By Matt Kelly
Floridians are brandishing their growlers as the state’s legislature considers reforms that would finally legalize the popular 64 oz. alcoholic beverage container. Florida is the only state in the nation to prohibit the growler, a legal idiosyncrasy that craft brewers say stifles their growth. An exemption to allow small brewers to self-distribute their beer is also on the table. These proposals have brought the inefficiencies of Florida’s beer regulation to the fore as legislators debate the fate of beer.
Beer regulation in the United States is cumbersome by design. When the 18th Amendment was repealed in 1933, ending Prohibition, policy makers endeavored to keep alcohol prices high and raise barriers to entry into the market. Even after the death of the speakeasy, puritanical sensibilities persisted. The regulation of alcoholic beverages was left to the states, some of which established public monopolies while others constructed byzantine regulations for private companies.
The key provision of post-Prohibition alcohol regulation has been a requirement that producers not sell directly to retailers, but rather contract with distributors who do business with bars and liquor stores. These regulations have come to be known as the three-tier system. Although state laws vary significantly, most divide the three tiers (production, distribution, and retail) into separate interests that cannot intermingle.
Additional laws that restrict breweries’ right to contract with distributors also limit the industry’s growth. These “franchise laws” lock brewers into long-term contracts with only a single distributor, exposing them to supply chain risk and limiting their flexibility.
However, with the impressive growth of craft breweries many states have created exemptions that allow small breweries producing less than a certain amount of barrels a year to self-distribute. As of yet, Florida has created no such exemptions, but does allow sale on a brewery’s premises in so-called “taprooms.”
Self-distribution allows craft manufacturers to compete in a business dominated by a few large firms. MillerCoors and Anheuser-Busch Inbev, together control about 80% of the beer market nationally. Distributors tend to favor these massive companies, which make up the bulk of their sales. Allowing small firms to self-distribute could help level the playing field.
Craft brewers constitute an increasingly vibrant segment of the Florida beer market. A study from The University of Florida counts 90 craft brewers in the Sunshine State, employing 4,000 people, but the potential for growth is far larger. This fledgling industry is projected to reach a capacity of 550 breweries and create over 40,000 jobs.
The three-tier system was intended to raise prices and stifle growth in the alcoholic beverage industry. Indeed, it has accomplished these goals. However, if the state wishes to create jobs and allow business to prosper, it should not only end the growler ban, but also create a self-distribution exemption as 36 other states have done already.