To dismay of craft brewers, Ga. sticking with ‘three-tier’ system

Georgia Public BroadcastingFebruary 16, 2014 

Georgia craft brewers had hoped this would be their year.

They’ve been lobbying state legislators to loosen regulations that some say are stifling their industry, but for now it seems lawmakers aren’t interested in changing rules that have been around since the end of Prohibition.

Some Georgia microbrewers, such as the established SweetWater in Atlanta and Terrapin in Athens, are doing great. But for those still in the start-up phase, life isn’t easy.

Jeremy Knowles and Cory Smith are the co-founders and sole employees of the Macon Beer Co., which started brewing from a converted warehouse downtown over the summer.

At first blush, their legislative wish list seems modest.

“We’d like to be able to sell our beer to the public,” Smith said.

But Georgia, like most other states, has what’s called a “three-tier system” for alcohol. Making beer, distributing beer and retailing beer are three activities that must be done by three separate companies.

“People could come into our taproom and take a tour, sample the products. But when they want some to take home with them, they can’t get it from us,” Smith said.

Macon Beer Co. isn’t asking for the right to retail beer anywhere -- just at the warehouse where they make it. That, Knowles said, would provide what start-ups need the most: cash flow.

“You don’t have to wait 30 days, you don’t have to wait 60 days to get your money. You get it right then, and you can spend it and keep your business going.”

Brewers in North Carolina have been able to sell directly since the 1980s. As a result, the state sometimes called “the Oregon of the South” for its beer-friendly regulations has four times the number of breweries that Georgia has.

A bill that would have nudged Georgia in that direction stalled last year. Between then and now, state Sen. Jack Murphy, R-Cumming, chairman of the Regulated Industries and Utilities Committee, convened a study committee on the issue. His conclusion: Georgia brewers need to work within the status quo.

“If their strategic plan was based on them opening up a microbrewery then changing state law, then that was a poor strategic plan,” he said.

Murphy’s report does throw a bone to craft brewers. It recommends allowing brew pubs that sell food with beer to sell growlers -- big jugs of beer, provided that customers partially consume them on site. Basically, you’d be able to get your leftover beer in a doggie bag.

“The three-tier system has been in place for, what, 80 years now? And what it was designed to do and is designed to do is regulate an industry that needs regulating,” Murphy said.

After the end of Prohibition, lawmakers around the country were trying to prevent the re-emergence of something called a “tied house.”

Imagine a saloon owned by a brewery. They wanted to sell just their own beer, so they’d offer goodies to get you in the door -- free lunch or sometimes even free prostitutes. And then they’d try to sell you more beer to make up the loss, all leading to what upstanding citizens of the day referred to as “intemperance.”

But the three tiers weren’t just a solution to a moral problem, said Carey Wiggins, an Atlanta lawyer who represents people in the alcohol business and formerly chaired the American Bar Association’s Committee on Beverage Alcohol Practice.

“The state used the wholesalers to more or less be private tax collectors,” Wiggins said. Wholesalers helped the government wrestle back control of an industry that had gone underground with bootleggers who weren’t exactly reporting their income.

“And then you get inertia and then you get mission creep, and then next you know, the wholesalers are locked in.”

Today, distributors and their industry groups make regular campaign contributions to legislators, including Murphy.

Knowles at Macon Beer Co. said he’s glad the wholesalers still exist.

“I don’t want to have a fleet of trucks. You know, I want to brew beer and sell beer.”

But, Knowles figures, if the state were to let him sell a few bottles himself, that wouldn’t put anybody out of business.

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