The Blog

Issues in Focus: Georgia Breweries

Posted on January 29, 2015

By: Nathan Lavender and Andrew Stoehr

Fairness. It’s a quality we cultivate in this country and this state. This quality extends to small businesses trying to compete in today’s competitive world. However, in Georgia, one group of businesses is not treated with the same fairness the rest of our state’s industry enjoys: Georgia’s Brewers. Craft breweries are breweries that make specialty beers in limited amounts to be sold locally. These breweries first came to prominence about 30 years ago after a long fight to become home brewers. With the deregulation of the brewing industry, home brewers were finally allowed to bottle, sell and market their own unique beers and other products leading to a new level of creativity and cultural appreciation. Today there is a fight in Georgia over the strict regulations and rules placed on these businesses. Those working to ease these regulations aim to make sure that Georgia puts breweries on an even playing field with wineries and other small businesses.

Most states regulate their alcohol industries by using a three-tier system. The business makes the beer, the wholesaler buys the product and sells it to retailers, and the retailers sell the beer in their store or restaurant. In Georgia, the wholesaler’s role is heavily regulated. All three tiers must be independent of each other, and a manufacturer cannot hold a wholesaler license nor a retail license. Manufacturers can only sell product brands to one wholesaler by region. For retailers, this creates a monopoly on products, eliminates competition, and leads to distorted prices. Wholesalers are then required to sell the beer to all retailers pre-disclosed, uniform  price. This warps costs even more, further harming small breweries.

Legislation that prevents breweries from selling alcohol directly to consumers harms Georgia’s small breweries. Title 3 of the Georgia law makes specific designations as to how a brewery can operate. According to the Code, breweries, or brewpubs, are designated as eating establishments that can only sell beer in draft form and specifically not for sale by package for off-site use. These burdensome statutes harm Georgia’s craft beer businesses.

Over-regulation has stifled the industry’s growth. Not only does Georgia trail craft beer juggernauts like Vermont, Colorado and Oregon. Per capita, our state ranks 43rd in economic impact of craft breweries, behind regional competitors like North Carolina, Louisiana and Virginia. Our market is also less competitive as Georgia ranks 47th in the number of breweries per capita.

Numerous other states have seen success through a less restrictive approach. California, Oregon, Colorado and Washington make up approximately one-third of the country’s craft brewing industry. All of these states allow direct-to-customer sales. California and Colorado also allow manufacturers to hold wholesale licenses. In Washington, the process is entirely run by the state using the Washington State Liquor Control Board to determine the pricing for beer. Washington’s policy allows for uniform pricing from the manufacturer to the distributor and from the distributor to the retailer, eliminating confusion and simplifying the process.

Our neighbors have also adopted more flexible policies. Florida, South Carolina, North Carolina, Tennessee, and Alabama each allow breweries to sell directly to the consumer. Rational statutes have allowed these breweries to raise revenue, attract workers, and expand their operations in cities like Asheville, NC. In turn, expanding breweries adds additional tax revenue to states and provides positive economic impacts in their communities by boosting tourism. Georgia’s approach has left the state importing almost 70 percent of our beer.

The most important reform, limited direct-to-customer sales, is particularly important for small breweries. Small startups in this industry need cash on hand at all times to stay afloat. Without direct-to-customer sales, most breweries have to wait 30-60 business days to receive their earnings from selling to wholesalers. Easing the current regulations on this industry would quicken the cash flow for small businesses, giving them the chance to survive and succeed.

Recently proposed changes aim to provide limited exceptions, such as the operation of tasting rooms, to the three-tier system and align our policy with the rest of the country. In 2014, Spencer co-sponsored HB 314 which allowed for limited amounts of beer to be sold on-site at breweries and allowed Georgia to collect taxes on this sale. While this legislation did not pass, a similar bill has been introduced in Georgia this year in the form of Senate Bill 63. As Georgia considers changes to the laws and regulations governing our brewery businesses, we should seek to bolster competition both as a state and within our industry by limiting government intervention and creating a fair playing field.

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