blog post, beer fans have been fairly complacent about brewers receiving subsidies. Yet they react fanatically when craft breweries they love finance their growth by selling out to big beer conglomerates. Beer brands can unceremoniously lose their "craft" reputation when they enter into such arrangements, even if they continue to make great beer. Why does growth via a private sale raise the ire of beer drinkers while growth via government subsidies gets barely any backlash?

In other contexts, opposition to crony capitalism bridges ideological divides, animating everyone from Tea Partiers on the right to anti-corporate activists on the left. Big beer companies shouldn't get a pass. By the time breweries have the track record needed to attract multi-million dollar grants, they already have plenty of options for private financing. They should use them.

Many a story has been written on allegedly faux "craft" beers owned by big companies, with the implication that consumers should shun them and support independent breweries instead. Whatever the merits of that, perhaps they should do the same for breweries that finance their growth with loans or outright gifts from taxpayers. As Lagunitas' Tony Magee says, "you make the world around you by the decisions you make as you move through it."

If you'd rather see breweries live or die by the quality of their beer rather than the strength of their political connections, that's something to consider the next time one scans a tap list deciding what to drink.

Jacob Grier's work in the beverage industry sometimes includes contracting with beer companies, though he has not worked with any of the brands mentioned in this article.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

87 responses to “The Crony Capitalists of Craft Beer

  1. Scots hitting the dole for money? Who would have thunk it?

    1. But are they True Scotsmen?

      1. [golf clap]

    2. til I saw the bank draft which had said $8133 , I did not believe …that…my friend truley making money part-time from there new laptop. . there dads buddy haz done this for only 9 months and resantly paid the mortgage on there cottage and purchased a top of the range volvo . you can try here ??????? http://www.elite36.com

  2. Make everyone your bitch…with a hand out!

  3. Watt advises hitting up local governments for money

    Many punks lived on the dole while pissing on the State. I thought “comfort with hypocrisy” that was one of their more endearing characteristics.

    1. Zack de la Rocha totally never expressed pro-machine views, neither.

      1. Well, they weren’t a punk band. I always appreciated them, however, for their full-throated Communist beliefs while at the same time making millions of dollars from Sony. That kind of industrial-strength hypocrisy is hard to come by.

        1. True, annoying rap metal was more their forte. But you’re correct, the blatant hypocrisy was delicious.

        2. Zack was in a punk band called Inside Out, with a song called “Rage Against the Machine” even.

        3. I always considered them a comedy act, which made it much more enjoyable.

        4. Probably traverses into “grammar nazi” territory, but hypocrisy is saying one thing outwardly while discretely doing pretty much the opposite privately. Saying one thing outwardly, and doing another thing OUTWARDLY, is a “double standard”. It’s clear for everyone to see that THIS applies to ME, and THAT applies to YOU, because – after all – YOU”RE not ME.

          In the first case, the sheep are fooled into following the hypocrite, and probably quickly abandon them once the jig is up (Jim Baker). Meanwhile, with a double standard, the sheep are given all the data they need to be offended and abandon (if never engage) as a follower, but they keep their mouth attached to the anus of their Better. In the first case, you might shake your head at the naivety but respect them finally waking up, while in the second case you can’t have anything but scorn for the willfully ignorant follower of an officious purveyor of double standard. But you can’t get an oppressive, cross purposed, tyrannical, insane leviathan off the ground without a robust group of purveyors of the double standard and shiny eyed adherents. In short, sociopaths and the superstitious fucks who need them.

      2. My experience with self-described OG punks (*crusty middle aged guys who ended up bartenders in the east village) was that they possessed a worldly cynicism and skepticism of ideologues.

        It was the NYHC and Straight-Edge/Fugazi types that were the purist, idealistic, vegan-communists who constantly injected politics into their music/lifestyle and moaned about other people’s hypocrisy. OG Punks were more a rejection of anyone’s authority to pass-judgement. More like “nihilist/realists”. Do onto others as you’d like done unto you, and beyond that? Fuck off.

        then again i was never all that curious about it really. this is all just an impression gained in passing.

  4. “Take a DIY approach and learn the skills you need to survive and build your business,” Watt continues. “Don’t depend on anyone for anything.” But elsewhere in the book, Watt advises hitting up local governments for money:

    As well as the obvious places, there are several other ways to get more cash, legally of course. There are very often loans, soft loans, grants, job-creation assistance, tax relief and a myriad of other types of funding available from various public bodies, business development agencies, local authorities and government organizations.

    This is so prevalent I’m trying to figure out if it’s even inconsistent. LIke maybe us Libertarians are getting it wrong. So many so-called anti-government protests are essentially pro-government pep rallies.

    I have no idea what we’re getting wrong, but when everyone in the room says up is down, you begin to think that maybe up is down.

    1. I’ve said it before: don’t blame the pigs for running to the trough, blame the farmer who’s dumping the slops into it.

      I have a hard time faulting those who loot while the looting’s good. Especially when the alternative is to be looted yourself and/or get crushed by those who do take the handout.

      1. Can we still make bacon out of them when they are done?

      2. Consider that you’re paying for it whether you apply for the benefit or not.

        1. Citizen X’s point is that we should blame politicians for selling favors that shouldn’t be sold in the first place (for campaign cash and perhaps the few votes they get by falsely claiming they are creating jobs in their district), not those who take advantage of these corrupt politicians.

          What gets me, is how so many in these political districts allow it and vote for such corrupt politicians. As Grier points out, existing brewers are essentially subsidizing their competition because they aren’t getting any political handouts.

          You can’t have freedom, and the prosperity that comes with it, unless you are first willing to give it to others. And that means not voting for politicians who promise to steal for you or anyone else. Apparently a lot of voters are willing to vote for politicians who corrupt the free market. I guess they need the campaign cash to convince voters they really are for free markets, because they obviously aren’t.

    2. Does he mention anywhere about partnering with other like-minded individuals to expand or support your operation, or is that just crazy talk?

    3. “All you have to do is walk up to someone’s house, knock on their door, say I’ll talk the way you want me to talk, and think the way you want me to think, and you’ll never be lonely ever again.”

      Inherit the Wind should be taught more frequently than it is.

  5. I have something to confess:

    I am a complete craft beer snob. It’s the only part of my life where I’m a total snooty, elitist hipster about things, but there it is.

    I go to beer festivals, and every other weekend try to find something exotic and new to try.

    Also, IPAs and sours are shit, and people who like them should gargle with broken glass.

    1. Get a load of this hopophobe. Next you’ll tell me that Shiner Bock isn’t the fermented piss of Texas longhorn cattle.

      1. Eh, Shiner is a useful lingua franca in that it isn’t total garbage (re: Miller Lite), and is found in most bars here.

        Ayinger Celebrator Dopplebock…now that’s a bock.

        1. Ur Weisse… [drool]

        2. Meh, kraut.

          /sips watermelon Dorado

    2. IPAs, like Bernie Sanders, are a nasty joke someone is playing on hipsters.

      Sours are awesome, though.

      1. Since you outed yourself some time back, I only ever want to respond to your posts with Warhammer references.

        1. YOU DON’T KNOW ME.

          1. It’s OK; Heroic Mulatto also used to be down with the Emperor.

          2. BLOOD FOR THE BLOOD GOD!

    3. Barrel-aged, sour ale is awesome.

      1. There’s been a surge of bourbon-barrel aged beers lately, and I’m loving every drop of it.

        1. I am not a big fan of bourbon-barrel age beer. If I want to drink whiskey, I’ll drink whiskey.

          I’m talking about brett-infected, wine barrels that destroy fine wines, but make great funky, sour ale.

        2. You don’t like IPAs, but you like barrel aged shit? Eww. I agree with Kinnath. If I want bourbon flavor, I drink bourbon

          1. It’s weird; I don’t like straight bourbon, but I love bourbon-flavored everything. No accounting for taste, I suppose.

        3. Buddy of mine and I won the lottery for Founder’s KBS. Split a case. Drank two, shared a few, letting some others age to compare to other years. I could probably sell the 12 ounce bottles for $20 each.

        4. MOAR BOURBON BARREL AGED IMPERIAL STOUTS, PLZ!

          1. This Guy ^^ …

            gets it.

          2. I had a nice barrel-aged porter not long ago. I liked it as an interesting experiment. It was good. But not a religious experience.

    4. THANK YOU!! I’ve been railing about how most IPAs are nothing more than super-bitter garbage for years, only to be told “Well, *my* tastes are sophisticated enough to appreciate them even if yours aren’t”

      News flash – disliking IPAs =/= loving shitty mass market beers. There are other varieties, y’know?

      1. I think it was the first big “American” micro trend, but I’m seeing a lot more porters, stouts, Belgians, etc., coming out of the craft sector now that even five years ago. Hope springs eternal.

        1. I think it depends on geography too. I live in Florida and have had like 1 porter since I have been here. Drinking chocolate while it is 90 degrees isn’t appealing. Give me a crisp, citrusy pale ale or IPA any day

          1. It’s hard for me to find (non-black) lagers and pale ales that I like, because I don’t care for the taste of hops, and I find those beers lacking in flavor mostly.

            Einstock does make a great white ale, though.

        2. Oh, absolutely. There are plenty of good things available. I’m just talking about the attitudes of a lot of the craft beer drinker mafia.

          Big fan of porters, stouts, dopplebocks, and quality lagers. Schwartzbier is awesome.

          1. I also love schwartzbier.

      2. Your tastes are fine. It really is true that other people like IPAs, though. Get over it.

    5. I thought you were also a snooty, elitist hipster about Halloween, Jimbo.

      1. Is that a hipster thing?

        Didn’t know that.

    6. I would say you are trying the wrong IPAs. Do you like Malty beers?

      1. Si. I like malt, and roasted flavors.

        I just really don’t care for the taste of hops.

        1. Odd thing for a beer snob, I would have thought.

          1. Not at all. IPAs have a dreary sameness (“Oh, look! Another overhopped beer!”) compared to other varieties.

            In their defense, they do pair reasonably well with deep-dish pizza.

            1. I’m a big fan of IPAs, so I don’t find that to be the case at all. Though I mostly stick to two or three favorites.

              But most beers taste like hops. So if you don’t like the taste of hops, being a beer enthusiast is an odd choice.

              1. Ok, let me rephrase: I don’t like the overwhelming taste of hops. A little is fine.

                I think it’s perfectly rational to like some of an ingredient, but not want the taste profile to consist almost entirely of that ingredient.

                “You like garlic, but you don’t like my pasta in garlic sauce, garlic oil, with chunks of garlic chopped up in it?”

                1. I know what you mean. It can be overdone. Especially when you get a ton of the really green, bitter Amercan hops flavor. But my threshold for overdone is way higher than yours, apparently.

                  Except for sweet fruit beers and pumpkin pie shit, I pretty much like all styles of beer that I have encountered.

                  1. Pretty much the same here.

                    I like an IPA, but I mostly gravitate more to Belgian styles.

                    I do think the craft beer makers in the US have gone way overboard on IPAs and hoppy beers. And, having brewed myself, I know that hops are an excellent way to cover subpar brewing, and I suspect that’s why they do it – hit your beer with a big dose of hops batch after batch, and they will all taste the same.

    7. Sounds like Gojira needs to brew their own?

      1. These masturbation euphemisms are getting less abstract than they used to be.

    8. Eh. Some IPAs are better than others, of course- but I do enjoy several. Anti-hero tends to be my go-to because of easy availability in Chicagoland. Then again, I also enjoy a lot of craft stouts, scotch ales, and brown ales. I’m picky with flavor, but not necessarily style.
      The American Beer Classic at Soldier Field is a blast. I assume it’s a travelling festival, but I’ve never looked into it.

    9. Eh. Some IPAs are better than others, of course- but I do enjoy several. Anti-hero tends to be my go-to because of easy availability in Chicagoland. Then again, I also enjoy a lot of craft stouts, scotch ales, and brown ales. I’m picky with flavor, but not necessarily style.
      The American Beer Classic at Soldier Field is a blast. I assume it’s a travelling festival, but I’ve never looked into it.

    10. No you’re shit!

    11. I am a complete craft beer snob

      being a snob about beer is faggy. Beer is swill and you drink it. Its not meant to be sipped and mulled over like a Proust novel. Its meant to be swallowed in large quantities with groups of people and provoke you to urinate frequently. Making effete noises about the relative merits of X vs Y beer is more boring than listening to stoners talking about strains of weed while watching ren & stimpy reruns.

      disclosure = i’ve worked in a regular brewery, a craft brewery, consulted for AB and covered the beer industry as an equity analyst. and i like all kinds of beer, free beer the most.

      1. I’m with you there. I like quality beers, but part of my standard for a good beer is that it should be pleasant to swill down in big gulps and in large quantities. And I can appreciate a nice cold can of cheap pils too (as long as it’s not one of the brands that already tastes like someone put a cigarette out in it as soon as you open it).

        1. [slides Milwaukee’s Best Lite to back of fridge]

          1. I think the absolute worst are anything Keystone and Gennesee Cream Ale.

      2. Well I’ve certainly never turned down a free one.

        I’ve also never told anyone that having a different opinion than me makes them faggy and boring, so there’s that.

        Except about motorcycles. If you ride a scooter or a can-am, you’re a boring fag and don’t park in my motorcycle-designated parking or I’ll fuck your shit up because I’m a manly man.

        1. Well, it’s good to know that while I should gargle broken glass, at least I’m not faggy and boring.

          1. What I did there, you saw it ; )

    12. IPAs are the lazy brewer’s way to cover inconsistency with bitterness.

      Sours, though, are how you show off what a brewing badass you are. One of the best beers I’ve ever had was a one-off wold sour from Borderlands brewing. It was the universal favorite at a little beerfest here in Tucson.

      1. Should be “wild” sour. As in, the wort was left exposed for awhile, and it brewed with the wild yeast that fell into it.

        Getting an awesome beer that way is the pinnacle of brewing, IMO.

      2. IPAs are the lazy brewer’s way to cover inconsistency with bitterness.

        You are probably right about that. I still love them, though.

    13. Meh, beer is for pussies. I drink liquor.

  6. If US company opens a brewery in Berlin, about the last thing I think is that they mean to import beer into Germany

  7. Oh, good. Beer.

    Which is worse, IPAs or Frank Gehry?

    Fucking Philistines. My tastes are the correct ones! When I come to power IPAs will be compulsory.

  8. All this beer talk has got me thirsty. To the keezer!

  9. I just miss my switchback.

  10. With good beer so easy to find, I don’t see what the fuss is about. I live in Huntsville, AL with a metro population of roughly 400K we have 5 breweries with two of them beyond boutique in size (Straight to Ale & Yellowhammer). If a thing is ubiquitous how can it be the object of snotty affection?

    I remember back in the 80’s about the only decent beer one could find was Moose Head or Dos Equis, then Sam Adams came along. Brewing your own beer or getting hooked up with a craft beer outfit was a big deal back then now good beer is as easy to find as eggs. The difference between super awesome beer and a merely good beer is minimal and not worth the effort.

  11. “Why does growth via a private sale raise the ire of beer drinkers while growth via government subsidies gets barely any backlash?”

    Big business bad, government good. (Ch 7, v 22-24, The Book of Prog)

    Was that so hard?

  12. Are you single tonight? A lot of beautiful girls waiting for you to http://goo.gl/X6JhyG

  13. Start making more money weekly. This is a valuable part time work for everyone. The best part work from comfort of your house and get paid from $100-$2k each week.Start today and have your first cash at the end of this week. For more details Check this link??

    Clik This Link inYour Browser?

    ???? http://www.selfCash10.com

  14. The clarity for your post is just spectacular and i could suppose you are knowledgeable on this subject.
    detect water leaks
    company
    detect water leaks in Riyadh

  15. Cole . if you, thought Emma `s blurb is really cool, last friday I got a great Land Rover Range Rover after I been earnin $6297 this-past/4 weeks and-just over, 10k this past-munth . it’s definitly the best-job I’ve ever had . I actually started five months/ago and practically straight away began to make more than $79, per-hour ….. You also try well? ? ? ?Please avoid spammer.F–02

    START HERE__ http://www.ny-reports.com

  16. til I saw the draft which was of $6881 , I didnt believe that my mother in law had been realy taking home money part-time on their laptop. . there best friend has done this 4 only twelve months and at present took care of the mortgage on there condo and got a top of the range Subaru Impreza . Learn More ….

    Click This Link inYour Browser….

    ?????? http://www.Reportmax20.com

  17. Kylie . although Martin `s stori is inconceivable… on tuesday I bought themselves a Jaguar E-type after bringing in $8921 this last 4 weeks and over ten k this past month . it’s certainly my favourite-job Ive ever had . I began this 10-months ago and right away began to earn minimum $71… per-hour .r…I’m Loving it!!!!
    ???????? http://www.ny-reports.com

  18. before I saw the bank draft which had said $9426 , I didnt believe that…my… brother woz like actualy earning money part-time at there labtop. . there uncles cousin has done this 4 less than fifteen months and by now repaid the dept on there place and got a great new Mini Cooper . read the full info here …

    Clik This Link inYour Browser??

    ? ? ? ? http://www.SelfCash10.com

  19. Start making more money weekly. This is a valuable part time work for everyone. The best part work from comfort of your house and get paid from $100-$2k each week.Start today and have your first cash at the end of this week. For more details Check this link??

    Clik This Link inYour Browser?

    ???? http://www.selfCash10.com

Please to post comments

Comments are closed.