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Myths, legends and truths

Myths, legends and truths

After spending more than a decade covering the brewing industry, I can say with certainty that there are two separate beer industries in the United States. You have the craft beer industry, and you have the big boys, and make no mistake, these are two industries that are at odds with each other.

A little background on the three-tier system — the three tier system (production, distribution, retail) came out of prohibition on the premise that separating the three key players would not only protect the public but also allow for the government to collect taxes more efficiently. The tiers were intended to keep any one group from gaining a monopoly.

Despite this, Anheuser-Busch/InBev now owns multiple distributorships throughout the country. In Maryland, they own nine. There are fewer than 20 wholesalers statewide, meaning AB/InBev owns roughly half of the distribution networks in the Old Line State.

Which brings me back to HB 1283, the trainwreck of a law changing the rules for Class 5 breweries in the state. A close analysis of the bill reveals a new set of laws designed to force more beer to run through the wholesalers. Yes, the bill has increased the barrel limit for tasting room sales, however by restricting hours (yes, existing Class 5s have had their hours grandfathered in), it makes it harder on the brewers to sell more beer in their tasting rooms, forcing them to sell more of their beer through wholesalers/distributors.

So, the idea that we still need a three-tier system to protect us from the big, bad brewers, or to combat an industry monopoly? Total myth, otherwise, the legislature would never allow a brewery conglomerate to own half of the wholesalers in the state. Nor would they allow the wholesalers to control the conversation in the legislative halls. But here we are.

This conversation isn’t limited to Maryland. AB/InBev lobbied for years to restrict the ability of Florida brewers to pour the standard 64-ounce growler. Texas brewers are currently fighting legislation that forces them to sell their beer to a wholesaler, and then buy it back from them in order to sell it in their tasting room (by the way, ever notice that farm stands aren’t required to sell their corn to a wholesaler and buy it back in order to sell it to the general public?). Other than lining the pockets of the wholesalers, this law serves no practical purpose.

Why would the big guys concern themselves with the business of these small breweries? To start with, overall beer consumption is down and has been going down year after year for sometime now. Craft beer consumption? That’s up. Which means that the companies that have been losing their share of the market have been the big boys — AB/InBev, MillerCoors, and Pabst account for about 79 percent of the market. When I first started writing about beer, those three brewers accounted for about 95 percent of the market.

Ten years ago, craft was less of a concern for the macros. The small breweries were coming off six straight years of industry contraction — the so-called craft beer bubble bursting.

The craft beer bubble of the late ‘90s — another myth. This gets played up a lot when people talk about there now being too many breweries. It is also wildly overstated.

From 1999 until 2006 the industry lost 104 breweries, with the industry dropping from 1,564 to 1,460 total breweries. That’s less than 15 per year, or a contraction of less than 1 percent per year.

That’s hardly a bubble bursting. But it is used to justify the idea that the 5,300 breweries that are out there now are unsustainable.

Now we’re living in a world where the script has been flipped. Craft has grown and the macros are desperately trying to stem the bleeding, and that’s how we end up with legislation that can have a damaging trickle-down effect on the businesses that have benefitted from the industry’s growth.

Here in Frederick, that means farms in Mount Airy and Walkersville; restaurants and retailers in downtown Brunswick; restaurants in Frederick such as The Roasthouse, JoJo’s, Brew’d Pub, Madrones, and the newly opened White Rabbit Gastropub that have built their taps around the craft beer industry — some specializing in Maryland brews.

So, let’s get on our legislators and get them to revisit these laws in the next session, and make sure they’re passing laws that benefit all of Maryland, not just one, tiny business segment.

Until next month, when I talk to brewers about the Maryland beers they reach for, harass your local lawmakers, be well, and drink good beer.

Cheers!

Originally published in the Frederick News Post on July 13, 2017.

About The Author

Kevin Smith

A veteran reporter of more than two decades, Kevin Smith has been covering the Maryland Beer industry since 2005 when he covered the business beat for the Frederick Gazette. Since early 2007, he has covered Maryland for the Mid-Atlantic Brewing News, and penned columns about craft beer for frederickbeer.com, The Frederick News-Post, Want2Dish.com, and Maryland Life Magazine. He has also written about the wine industry in the Mid-Atlantic region for The Frederick Gazette, Wine Business Monthly, and Hagerstown Magazine. Kevin currently lives in Western Frederick County with his wife, two daughters, and his goofy dog, Fezzik.

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