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Has the three-tier system become archaic?

For many, the ability to go to the local grocery store or corner store and pick up a six-pack of their favorite craft beer is merely a matter of convenience. No thought is given to how that beer got there or who put it there. It is just there, ready to be picked up, purchased and consumed. But, the story of how craft beer gets from brewer to grocer is fascinating and, at times, frustrating.

As America awoke from the long, dark nightmare that was Prohibition, the federal government left the regulation of alcohol to the states. Lawmakers wanted a way to prevent the proliferation of “tied houses” or saloons that served beer from only one brewery. Before prohibition, it was common for breweries to provide loans to bar owners for furniture and bar equipment under the stipulation that the bar only serve their beer. Along with the loan, breweries applied pressure to the barkeep to sell more and more beer, often leading to overconsumption and drunkenness of patrons. Add in the specter of the mob-controlled distribution and speakeasy networks during Prohibition and it was apparent a change had to be made.

These fears led to the adoption of what is known as the “three-tier system.” This set of laws separate brewers from retailers through a middle-man or distributor. In essence, the system requires brewers to sell their beer to a distributor who then sells the beer to retailers like bars, restaurants and stores. Since the federal government left the states to regulate alcohol as they saw fit, the system is not consistent across the nation. But, for the most part, the system prohibits breweries from owning distribution firms or selling directly to retailers. In Florida, breweries are allowed to operate tap rooms where they are allowed to sell their own beer to guests on a limited basis.

But, in an industry overflowing with choices, brewers can find it difficult to get shelf space or tap placements if their beer is sub-par. For this reason, many distributors recommend breweries fine tune their beers in their tap room before releasing them to distribution.

“A tap room’s a beautiful thing,” said David Rigdon of Jacksonville distributor Champion Brands to a group of brewery owners at the recent Florida Brewers Conference. “Use your taproom to develop your beers. At the end of the day, though, it’s the old push pull. We push your brands, but buyers have to pull them.”

The system is not without its critics. Some breweries, particularly smaller ones, contend that self-distribution would allow them to ensure their beers stay on tap thereby helping both the brewery and retailer make more sales. They cite the example of a bar that blows a tap of their beer on a Friday evening. If there are no self-distribution laws and only the three-tier system, the bar must wait until Monday when the distributor is open for a new keg. With self-distribution, the brewery could deliver a keg directly.

As is common among older alcohol laws, a close look at the system is needed to fully understand what still makes sense. And, as we all know, the wheels of government turn slowly. But, for now, raise a glass of your favorite brew to the fine men and women employed by your local distributors for they truly do deliver happiness.

But, some brewers, particularly small and local companies, are discovering that the three-tier system is holding them back.

Georgia’s allows taproom beer sales starting Friday, September 1

01 Sep

Since the end of prohibition, liquor laws have been under the control of each individual state. Most states enacted three-tier system laws that separated alcohol producers from retail outlets via a middle man or distributor. But, many states, even though they passed three-tier system laws, left wiggle room for small producers that allowed them to sell their products in self-run tasting rooms. Georgia was not one of those states. Until today, that is.

As Prohibition came to an end, lawmakers wanted a way to prevent the proliferation of “tied houses” or saloons that served beer from only one brewery. Before Prohibition, saloons were extremely competitive. Most areas had several, each tied to a different brewery. To enhance their beer’s prominence, brewers enticed bar owners to pledge fealty to them by providing loans for furniture and bar equipment under the stipulation that the bar only serve their beer. Breweries ran aggressive marketing campaigns and often applied pressure to their tied barkeeps to sell more and more beer. Often the result was overconsumption and drunkenness leading to deteriorating social situations. Add the specter of mob-controlled distribution and speakeasy networks during Prohibition and it was apparent a change had to be made.

The answer, or so the lawmakers of post-Prohibition America thought, was to put in place a three-tier system in which brewers or distillers could not sell directly to consumers or retailers, they could only sell their products to distributors who could then turn around and sell the product to retailers at a marked-up price. Lawmakers saw this as a way to prevent tied-houses and their overpowering influence. What they accomplished in many instances was to simply shift the corruption from overpowering breweries to distributors who forced breweries into distribution contracts that heavily favored the distributor and prevented producers from breaking the contract even if the distributor failed to market a product effectively.

This inequity is what led to a years-long fight for brewer’s rights in Georgia.

As early as 2001, Georgia’s lawmakers were conducting studies to determine the fairness of the three-tier system. In 2013, the subject was again taken up with brewers appearing before a committee to discuss the issues presented by a strict system that forbids them from selling to consumers directly from their breweries.

“This issue,” Said Rick Tanner of Cherry Street Brewing Cooperative to the commission. “Is more about competitive economic development than it is about alcohol distribution systems.”

In the end, the 2013 study simply made the suggestion that brew pubs be allowed to sell growlers of beer as long as it was purchased with a meal consumed at the brew pub and that it was partially consumed before leaving the premises.

Then, again in 2015, the subject was broached in the Georgia senate. The Republican Senator Hunter Hill from Smyrna introduced Senate Bill 63, that allowed breweries to offer “souvenirs” of their products to customers who took a “tour” of their facilities. While the bill fell short of small brewers’ hopes of being allowed to self-distribute in a limited capacity, it opened the door for future reform.

Finally, in February 2017 Senate Bill 85 was proposed. The Bill would allow the state’s licensed breweries to sell up to 288 ounces of beer — equal to 24 12-ounce bottles — to patrons at their taprooms with a direct sales limit of 3,000 barrels per year or about one million bottles.

Eventually, the Bill passed and Georgia’s governor signed it into law. Starting today Georgia’s breweries can now sell beer to their taproom visitors by the pint, bottle, can or even keg.

Across the state, breweries are hosting celebrations to mark the occasion. In Atlanta, SweetWater Brewing is marking the occasion with new tours and full pours for sale, while Red Brick is offering full pours and case sales. In Cobb County, Burnt Hickory is offering case sales of their brews at a special price, while Macon Beer Company in Macon will mark the day with a ceremonial first full pour.

Law restricting Florida craft beer breweries up for vote

25 Apr

Things have been brewing in Florida’s state legislature, but not to the benefit of the state’s craft beer brewers. In fact, one bill – Senate Bill 1714 – makes it illegal for a brewery that produces more than 2,00 kegs per year to sell its own beer in bottles or cans directly to consumers. Instead, the brewery must sell the beer to a distributor and then purchase it back at the distributor’s price, typically 30% to 40% higher.

Jacksonville brewery owner Ben Davis of Intuition Ale Works has made it his mission to defeat the bill and preserve the rights of Florida brewers to sell their own beer in their tap rooms. Davis has attended sessions at the Florida senate where the bill has been discussed and even hired a lobbyist to work the political circles and inform elected officials of the damage 1714 would cause. In an interview on Jacksonville television station WJXT, Davis said, “It’s going to kill us. It’ll make us question our whole business plan… I think basically it’s going to push future brewers into other markets, other states.”

Watch the entire story from WJXT by clicking the link at the bottom of this article.

In a press release dated April 21, 2014, Eric Criss, president of the Beer Industry of Florida – the industry association for Miller/Coors distributors in Florida – made it clear that his organization was opposed to SB 1714. In the release Criss said, “Brewers and distributors are good partners and some craft brewers need limited retail privileges to build their businesses. Therefore, it’s in distributors’ interest that small brewers should have a well-defined, limited exception in the statute that allows them to operate as retailers, both on-premise and off-premise.”

Criss also came out in support of 64-ounce growlers, currently banned in Florida, but the industry standard in 47 other states.

On the other hand, the Florida Beer Wholesalers Association has been a strong proponent of the bill and has more than doubled its contributions to the re-election campaign of senators who have voted to pass the measure. According to an article in the Miami Herald April 22, 2014, the association has contributed $65,600 to 2014 or 2016 senate re-election campaigns.

In addition, Senate President Don Gaetz, R-Niceville, came right out and told the Associated Press that he would support the bill unquestioningly because craft breweries were a problem to his friend Lewis Bear, owner of the Anheuser-Busch distributorship in Florida’s panhandle. Gaetz received more than $8,000 in contributions from beer distributors for his 2012 campaign with Bear anteing up $2,000.

Mitch Rubin, executive director and lobbyist for the Anheuser-Busch distributer group Florida Beer Wholesalers Association, told Reuters their goal is to re-write the state’s rules governing the craft brewing industry to create strict lines between manufacturers, distributors and retailers, which he said would preserve competition. But, many industry insiders say the actual result of the bill would be to eliminate small breweries that need the ability to sell packaged beer from their tap rooms to foster their own growth.

Still, Senator Kelli Stargel, R-Lakeland, the legislation goal is to bolster the three-tier system of alcohol distribution set up by the federal government after Prohibition. In the three-tier system brewers must sell their beer to distributors who then sell the beer to retailers. The system was originally put in place to keep large beer companies from monopolizing the industry. Somehow, that same system has now been turned to the favor of the mega-beer producers who carry political clout because of their deep pockets and campaign sponsorships.

Senate Bill 1714 has already passed its committee hearings and will be brought up to the full senate on Monday, April 28. Senate has until the end of the scheduled legislative session to pass the bill or it is considered dead. The scheduled date to close the current legislative session in the Florida senate is Friday, May 2.

Intuition Ale Works and Davis have announced that they will hold a post-legislative session wrap-up event at the brewery Saturday, May 3starting at 2:00 p.m. According to the Intuition website, Davis “will provide an overview and behind-the-scenes perspective of the anti-craft beer measures that moved through legislature during the 2014 session.” Davis will also provide information on how craft beer lovers can get involved and support the Florida craft beer industry.

If you wish to express your opinion on SB 1714 you may write your state senator. To find the address of your senator, go to the senate website at: http://www.flsenate.gov/about/contact.

You may also contact Mitch Rubin at the Florida Beer Wholesalers Association at:

Florida Beer Wholesalers Association
215 South Monroe Street, Suite 340
Tallahassee, FL 32301
(850) 224-2337

WJXT story on SB1714

3 Comments

Posted by mwisdom562 on April 25, 2014 in Beer Industry

Tags: AB-InBev, Beer Industry of Florida, Ben Davis, craft beer, craft beer breweries, Eric Criss, Florida, Florida beer laws, Florida Beer Wholesalers Association, florida craft beer breweries, Florida senate, Intuition Ale Works, Lewis Bear, MillerCoors, Mitch Rubin Doan Gaetz, Senate Bill 1714, three-tier system