A LEVEL PLAYING FIELD

One factor that makes the beer industry particularly confusing is that each state has dramatically different laws pertaining to how beer is produced, bought and sold there. We’ve talked at mind-numbing length about the travails of craft beer drinkers in Alabama, but if you’ve watched the news recently, you’ve seen similar legal battles in Illinois, Tennessee and Texas. Every state is at a different “stage” of craft beer acceptance, so it can be challenging just keeping tabs on who is fighting for what.

In Alabama, we just wanted to have taprooms in our breweries. In Texas the fight was over whether or not breweries should be allowed to sell a VERY limited amount of beer (just 12 bottles worth) as part of a tour package. In Tennessee, they’re quickly trying to alter some restrictions to allow the massive Sierra Nevada brewery to open an East Coast headquarters in the tiny town of Alcoa (I know that sounds sketchy, but it’s a very good thing for both Sierra Nevada AND Tennessee). As for Illinois, that’s probably the most confusing situation of all. For a number of years, breweries were allowed to self-distribute in the state, but some people weren’t even aware of it! Then, when Anheuser-Busch tried to buy a distributor, they were denied because they were an out-of-state brewery. A judge deemed it unfair that in-state breweries could self-distribute but out-of-state ones could not…so he banned ALL self-distribution which sent the matter to the state legislature. In the end, a new bill was passed which allows EVERY brewery the opportunity to self-distribute in Illinois…up to 7,500 barrels (15,000 kegs). This allows very small craft breweries to distribute their own wares, but prevents Anheuser-Busch (and other giant brewers) from gaining self-distribution rights since 7,500 barrels for AB is meaningless…

Maybe you don’t care about the ins and outs of state beer legislation, but you should. The beer industry (at least the “craft” segment of it) is one of the few industries that is growing in leaps and bounds in this tough economy. Local breweries are proliferating at a shocking pace…and with these new businesses come jobs, tax revenue, and civic pride. Supporting craft beer, even if it means following the labyrinthine world of state politics, is important…and I would urge all readers to at least keep an eye on their own state’s approach to craft beer. Even seemingly progressive states like Massachusetts have some strange restrictions when it comes to beer laws (it’s one of the few states where you can’t even get Beer of the Month club brews shipped to you). Thanks to Prohibition and the mess it left, beer legislation is problematic everywhere.

Which leads me to the ostensible purpose of this post (500 words later…brevity is not my strong suit). For perhaps the first time in my life, I’m siding with Anheuser-Busch. The hell you say! Lemme explain…

My concerns are with two states…Texas and Illinois. In Texas, House Bill 602 died last week. The bill would have allowed breweries to “sell” up to a 12-pack of beer as part of a brewery tour. It was fought hard by the Wholesale Beer Distributors of Texas (Quick Note: If someone is fighting pro-craft beer legislation in your state, chances are it’s the distributors…they like things just the way they are). The WBDT felt this bill was a threat to the three-tier system (which separates the beer industry into breweries, distributors, and retailers). The fear was that the bill skirted the three-tier system by allowing breweries to sell directly to the public. Never mind that selling a 12-pack of beer at a tour isn’t exactly going to affect the bottom line of the WBDT…they saw this as a warning shot against their very way of life. As such, they quickly demanded an amendment stating that the bill could only apply to breweries which produce less than 75,000 BBLs a year. Since Anheuser-Busch has a brewery in Houston, this was a way to exclude them from the legislation. The wholesalers concern was obvious…Anheuser-Busch products make up the vast majority of their sales and they didn’t want AB drinkers driving out to the brewery every day and getting a 12-pack of Bud Lights direct from the manufacturer. Of course, the fact that Anheuser-Busch doesn’t even OFFER tours didn’t seem to matter to them. They were nervous, they tacked on a restrictive amendment, Anheuser-Busch predictably battled it, Texas politicians were somehow “convinced” by the largest and wealthiest brewery on Earth (shocking, I know), and the bill died an ignominious death.

The Illinois situation went the other way. Anheuser-Busch fought tooth and nail to get self-distribution rights only to see those rights granted for tiny craft breweries instead. While that bill was “good” for craft beer in that it guaranteed the right for all breweries to self-distribute in the Prairie State, the new law actually LOWERED the amount of beer that local breweries could self-distribute (from a respectable 60,000 barrels before the new legislation was passed down to a fairly limited 7,500 BBLs). So in Illinois, like in Texas, Anheuser-Busch was also fighting for the same rights as other breweries, and this time they lost.

You might think I’d be praising what happened in Illinois (little guy wins, AB loses) and decrying the events in Texas (everybody loses), but truth be told, I find both situations problematic. Look…I’m not a laissez-faire type…I know that rampant, unchecked capitalism causes more problems than it solves. But in the case of beer legislation, I say open the floodgates and let’s see what happens…

Texas Lt. Governor David Dewhurst is being painted as the bad guy when it comes to HB602 (and for a simple reason…he is the bad guy). He claimed the bill was unfair and that he wouldn’t support it because the 75,000 BBL cap for on-site sales didn’t create a “level playing field”. And while Dewhurst may have been on the take or at least influenced by Anheuser-Busch, I was actually surprised to find that I agreed with him. The same is true in the Illinois situation. While I’m for any legislation that helps craft beer, I don’t necessarily agree with a bill that was designed to promote tiny craft breweries while restricting much larger ones…yes, even breweries like the evil, awful, Belgian-owned, Brazilian-operated conglomerate, Anheuser-Busch.

When it comes to beer, I WANT a level playing field. I may be wildly naive or overly optimistic, but I think that the reason craft beer has grown so rapidly over the past few decades has little to do with favorable legislation and everything do with the quality of the product. It’s not like craft beer is a “little” better than the swill Anheuser-Busch (or Miller or Coors) produces…it’s EXPONENTIALLY better. Craft beer keeps chipping away at Big Beer’s seemingly insurmountable market share because it’s simply a superior product. End of story.

A “level” playing field might give AB some advantages they don’t have now. Maybe they could have much more elaborate brewery tours than microbreweries who can’t afford any bells and whistles. Maybe self-distribution would greatly favor a company like AB that can just snap up the biggest distributors in town and dominate the retail shelves. But really, they already essentially do that. Even if Anheuser-Busch doesn’t technically “own” most of your local distributors, their influence over the wholesalers is so immense that they might as well.

Every brewery in Texas, regardless of size, should be allowed to sell their wares at the brewery. Maybe Anheuser-Busch “could” have a cooler tour…with free T-shirts, a big-name band playing on weekends, and buxom, scantily-clad servers. But ultimately, the Texas craft breweries…St. Arnold, Southern Star, Live Oak…make MUCH better beer than Anheuser-Busch. If the playing field is level, people will gravitate towards the tastier beer (honest!). Anheuser-Busch can put us much lipstick on that pig as they want…but their beer is still a squealing, filthy sow. By the same token, Illinois should allow every brewery to self-distribute regardless of size. Let Anheuser-Busch buy City Beverage if they want. The local craft breweries could then band together and start their own self-distribution consortium to counter AB. At the end of the day, with all parties playing by the same rules, let’s see which beer the good people of Illinois prefer. The tasty, thoughtfully-crafted, all-malt ales and lagers of the locally owned-and-operated small breweries? Or the tasteless, watery swill pumped out by AB’s massive factories? I wonder who will win that battle.

I know the arguments against equal rights for all breweries will come fast and furious. Ultimately, as a craft beer fan, I should be supporting any legislation that hurts Anheuser-Busch while helping small breweries. But I don’t. I support legislation that creates a free beer market. I don’t want laws specifically designed to hurt one segment of the industry. We already HAVE laws like that (except they currently favor Big Beer over craft). I want an open, transparent system where every brewery, regardless of size, plays by the same rules. I want the chips to fall as they may. I want the people to decide which beer to buy not based on complicated, jury-rigged legal restrictions, but on which beer they actually prefer. In a perfectly open market, I honestly think craft beer will continue its incredible growth.

So what do you say politicians? Let’s take off the handcuffs and let this battle come to a head. Let’s see who gets the worst of it when everything is fair and square.

Maybe I’m insane (probably). Maybe I’m stupid (definitely). But you know what? I like our chances.

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6 comments

  1. Apologizing while making free market talk is good sign of improving political outlook. Idea that free market ‘runs rampant’ is classic misunderstanding. Most (nyet all) ‘free market inequalities’ are created from inefficient regulation and basic governmental corruption. I know this. I come from such a place.

    As for beer legislation? I sides with anarchy. Unlock the gates, release the prisoners and let the streets run with bud light lime.

  2. But isn’t that the beauty of our federal system — 50+ different sets of rules governing breweries, all competing in the marketplace of ideas. How have craft beers (and AB, for that matter) fared in states with a more level playing field?

  3. Another crucial story, Shannon. Thanks for the link. I encourage everyone to click on the URL Shannon included to learn a little about another major battleground state.

    As usual, it all comes down to distribution. If you free up beer distribution laws, everybody wins. The goal for state legislatures should be to make it EASIER for local companies to do business…not harder. Seems pretty simple to me, but apparently things get a little more complicated when SABMiller and ABInBev are making gigantic campaign contributions.

  4. The worst part about the situation here in Wisconsin is the governor, Walker, has been cramming unpopular legislation through while his part is in power, all under the guise of it being necessary to help businesses create jobs. Ok, fine, I disagree, but let’s pretend he’s telling the truth. Then, when it comes time to help these craft brewers, we find out that he *really* meant by “businesses” was the really large businesses who contributed the most to his campaign, not the small business that create the vast majority of the jobs here.

  5. “I’ve heard that Anheuser is going to try pushing their beer into our state using logo glasses, so let’s introduce a piece of legislation that will ban all brewers from being able to serve beer from glasses in Wisconsin. That’ll keep AB out of here.”

    Success!

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