September is Coming!

Patrick Tuley and Joshua Jones

July 5, 2017

For those Game of Thrones fans, we have heard for several years that “Winter is coming.” Less certain, however, was the timing of the much needed reform to Georgia craft brewing laws and regulations.  Finally, thanks to the coordinated efforts of the Georgia Craft Brewers Guild, the Georgia Beer Wholesalers Association, the Georgia Distillers Association and the Georgia Municipal Association, not to mention the support of key elected officials (Lt. Governor Casey Cagle, Speaker of the House David Ralston, Representative Howard Maxwell and Senator Rick Jeffares), a bill changing Georgia’s laws to catch up with the rest of the country was passed and will become effective in September.  So, September is Coming!  To give a complete synopsis and illustrate the importance of this law change, we must start with the past.

Beginning in 1920, the federal government and the separate states collectively banned the production, transport, and sale (but not consumption) of alcohol via the 18th Amendment to the U.S. Constitution and the National Prohibition Act (also known as the Volstead Act). These laws reflected the sentiment at the time that alcohol was the root cause of societal problems in the United States. The unintended effects of the new law, a black market for alcohol and an unexpected increase in consumption, led to the eventual repeal of the 18th Amendment by way of the 21st Amendment, ratified on December 5, 1933.

After Washington released its grip, many states created a “three-tier system” to regulate private companies that produced and sold alcohol.  States were free to decide how independent each level of the three-tier system would need to be. Laws were also set up in states to protect distributors, who were at the time smaller and more numerous, against the leverage of large beer manufacturers, many of whom are the macro-brewers of today.  Alcohol “franchise” laws were created, which in part mandated that breweries designated a sole-distributor for their beer with the state and could not dissolve that relationship without some form of just cause.  The laws of the time were put in place to protect the little guy and serve the needs of consumers.

Now, it seems, the roles have reversed. There are now over 4,000 breweries and brewpubs in the United States, the vast majority of which are very small businesses.  Georgia has been one of the states with a restrictive three-tier system and the requirement of breweries to designate a distributor for the life of the business.  Georgia breweries have not been allowed to sell beer directly to customers from their breweries or taprooms to date.  Instead, the breweries were only allowed to sell only “tours,” and provide samples of their beer to tour attendees.  While this structure is rooted in the post prohibition era, every other state (aside from Mississippi) had made changes allowing for limited retail sales directly by breweries, except for Georgia.

The catalyst of growth in any industry is consumer preference. As every economist would say, the world revolves around supply and demand. If there’s high demand, but low supply, the market should adjust supply to meet demand, lest the price skyrocket for that product. Unfortunately, regulatory obstacles (like the lack of flexibility to sell your own product) artificially prevents the alcohol industry in Georgia from growing with demand. On the other hand, breweries located in states with less restrictive laws still compete for local shelf space with Georgia breweries, which effectively means Georgia breweries have had a hard time getting a seat at their own table.  As a result, many neighboring states that have embraced the craft brewing industry have flourished, and their brewers have had the advantage in selling their beer (even in Georgia) over in-state brewers.

The Brewers Association published an article in June 2016, highlighting the relationship between the market for on-premise beer sales and abundance of craft breweries in the U.S. According to its analysis, states with markets that favor on premise sales are a reliable predictor of the number of breweries in that state.[1] Additionally, the data also suggests that states that allow some degree of direct sales also see better retail sales – that’s money in the pockets of the wholesale and retail tiers.

So how will this new law transform the Georgia Craft Brewing industry?

A well-known local Atlanta brewery, Monday Night Brewing, announced last fall that it plans to expand its operations by building a new facility dedicated to their sour beer production and barreling programs.  The new brewery will include a brand new tasting room and the facility will be built on the Atlanta Beltline.  In addition, Wild Heaven, Banyan Roots and a new entrant to Georgia Beer (but no stranger to craft brewing), New Realm Brewing will also call the Beltline home.  Already on the existing Beltline near Piedmont Park is Orpheus Brewing. These are but a few examples of the industry opportunities that await breweries and their customers in the coming years.  If you have been to Asheville, North Carolina recently, you quickly realize that you can’t walk the length of a football field without encountering a brewery.  With the continued expansion of the Beltline in Atlanta, and the obvious population concentration, it is easy to see why craft brewers are excited about the new law scheduled to take effect in September 2017.

While the beltline is one example of the expansion drive, Athens-based Creature Comforts has also announced a significant expansion of their brewing operations in Athens.  Situated in a redevelopment zone, the new brewery location will provide immediate economic impact and serve as a hub for other redevelopment.  Athens could easily be another brewery destination like Asheville, given the thriving college support, nightlife and music scene.  The implications for craft beer tourism in Atlanta, Athens, Savannah and other locations are exciting.

Because the new law allows breweries to sell beer in their taprooms and packaged beer to go (subject to certain limitations), it allows breweries to exist profitably on a smaller scale. This is already leading to a surge in breweries in formation around the state.  More notably, breweries are planned in many more communities to cater to their immediate locations.  Recent brewery openings in Lagrange (Wild Leap Brewing) and Greensboro (Oconee Brewing) are examples of the spread of the craft brewing industry throughout the state, which will ultimately provide a bevy of new job openings.  In addition, the grass-roots nature of these breweries makes them invaluable members of their communities. Whether through serving the less fortunate in Athens (Creature Comforts’ Get Comfortable Campaign), the support of Veteran Charities (Service Brewing in Savannah) or many other examples, it is hard to understate the role of these brewers in supporting, strengthening and giving back to their local communities.

Needless to say, the other winner from the new legislation is consumers. Never have so many choices existed for consumers to experience such a wide variety of freshly-brewed beers, right in their own back yard.  While the number of breweries (and brewery jobs) in Georgia has lagged, especially on a per capita basis, the new legislation will make local craft beer more accessible for everyone.

It is a brave new world for Georgia, craft beer enthusiasts and the industry. But, September is Coming!  We look forward to buying a pint and raising it soon at a brewery near you.

[1] https://www.brewersassociation.org/insights/importance-on-premise-craft-brewers/

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