Craft Breweries Threatened by Modern Bootleggers
Picky beer drinkers like me have rejoiced at the growth of the craft beer industry during the last few decades. Since homebrewing was legalized in 1978, the craft brewing industry has grown from nearly zero craft breweries to over 5,200. One only has to compare the dull, watery taste of a Budweiser with the fresh, floral taste of a Great Lakes Turntable Pils to know that major macrobreweries produce a lower-quality beer than smaller, local breweries.
Unfortunately, craft breweries like Great Lakes are under attack by regulators and Big Beer. Laws are being considered that will crack down on the use of tasting rooms or “tap rooms,” which are used by small breweries to allow customers to taste their product before buying it in a store or traditional bar. Some proposed laws aim to reduce tasting room hours, require breweries to produce their beer at each of their tasting rooms, or even require microbreweries to sell their beer to distributors and buy it back from them in order to serve the beer in tasting rooms.
Advocates for these regulations include the beneficiaries of the infamous three-tier system. By law in nearly every state, the producers and retailers of beer are separated by a middleman: wholesalers. Originally intended to reduce the influence of vertically integrated saloons from the pre-prohibition era, the three-tier system has enabled wholesaling to grow into a big business. Any threat to the wholesalers’ revenue stream, such as direct sales to consumers at tasting rooms, is threat to both wholesalers and retailers who benefit from the current system.
Wholesalers, retailers, and larger breweries say they feel threatened by the use of these tasting rooms by craft breweries because tasting rooms are far less regulated and require fewer licenses than a traditional bar. But most breweries do not intend to use tasting rooms as a replacement for traditional bars. Many breweries attempt to minimize the bar-like atmosphere (such as refusing to show sports on televisions or refusing to have live music) in order to reduce the risk of violating the law. In New Jersey, for example, craft brewers have already made regulatory concessions, with breweries requiring a full tour every time patrons come to sample beer and banning the operation of integrated restaurants.
Studies show that tasting rooms are vital for the health of craft breweries as a business. As of 2016, nearly 10 percent of craft brew consumption occurs on-premise. For microbreweries specifically (breweries producing less than 15,000 barrels per year), that number doubles to 20 percent. These tasting rooms allow small breweries to build a brand without having to convince wholesalers to buy and distribute their product. One study found that microbreweries with tasting rooms experience double the growth rate of breweries without tasting rooms.
Tasting rooms are not only beneficial for incumbent craft breweries. States that have legalized self-distribution and on-premise consumption, which includes tasting rooms, have experienced an increase in the total number of breweries. Both existing and potential microbreweries especially benefit from the liberalization of these laws.
Lawmakers and regulators often claim to care about the little guy and small businesses. Each of the over 5,200 craft breweries in the United States are small, local businesses which depend on their tasting rooms to survive. If laws and regulations are implemented that hinder the viability of operating these tasting rooms in the interest of protecting the big profits of corporate brewers, many of family-owned breweries across the nation could be driven out of business, harming their owners, employees, and millions of beer lovers. A free and competitive beer industry will best support beer-making families and provide consumers quality beer, not limited to the mediocre choices offered by macrobreweries.
