In the last decade, Georgia officials reexamined a series of century-old laws that regulated the state’s alcohol industry. Georgia legislators reformed some of those laws — but not all of them.
The reforms that were passed undoubtedly gave the Georgia craft brewing industry a boost.
But people who work in Georgia’s craft brewing industry say those unchanged Prohibition-era laws not only deprive the Peach State of jobs, they also deprive the state of new economic development prospects.
As a result, Georgia Craft Brewers Guild Executive Director Joseph Cortes said recently, “the biggest threat [to craft brewers] in Georgia is actually [government] policy.”
Georgia legislators, craft brewers went on to say, have more work to do.
Reforms, Followed by Growth
As part of the 1933 repeal of Prohibition, states were empowered to create their own alcohol policies, with regulations differing greatly between individual states. Some of Georgia’s most onerous alcohol laws have been unchanged for nearly 100 years.
One of those laws, says craft industry consultant Crawford Moran, is the “franchise” or three-tiered distribution system. Georgia, Moran went on to say, adopted a system that separates the industry into three tiers. Production facilities, like breweries and wineries and distilleries, fill one tier. The next tier is a wholesaler distributor. The third tier is the retailer.
What does that mean for someone who wants to enjoy a local brew? Craft brewers are required to sell their product to wholesalers, who then sell those products to retailers, like restaurants, package stores, or grocery stores.
Before these regulations were reformed, a brewery couldn’t offer samples of its product and also sell six-packs to go.
Until 2015, craft brewers in Georgia didn’t have the sales volume in their brewpubs to make a profit and still obey the law, said former State Senator Hunter Hill.
Hill explained the dilemma from the perspective of a craft brewer:
“I must sell all my alcohol at wholesale prices to the distributor and then the distributor sells it to the retailer and then the retailer sells it to the people,” Hill said. “There wasn’t enough [margin] in there.”
Relief for brewers was long in coming, but it eventually came.
Hill successfully carried a bill through the Georgia General Assembly, nicknamed the Beer Jobs Bill, which passed in 2015. The legislation allowed customers to purchase around two pints of beer for on-site consumption. They could also take home up to 64 ounces of beer in a single container, such as a growler. But there was a catch: The beer had to be included in the price of a tour of the brewery, and customers could take that drink home as a sample or souvenir.
“Just getting it [the bill] through, everyone saw that it wasn’t this big, horrible dragon. The thought was it was really going to hurt the distributors. It’s going to hurt their business model because if you crack the side of letting craft brewers make the product and sell it retail then [distributors] were worried about their protection under the law,” Hill said.
“My thought was if a small business could sell a little bit of their product retail and create some customer connection with the product then it would help the whole industry but, most importantly, it would help those small businesses get a little momentum as they were making their craft.”
In 2017, state legislators passed Senate Bill 85. The new law permitted breweries to sell directly to consumers in their taprooms. They could sell 3,000 barrels of beer per year directly to customers.
Joseph Cortes, Georgia Craft Brewers Guild Executive Director, said SB 85 was a major catalyst for the roughly 80 breweries and brewpubs statewide that the Guild represents.
“That allowed breweries to open up, and the ceiling was raised a little bit in terms of breweries being able to actually invest and succeed in Georgia,” Cortes said.
Flash forward to 2022, and craft breweries can be found in every corner of Georgia. The Brewers Association, which cites data up to 2021, reported that Georgia had 155 craft breweries and that craft brewers in the state put out more than 550,000 barrels of craft beer per year. In 2015, the year Hunter Hill’s “Beer Jobs Bill” was passed, there were only 45 craft breweries – less than a third of today’s number.
“That’s a huge leap,” Cortes said.
SB 85 “was a huge step forward for his guild members,” said Cortes.
“But it was just a step,” Cortes said. “It didn’t solve all of the issues that our small brewers faced from a policy standpoint.”
These changes in Georgia law helped the state’s craft breweries stay afloat.
“They can at least be able to succeed and get by,” industry expert Crawford Moran said. “But more needs to be done to make it much more viable. There are a lot of people out there running small breweries who are really struggling.”
Competition from North Carolina
In other states, deregulation has allowed craft brewers to make a healthy profit and contribute to their state’s economies. North Carolina, and Asheville in particular, is quickly becoming a popular vacation destination for craft beer fans.
In 2019 North Carolina officials passed a law that allows breweries to sell, deliver, and ship up to 50,000 barrels of beer per year.
As stated, Georgia law restricts craft brewers to sell 3,000 barrels per year.
State Rep. Kasey Carpenter (R-Dalton) owns a microbrewery in his home district. He said potential customers bypass his establishment and travel on weekends to the brewery haven of Asheville.
And Carpenter said they leave because the Tar Heel State’s craft brewing laws “are 3,000 times better than the laws in Georgia.”
“They come back and say ‘Damn, I wish Georgia was more like Asheville,’” Carpenter said, dejected.
“The Most Onerous Part of Georgia Law”
Eventide Brewing cofounder Nathan Cowan offered another analogy to explain Georgia’s current craft brewing laws. He invited readers to imagine they own a small business.
“Imagine that that business sells a thing. You have one sales rep. You cannot fire that sales rep. They get to tell you what their commission is going to be,” Cowan said.
“And if you don’t like it then that is OK [with them] because they sell your competition’s product. And that is the situation that we have in the state of Georgia. That is the franchise laws.”
These franchise laws are “the most onerous part of Georgia law,” according to craft industry consultant Crawford Moran.
“It almost seems unconstitutional when you really look at it. If you are a brewery or a winery or a distillery, you can only operate in that tier, and you cannot be a wholesaler and you cannot be a retailer,” Moran said.
“You have to sign up with a wholesaler and when you sign up with a wholesaler under the franchise law then they own the [distribution] rights to your brand forever. And that ends up being, as you can imagine, ridiculous. It’s impossible to defend.”
Moran said these laws give all the power to the wholesalers and not the breweries or the retailers — and certainly not the consumers. He said these laws deprive Georgians of more choices and force them to pay higher prices for the options that they do have.
“We get fewer jobs,” Moran said. “We also get less of the economic development that goes along with those things.”
Meanwhile, Cowan said Georgia’s brewery laws are depriving consumers of the kind of variety that is easily found in other states. Cowan explained that at any one time Eventide Brewing has 19 styles of beer on draft at the brewery but only three are available in the statewide wholesale market. That means only local consumers are able to access Eventide’s full range of products.
“If you are a craft beer bar then what are you selling? You are selling variety. You are selling uniqueness. You are selling stuff that, unless you are at the brewery, you cannot get,” Cowan said.
At the same time, he said, there are a lot of breweries that don’t make anything that doesn’t go through wholesale because they don’t really have a strong taproom, so you are stifling creativity.
Attempts to reach members of the Georgia Beer Wholesalers Association and the Georgia Wine and Spirits Wholesalers Association for comment were unsuccessful.
A Place in the Neighborhood to Spend Money Locally
Why should Georgians care about the craft brewing industry? What sets these craft brewers apart from the larger beer manufacturers?
According to Craft Brewers Guild Executive Director Joseph Cortes, the answers are, sometimes literally, in our own backyard.
Small brewers, he said, “make products that are brewed locally, close to home, and they provide gathering spots in neighborhoods. That is an important aspect of why people enjoy craft beer and enjoy local and small breweries. There is a real focus on quality and innovation.”
Industry expert Crawford Moran, meanwhile, said Georgia has plenty of untapped potential.
“We want to create a manufacturing base, and that is what breweries are. It just used to be [we had] breweries in Atlanta, and it was kind of an urban thing. Now they are all over the state, in small communities, and people see how important they are to the small communities,” Moran said.
“Politicians should pay attention to their small breweries and ask, ‘What do you guys need?’ Then look at the laws in other states and other areas of the country. What helps those industries succeed? And then change the laws of Georgia to reflect that to allow more jobs to be created, more businesses to grow and flourish, to improve people’s lives and to make Georgia a better place to do business.”
Feds Ask for Reform
In February, the U.S. Treasury Department published a 63-page report that examined America’s beer, wine, and spirits industries.
Titled “Competition in the Markets for Beer, Wine, and Spirits,” the document encouraged state government officials nationwide to examine the effects of their regulations on small producers and their ability to compete, including their access to distribution.
The report, in its conclusion, asked that state governments consider changes that would “eliminate anticompetitive effects” and “bolster competition.” It specifically mentioned one law that still haunts Georgia’s brewing industry – the three-tier distribution system.
“For example, state legislatures might consider if the benefits of the three-tier system outweigh its costs to competition and study markets without a three-tier system,” according to one passage.
The Work that Remains
When it comes to the path forward for craft beer regulation, industry consultant Crawford Moran would tell legislators to focus on “freedom and free markets.”
Brewery owner and State Rep. Kasey Carpenter said his colleagues in the legislature should permit craft brewers to self-distribute within their respective counties. He argued this would be good for distributors as well as producers.
“This would allow brands to really grow on their own. When they [the craft brewers] went to the distributor to get a contract they could say ‘Hey, we have this product. Here it is. This is what we have done in our county. We think that it’ll go well state-wide.’ Revenue shows they have a proven product,” Carpenter said.
“But, as it sits now, they just have to go to the distributor and dance around and say ‘Yeah, people love our beer, but good luck.’ Maybe they do. Maybe they don’t. So, the distributors are taking a lot of risks by bringing in those products because if they don’t sell them then they have to buy them. And then they have to try to get rid of them. If you could eliminate that then there is no telling how much product it would save them.”
Joseph Cortes said he wants the members of the Craft Brewers Guild to be able to compete with their rivals in surrounding states.
For longtime craft brewing supporters like former State Sen. Hunter Hill this cause is about more than merely assisting Georgia’s craft brewers.
“It’s about creating an environment that is good for small business. It’s about allowing people to compete and not have rules, regulations, and laws hampering their ability to bring their creative energies to the marketplace. That was my goal. I think we accomplished that,” Hill said.
“I hope someone carries the banner for the next industry or even for this one to the next level.”
