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Free Minds & Free Markets

Bad State Laws and Big Money Beer Wholesalers Are Still Hurting Craft Brewers

The craft beer industry can only go as far as lawmakers will allow.

BridgePort cellar master Todd Fleming teaching visitors about hops in 2014. Mark Harrison/MCT/NewscomBridgePort cellar master Todd Fleming teaching visitors about hops in 2014. Mark Harrison/MCT/NewscomBridgePort Brewery in Portland, Ore., a craft beer pioneer that brewed one of the best tap beers I've ever had the pleasure to drink, shut its doors for good this week. The owners blamed competition and profitability issues for the closure of the brewery, founded 35 years ago.

While the market for craft beer is still growing, the rate of growth has slowed considerably in recent years. Brewers Association chief economist Bart Watson last year said the craft beer industry his group represents is showing signs of "deceleration."

I'm confident the industry's growth can continue. But here's a caveat: craft brewers also continue to face their share of outside obstacles, chiefly in the form of state laws that hinder growth and profitability.

In Colorado, for example, a new booze-delivery law was intended to benefit local beer sellers and "to stop Amazon from taking over the local liquor-delivery market," reports the Denver Channel. But the new law has actually hurt local sellers such as Denver's Craft Alley, a craft beer delivery service, because it requires sellers to get at least half their revenue from a brick-and-mortar location. The unintended consequences mean that, as a delivery service, Craft Alley could be out of luck if lawmakers don't amend the law.

In neighboring Utah, a bill that would raise the state's embarrassing cap on alcohol content (currently 3.2% by weight, the lowest in the country) is opposed by the state's craft brewers, who argue correctly that the proposed new cap of 4.8% is still far too low.

In Montana, efforts to overturn a state law that requires breweries to close their taprooms by 8 p.m. died earlier this legislative session. A recent Flathead Beacon column lamented the fact that "opponents, including the Montana Tavern Association, argued that the legislation would allow breweries to further circumvent a quota system that has been in place since Prohibition." Worse still, the piece also notes that Montana lawmakers are considering a proposal that could raise the price of alcohol licenses.

And then there's Texas, the only state in the nation that prohibits most breweries from selling not just growlers but all to-go beer to consumers. (Would you, could you, with some eggs? "[N]ot in cans, not in growlers, not in crowlers or bottles or kegs.")

Efforts are underway to change the law. But those efforts face powerful opposition from powerful beer wholesalers.

"The argument that craft beer is stifled by Texas regulations is simply not supported by fact," says Larry Del Papa, president of Wholesale Beer Distributors of Texas, in a recent op-ed.

If Del Papa wanted facts, he might have spoken with Glen Harrod. The former owner of Grapevine Craft Brewery in Grapevine, Tex. said this week that he was forced to sell his brewery last year because the state law, coupled with competition over shelf space in groceries—which wholesalers often control—made it impossible for him to continue.

As bad as many state beer laws are, they aren't the only policy obstacles brewers face. Pres. Trump's indefensible steel and aluminum tariffs, for example, have rocked all sizes and types of U.S. brewers, who rely on the former for canning and the latter for kegging.

Both the Brewers Association and the Beer Institute, which represents larger breweries, have come out against Trump's tariffs.

Chad Melis of craft brewer Oskar Blues, which helped re-popularize canned beer with the success of its tasty Dale's Pale Ale, told CNN last year that the tariffs could cost the brewer $400,000 per year.

(Trade wars, it turns out, are neither good nor easy to win.)

Back in the states, there are some potential bright spots to report. In West Virginia, for example, lawmakers voted this month to ease restrictions on some alcohol sales. And in Oxford, Mississippi, lawmakers are considering a proposal that would allow craft beer stores to serve craft beer.

Fostering better state and federal beer laws is a topic I've written about many times (including here, here, and here). I'm generally optimistic about both the industry and trends in state laws in the decade or so I've been writing about the industry. But I'm also frustrated by the slow pace of change and by seeing the same tired arguments—such as those uttered by Del Papa of the Texas wholesalers' group.

Craft beer is a highly competitive, innovative, and important industry with boundless potential. In the end, though, the industry can only go as far as lawmakers will allow.

Photo Credit: Octavio Jones/ZUMA Press/Newscom

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  • SIV||

    Fuck craft brewers. I see in the article those swill merchants are also blaming "competition" for their woes.

  • Rockabilly||

    Craft marijuana growers is the new thing.

    http://tinyurl.com/y64tdk8y

  • Overt||

    To be clear, they are blaming competition from groups that have government protection. For example, most states have distribution laws that favor large producers. If you produce beer, you cannot go to your local liquor store and offer to sell them some of your beer. Instead, they have to get it from a licensed wholesaler.

    And by the way, "Craft Brewers" are equally at fault here. The Brewers Association has been captured by Sam Adams, New Belgium and Sierra Nevada. These large companies have basically created definitions and bylaws that make difficult for small craft brewers to grow. Again, this is why when you look at the "Craft Brews" aisle in many local stores, you see entire sections taken up by those three brands, and then small space for other brewers.

    I loved cruising through Loveland, Ft Collins, Berthoud and Firestone to all of the small taprooms established there. It was really fun to get growlers, but since moving away from Colorado, I can get exactly two of those beers any more- and that is largely because of distribution laws.

  • Murray Rothtard||

    It's a pretty accurate explanation though isn't it?

    I won't get mad at them for realizing realize it and being honest until they actually propose interventions to stifle that competition.

    This article seemed to imply that they were most upset about the non-competitive things that also make being a successful craft brewer difficult.

  • Rockabilly||

    Study finds a race gap in air pollution — whites largely cause it; blacks and Hispanics breathe it !!!

    http://tinyurl.com/y3p2nysv

  • Crusty JuggIer||

    Literally farting into the mouths and nasal passages of black and latino people.

  • Crusty JuggIer||

    Literally farting into the mouths and nasal passages of black and latino people.

  • loveconstitution1789||

    Craft beer makers are begging for crony capitalism too. Most of their stuff is garbage swill anyway.

    There is clearly something wrong with over-regulation of an entire industry when 6 packs of decent beer cost $9.99 at a grocery store. I understand that 6 packs are the big sellers, so they are marked up more but with alcohol sin tax, that takes it way over $1.50 for a bottle of non-draft beer.

  • wearingit||

    Yeah....crony capitalism is big brewing lobbying for laws that clearly target small breweries.

    You're an utter moron.

  • loveconstitution1789||

    Poor troll. Has a sad a day.

  • Sevo||

    OT:

    "Kids striking against climate change: 'We're fighting for our lives'"
    [...]
    "...These young people have never experienced a world untouched by climate change—yet they are the ones who will bear the brunt of its impacts, says Nadia Nazar, one of the organizers of the strike in Washington, D.C.
    "We're the first generation that's being significantly affected by climate change, and the last generation that can do something about it," she said...."
    http://www.msn.com/en-us/news/.....ar-BBUPAsq

    And they've gotten indoctrination for the entire time we've paid for their supposed "education".

  • loveconstitution1789||

    Then we taxpayers pay for a second dose of indoctrination with college.

  • Rockabilly||

    We have 12 years to save the planet, plan accordingly.

  • chemjeff radical individualist||

    Okay so I am genuinely curious. How do you teach an issue like climate change to kids, without it being labeled by someone as "indoctrination"? You can go too far in either direction, but my fear is that even 'teaching the controversy' so to speak would be regarded as "indoctrination" by someone.

  • Sevo||

    We might start by suggesting that whatever problem exists, the government is the solution only when every other possible option is exhausted. And that even this problem is far less critical than it has been portrayed.
    If some of these kids were marching with signs saying 'it's not as bad as claimed' and 'nukes can be a solution', well, I'd be willing to say they were educated rather than indoctrinated.

  • chemjeff radical individualist||

    Well, that's just another type of indoctrination though. Just ones we both happen to agree with.

    Now I do think that it is possible for someone to be educated, rather than indoctrinated, on the subject of climate change and still advocate for a particular course of action, whether it be the Green New Deal or something far more modest, or even something else entirely. It just depends on the weight one gives to the various items of evidence, along with one's own moral priorities. But I doubt most people have studied the issue to that depth.

  • Sevo||

    "Well, that's just another type of indoctrination though. Just ones we both happen to agree with."

    I think you missed the point:
    "*Some* of them...", meaning that they as a whole had been taught well enough for some to form an opinion other than the 'correct' one.

  • Leo Kovalensky II||

    There's a whole subculture that "distributes" craft beer for the best breweries through 3rd party trades. The beers have almost become a form of currency that can be traded or sold. In can get the highly sought after brewery-only released beers from all over the country with minimal effort by trading my local beers. Just pay for shipping. The breweries know this and encourage it as a way for building hype and increasing sales.

    It's amazing how powerful markets are in the face of draconian, cronyist laws and regulations.

  • loveconstitution1789||

    Hipsters and the idea that shitty beer is worth trading.

  • Leo Kovalensky II||

    Maybe one day you'll realize that the beauty of liberty is that we don't have to all respect your opinion.

  • JFree||

    In Colorado, for example, a new booze-delivery law was intended to benefit local beer sellers and "to stop Amazon from taking over the local liquor-delivery market

    It's not really the delivery law. They also changed the 'can only have one liquor store' rule at the behest of the grocery chains. That was a post-prohibition law intended to keep the mob from exerting influence on the distribution side - but it produced a great environment for craft breweries/distilleries (and created some HUGE liquor stores - which I'm sure were the warehouses being used for the local delivery businesses).

    Now the grocery chains are selling 'craft beer' but like all chains, they only purchase the bogus craft labels owned by the megalabels. And that significant part of the population that has just moved here from shitholes like CA and TX only knows the bogus craft labels that can afford to pay the slotting fees to be sold in supermarkets. And they only know Amazon for delivery. And they drive like shit and bring every fucking bad idea from where they came from and are all assholes to boot.

    CO is rapidly changing from being a unique place where it was possible to reinvent yourself and start a business to being just another big corporate mall. There is a serious conflict now between an environment that supports entrepreneurial businesses and one that supports big corps.

  • chemjeff radical individualist||

    OT: Okay, fess up you guys. LC1789, Shithead, Jesse, John, Nardz, SIV - which one of you did this?

    http://www.cleveland19.com/201.....city-hall/

  • Echospinner||

    Where is LeBron James when you need him?

  • Sevo||

    In LA.

  • Echospinner||

    Hogging the ball in the fourth.

    Let him stay there.

  • loveconstitution1789||

    I havent built a float since high school.

    You got to give that person credit, Its much more convincing than snapping fingers and shouting nonsense to Chelseas face.

  • Mcgoo95||

    I havent built a float since high school.

    So last week, then.

  • Bubba Jones||

    How many brands of overhopped ipa do we need?

    I go to a pub and they have 30 pale ales and ipa. And then maybe a bunch of that sour shit the hipsters are drinking.

    Where did the damned ambers go?

  • Crusty JuggIer||

    I have some frosty ones in my basement.

  • Bubba Jones||

    Hookers in your freezer?

  • MatthewSlyfield||

  • Eddy||

    The perfect H&R clickbait headline: "Armed immigrant craft brewers smoke marijuana while critiquing Game of Thrones."

  • Eddy||

    ..."while their dogs are shot by police."

  • Crusty JuggIer||

    "Cops who were no-knock raiding on a 'sex trafficking' sting"

  • loveconstitution1789||

    Innocent Illegal Immigrants cut hole in America's Iron Curtain to reach the land of Buttsex, 'Muricans, ganja, fruit sushi, and craft IPA.

  • Rev. Arthur L. Kirkland||

    A simplistic analysis in this context is not illuminative.

    Small brewers benefit from a reduced tax rate that was promoted by large brewers and wholesalers. Small brewers -- beyond the 'two men and a bathtub' operations that sell all or most of their beer directly to retail customers -- are generally parasites when distributing through established wholesalers, especially when they are starting. They also benefit from laws designed to prevent large brewers from controlling the wholesalers (who might otherwise be disinclined to enable small brewers to freeload with respect to a wholesale operation built on big brands), and from laws designed to shackle large brewers in establishing relationships with retailers. Without access to established wholesalers' relationships and resources, or the regulatory advantage in dealing with retailers, few small brewers would succeed beyond a small taproom or two.

  • JFree||

    Not illuminative

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