Thursday, July 24, 2014

The crazy regulations that keep American beer bad

Don Gaetz, the Republican President of the Florida Senate, has found at least one exception to the free market ideology that generally prevails in the GOP. He thinks it's important to keep regulations in place that prevent Florida breweries from selling half-gallon growlers of beer. He's even supporting a new bill that would force breweries to buy their own beer back from beer distributors at a markup before selling it back to customers. Conveniently enough for Anheuser-Bush InBev Distributors — a politically powerful business in the state — this is also the position that they lobby for as most likely to make it difficult for Sunshine State craft brewers to compete with mass market swill.

Jack Latvala, another Republican Senator who supports deregulation tells Saint Petersblog that the current beer distribution system is "like paying protection money" to the mob.

And he's right. An odd legacy of the way that Prohibition ended in the United States is that in most states it's illegal for a brewery to sell beer directly to a bar or to a retail store. Instead, people who sell beer to customers must buy their beer from a licensed beer distributor. These middlemen do nothing to add value, but that leaves them with plenty of free time to lobby in favor of rules that keep the system rigged in their favor. This so called three-tier system naturally disadvantages small breweries because it means new entrants can't simply try to outwork the competition in terms of beer distribution.

But many states have created at least some exceptions to the three-tier cartel system, the most common of which is allowing the operation of brewpubs where brewers sell beer directly to customers. Growlers (basically big jugs you can fill at a tap) have risen in popularity as a way for brewpub customers to enjoy craft beer at home. And in fact Florida currently does allow growlers — one quart growlers and full gallon growlers — it simply prohibits the half-gallon growlers that are industry standard in 47 other states. Craft breweries would like freedom to adopt industry-standard practices. But incumbent beer distributors would like to close the direct-sales channel and force breweries to sell beer to distributors, then buy it back at a markup, and only then sell it to customers. And lucky for them they have an ally in Gaetz.

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