It’s the economy stupid……

State favoritesBy the time the 21st amendment was ratified in 1933, the country was in the Great Depression.  Unemployment numbers were not sugar-coated in those days as they are now, and the jobless rate was reported as high as 25%.  One in four adults was out of work.  Once the depression had reached its depth, the brewers got smart.  By rescinding the 18th amendment, the brewers had explained to Congress and the President that, not only could the government realize the benefit of the tax revenue stream, but more than 10,000 direct jobs would be created along with thousands of in-direct jobs.  Tied houses could be eliminated by using a three-tiered system.  Congress was convinced. The great experiment had failed, the 21st amendment became law and the rest is history.

Last week the WSJ chronicled the craft brewers’ efforts to change the beer laws in Michigan.  The brewers want to raise the definition of a microbrewery to 60,000 bbls, from 30,000 bbls.  A second bill would raise to two the number of on-premise retail sites that a brewery can directly sell beer for consumption.  The current limitations on local craft brewers have halted millions of dollars in investment for the state.  One brewery pulled the plug on a million-dollar plus renovation that would have created 20 new jobs.  Another brewery stated they scaled back their growth by putting on hold a $2 million dollar expansion and over 100 new jobs.

The article goes on to highlight statements by State Sen. Howard Walker, who has introduced an omnibus-style bill in the senate which would cut out a wide range of “laws that were designed in the ’30s.”  The bill, however, has been bottled up in committee for a year and half, blamed on the lobbying by the Michigan Beer and Wine Wholesalers.

Through extensive lobbying, wholesalers, in conjunction with retailers, have gotten state laws passed which were favorable to their individual and collective interests.  At the time, opposition to these changes was minimal.  The changes, however, were certainly not limited to laws which included cash upon delivery, franchise protection, no dock sales, territorial protection, three tier restrictions, no dueling of brands and many more.  The wholesalers have been very successful and continue to be.

The rise and dramatic growth of the crafts are forcing the states to revisit these laws as the number one concern for the crafts are simple:  crafts need access to the marketplace.  As previously mentioned, carve out laws help to resolve crafts’ and imports’ issues with wholesalers’ lack of focus on their brands.  So the real question is, are these strategies the most effective ones for crafts?

Michigan, with bankrupted Detroit, appears as if it could play out as a template for all craft brewers by using the prohibition era-position strategies that AB, Pabst, Schlitz, Falstaff, Miller and others used to get the 18th amendment appealed.  Attacking the laws written and modified over the years by the wholesalers directly is, at best, a long-term process.  States need money and jobs, crafts can now provide that with their dramatic growth.  For craft brewers, it’s the economy stupid!


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