Terrapin, Creature Comforts and Other Craft Breweries Say Georgia Law Is Holding Them Back
If you’ve visited one of the two breweries in Athens—soon to be three—you’ve probably been surprised that the beer made in the back, the beer you’ve just now watched being brewed and bottled, can’t be sold to you in the front. You have to try finding it at a store. Nor can you buy a six-pack at Copper Creek to take home.
That's because Georgia hasn’t modernized post-Prohibition-era laws that established a “three-tier” system that enforces this seeming irrationality. The distributors—the companies that have to hold the bottles first before you can buy them—contend that the system is intended for the safety of drinkers and to avoid monopolies. The breweries are wondering why nearly 80-year-old laws are keeping them from expanding their businesses and hiring new workers. Prohibition ended in 1933; a six-pack is hard to keep safe in the Model-T while me and the missus catch the new talkie after our trip to the brewery. No thanks, I’ll just pick one up later.
Georgia is the only state among our Southern neighbors still forbidding craft breweries from selling directly to consumers. Small breweries are allowed to flourish in such progressive wonderlands as Alabama and South Carolina. Florida is closing in on a half-century of the sort of relaxed regulations that Georgia continues to balk at adopting, and the pro-brewery climate in North Carolina has enticed major breweries, bringing economic development and jobs to that state. Not so in Georgia.
In fact, Georgia is one of five states remaining where breweries cannot directly sell beer, either packaged or across a bar. The beer offered visitors to Terrapin or Creature Comforts is technically a free sample accompanying a purchased glass. No one’s confused about what’s happening; breweries are left to utilize a loophole to satisfy the market, in effect selling 32 ounces of beer, says John Cochran, president of Terrapin. “I mean, let’s call it what it is,” he says, “You buy a $10 glass, you get two glasses of beer, but it’s ‘free.’”
The inability to sell packaged beer directly to consumers hurts existing and potential breweries and the Georgia craft beer industry in general, say local brewmasters. Georgia should have more than twice the number of craft breweries it has today, says Creature Comforts CEO Chris Herron, but the restrictive laws place a barrier to entry for Georgia brewers. Prospective brewers, unable to start small and sell directly to customers, must seek million-dollar-plus investments to build a production facility sufficient to supply the sort of volume needed by distributors.
“We’re 47th in the country when it comes to breweries per capita,” says Herron. “We’re way behind the curve on this.”
An Outdated System
Since the years after the passage of the 21st Amendment, Georgia has mandated a “three-tier” system for alcohol distribution, where producers must sell to a middleman, which then sells to retailers. While the system protects against the monopolization that occurred in the market before Prohibition, the arrangement has created a network of well-heeled distributors able to maintain their market position by contributing tens of thousands of dollars to legislators’ campaigns. State Sen. Jack Murphy (R-Cumming), who chairs the committee charged with overseeing and regulating alcohol sales and distribution, receives thousands of dollars in campaign contributions from distributors and their various political action committees, even in non-election years. Even the minor changes desired by craft breweries and brewpubs run up against entrenched and well-funded interests with friends in Atlanta.
The three-tier system is also a weird remnant of the temperance movement, now maintained by Georgia’s lasting conservatism, says Sen. Frank Ginn (R-Danielsville), who serves as vice chairman of the regulatory committee under Murphy. According to the Georgia Beer Wholesalers Association, the system of wholesalers protects against alcohol abuse and underage sales. “I read the Bible,” says Ginn, “and it doesn’t say alcohol is a sin, but it says that excess is a sin.”
Those trucks full of Steel Reserve, Bacardi 151 and Four Loko are here to protect against alcohol abuse. Got it.
Craft breweries say they aren’t trying to destroy the three-tier system, only asking for minor revisions to the law to bring Georgia in line with its neighbors. “We have no interest in self-distribution,” says Herron. “We don’t want to have to go buy trucks. We need a distributor, and we love our distributor partners.” Nor does Terrapin want to upend a distribution network that brings its products into every corner of the state, says Cochran.
“Without wholesalers, there isn’t a craft beer industry,” says Nancy Palmer, who represents the breweries as executive director of the Georgia Craft Brewers Guild. “We have no intention of dramatically changing the distribution system. We simply want to modernize the law.”
Palmer estimates that only 1–2 percent of total production would be sold by breweries directly if the laws were changed. And while that amount would only minimally affect wholesalers, it would be a cash boon for breweries. Packaged beer is sold to wholesalers at only a marginal markup, but allowing breweries to sell at retail prices to visitors would provide windfall profits. Palmer says that while the margin on the sale of a six-pack to wholesalers hovers around 15 percent, breweries would see profits of more like 150 percent on direct sales to visitors.
Herron sees this as a necessity to cultivate new breweries in a state lagging far behind the rest of the country in terms of its craft beer market. Despite Creature Comforts being less than a year old, he wants to see the number of Georgia craft breweries more than double to bring the state toward the national per-capita average. “When we get more breweries, it ups the game for everyone,” he says. “There are more people for us to learn from as brewers. And the more offerings there are, the more Georgians are going to get into craft beer.”
The Georgia Craft Brewers Guild estimates that modernizing the laws will add around $375 million in economic activity to the state, when tourism and the entire supply chain is considered. “It’s about jobs, and it’s about economic development,” says Cochran. Proponents of direct sales are hoping that economic development and a Georgia-first mentality will convince legislators to modernize the laws. “We consume 6.2 million barrels of craft beer here, but only 2.2 [million] is made here,” says Herron. “We’re importing [most of] our craft beer.”
Herron explains that successful craft breweries have passed over Georgia in favor of neighboring states when they expand. New Belgium and Sierra Nevada recently invested in new breweries in Asheville, NC, a city much like Athens. “We’re talking about over a billion dollars’ worth of investment in some very neighboring markets because they look at the model here and they say, ‘This doesn’t work.’ There’s no reason to come here when you can go to one of these other states where the laws are much more friendly to breweries.”
State Rep. Spencer Frye (D-Athens) sees it as a local, Georgia-first issue, as well, asserting that “multi-national conglomerates” like Anheuser-Busch InBev maintain undue market control through their support of wholesalers. “Foreigners” affecting Georgia law “doesn’t sit well with me,” he says, “and it shouldn’t sit well with anyone.”
The arguments might be working. Breweries now have a presence under the Gold Dome, and a bill is being prepped to drop in the legislative session that starts Monday, Jan. 12. [UPDATE: After this print issue went to press, the website Brewbound reported that the bill will be introduced to allow breweries to sell consumers up to four pints for consumption on premises and a 12-pack to take home.]
“There’s a general feeling that this issue is getting some legs under it,” says Frye, whose district includes both the Terrapin and Creature Comforts breweries, as well as the Southern Brewing Co. facility under construction in East Athens.
Palmer says the bill will ask for three “simple exceptions” to the three-tier system: permitting breweries to sell pints of beer for on-site consumption and packaged beer to take home, with brewpubs being allowed to package their own beer for sale.
The hope is that the public will pressure legislators to modernize the laws. Terrapin tour-goers are encouraged to participate in the #GABeers social media campaign, sign a petition and contribute to an Indiegogo campaign to fund the lobbying effort in Atlanta.
“The number of jobs and the amount of money coming into the state that Georgia is losing by not having [modernized laws] is ridiculous,” says Cochran.
“For me, that’s our government’s role, to act in the best interest of the state,” says Herron. “We need to be able to grow like normal, healthy businesses.”