States Competing to Make Best Business Climate for Craft Brews

Last week, South Carolina’s took a big step toward helping a burgeoning small business vertical: local craft breweries and distilleries. Unfortunately, the brewing and distilling business remains one of the most over-regulated industries, tied up in decades-old red tape and purposefully problematic regulations put in the way by “Big Beer.”

Earlier this week, Gov. Henry McMaster signed S. 114 and S. 275 into law. The new legislation provides a glimpse of what many Americans hope to see across- the- board to help small businesses boom throughout the country. Unlike their neighbors to the north, South Carolina legislation now allows small breweries far more freedom to expand their offerings. S. 114 allows breweries to participate in charity and other events and fixes a recent crack-down on craft breweries pouring their product off premise in the name of charity. S. 275 finally allows S.C. brew pubs to also offer liquor in their forms of expansion.

The laws mark a slow and steady march towards better business climate over the past 5 years. In 2013, they began allowing craft breweries to pour beer for patrons on premises. In 2014, they allowed food to be served, and now they’ve gone further to help the small business owners. The results are clear: we’ve seen an increase in breweries from 8 to 42 since 2014.

Unlike their neighbors to the north, South Caroline has been making steady progress in improving the small business climate for breweries. North Carolina has been doing their best to quash the “Craft Freedom” movement and it looks like 2017 will be no different. N.C. breweries have a very low cap on production. If they exceed that 25,000 barrel cap, they are forced to turn over While North Carolina’s breweries are forced to hand over their distribution rights after producing a certain amount of beer (once you’re finally making it in the craft beer world, you’ve gotta give a huge chunk to unnecessary middlemenit all up to the government), South Carolina’s legislation protects the freedom of choice and action by allowing breweries to donate and participate in charity and nonprofit events, allowing growth without fear of losing basic freedom of choice.

Relationships should be built upon voluntary choice, promoting mutual respect and mutually beneficial outcomes.

Craft beer’s popularity has exploded over the last few years throughout the entire country and beer giants like Budweiser are trying their hardest to jump on the craft beer train. But that’s just it–small breweries are popular because they are everything big beer is not. They represent the little guy; the small business owner. Why not just let them be? Legislation should protect the rights of small business owners in regards to their level of regulation within the business itself.

It’s one thing to prevent minors from consuming beer–it’s far different than forcing breweries to give up their rights’ to distribution because they’ve grown. South Carolina legislators understand the importance of supporting small businesses owners by trusting the judgment of the individual while setting a general standard throughout the entire state by appreciating the beauty of small businesses. Moreover, South Carolina provides an example of what happens when government fosters the expansion of a business without punishing them for their growth and competitive edge against billion-dollar corporations.

Relationships should be built upon voluntary choice, promoting mutual respect and mutually beneficial outcomes. In these unions both parties are better off with each other, than they are alone. Voluntary relationships can create tremendous value to this world, however these only exist when parties are free to associate, finding cooperation at the right time, place, and manner.

If this makes perfect sense in personal relationships, why is there disconnect when we think about business relationships, such as breweries and distributors? More specifically, the 25,000-barrel self-distribution cap involuntarily imposed on local brewers by North Carolina.

North Carolina law forces brewers to hand over 100 percent of their distribution rights to a third party once they produce 25,000 barrels.

In a voluntary market, breweries oftentimes find themselves in need of distribution services outside of their own capacity. Breweries may be growing too fast for their self-distribution efforts, they may be unfamiliar in a new market, or decide they can cut costs by using a third party.

Other entrepreneurs see this opportunity and offer their expertise in distribution, competing against other distributors to help solve this problem confronting breweries. Oftentimes forgotten, distributors are also competing with the breweries’ right to say “no” should they not benefit and keep distribution in-house in a voluntary market.

Relationships in which one party benefits only at the expense of the other party are usually called “zero sum.” A zero-sum mentality fails to see how both parties benefit from voluntary interactions.

Forcing relationships between breweries and distributors makes at least one party in the relationship worse off. But that is exactly what North Carolina has mandated upon brewers via multiple antiquated regulations. Wholesaler and big-beer company lobbyists are using the law to benefit themselves at the expense of smaller brewers and consumers. These groups have framed the debate, pitting what should be two mutually beneficial parties against each other.

Lobbyists and legislators have utilized adversarial tactics to make brewers and distributors look as if they are at war with each other. There really is no other outcome if policy continues to use the strong arm of the government to penalize and take away the rights of brewers to self-distribute their product over 25,000 barrels.

Relationships in which one party benefits only at the expense of the other party are usually called “zero sum.” A zero-sum mentality fails to see how both parties benefit from voluntary interactions.

Absent coercion, zero-sum relationships rarely if ever exist. If one party were to suffer or be made worse off in a relationship, then it wouldn’t happen or it would quickly end. Mistakes are made and bad things do happen, though in a voluntary market there are always choices elsewhere.

In addition to self-distribution, there are many other liquor- and beer-related laws in need of reconsideration. As it stands now, breweries have few rights if they make a mistake when forced to pick a distributor. Laws supported by the wholesalers make ending a relationship with a distributor either illegal or so expensive the brewer is forced to maintain the inefficient partnership.

Trouble is, no brewer wants to make it look like distributors aren’t wanted. In a free and voluntary market, the two industries can benefit tremendously from each other.

In a free and voluntary market, the two industries can benefit tremendously from each other.

However, wholesale union leaders are very happy to make it look like the breweries are the problem. Wholesalers fought raising the alcohol limit cap that passed in 2006. Now they allege brewers at the 25,000 cap are trying to push out smaller brewers and destroy public health all because it is apparently “greedy” to want to sell and market your own creation the way the business owner sees fit.

It seems hypocritical to insinuate another party as controlling or greedy when in fact it’s wholesalers using government force to push brewers around. And it’s not just in North Carolina. Check out wholesaler claims in Florida, Massachusetts and Texas over the past few years.

As long as we allow government the power to destroy beneficial relationships, lobbying will go on. It’s time for brewers to get their rights back to choose their own methods of distribution. Then, once the government is out of the way, distributors and brewers can finally find the relationship they are looking for at the right time for both — ensuring our beer is made and distributed by a happy marriage, not one born of cheap political tricks.