Critical Drinking

Critical Drinking — Georgia’s Race to the Bottom

Georgia’s been giving away its breweries—and the revenue that comes with them—for years. Consider this one stat as an example: a small Peach State beer maker that produces 3,000 BBLs a year will generate $84,000 annually in state and local excise taxes—and that’s not even counting sales, use, payroll, and other taxes. But when that beer maker decides that Georgia's laws aren't favorable to small business, that money leaves the state.

Nevertheless, the Georgia Beer Wholesalers Association has relentlessly lobbied—making substantial political contributions along the way—to maintain Georgia’s beer status quo. The state’s laws are some of the most restrictive in the country, and year after year, the GBWA has opted to cling to an antiquated system where they maintain control of the sales of a product they don’t make. In doing so, they’ve stifled growth and turned off many would-be entrepreneurs who opt to open their businesses and contribute revenue to locales outside Georgia’s borders. 

When I talked to Atlanta resident Byron Burroughs a couple years ago, he was in a pretty good spot, as far as small beer businesses go. He’d opened a bottle shop in 2007, expanded that shop in 2009 (200 bottles! 50 taps! Growlers to go!), and added a brewpub in 2012. By 2015, he needed a production facility, so he opened one of those, too. Proof Brewing Co. produced 4,500 barrels of beer in 2016 (and is on track for 6,500 in 2017), they recently launched cans of their popular Eightfive-0 Pale Ale and Mango Wit, and are close to maxing out that still-young production facility. 

The catch? In order to live that dream, Burroughs had to move out of Georgia. Proof’s located in Tallahassee, where the laws are much friendlier to craft beer and where Burroughs and his company have been leading a city’s beer awakening for a decade now.

"Being from Atlanta, we definitely considered opening there," Burroughs said. "Unfortunately, there is such an antiquated system in place that seems resistant to change and positive growth that it seemed too much of a financial risk."

A lot has changed in the Peach State since I first spoke with Burroughs a couple years ago. And yet, you still can’t buy beer from a Georgia brewery. And, if Mississippi has its way, Georgia will be the only state left in the U.S. with that archaic designation. The Georgia Craft Brewers Guild hopes to affect big change in 2017, but that's no easy task. Historically, it’s been an ongoing fight between the GCBG and the GBWA, but signs are pointing to unprecedented compromise. Could 2017 be the year that changes Georgia beer forever?

Between 1993 and 2002, a handful of craft breweries and brewpubs began popping up in Atlanta, Athens, Savannah, and Columbus. Elder statesmen such as Red Brick, SweetWater, Five Seasons, and Terrapin laid the groundwork for a state that now boasts more than 50 beer makers

Georgia's alcohol laws have long been restrictive. And it wasn't until the state’s 6% ABV cap was lifted in 2004—and even then, only raised to 14%, at which it stays to this day—that breweries started opening up at a rapid clip. Along with those breweries came better legislation in fits and starts. In 2010, local governments started allowing the sale of growlers at retail establishments. In late 2011, citizens of Atlanta and Decatur voted overwhelmingly in support of Sunday sales, allowing Georgians to—gasp!—purchase beer on any day of the week. (Other municipalities quickly followed suit throughout the state.)

According to a study the Georgia Craft Brewers Guild did with nonprofit national trade group, the Brewers Association, if the Peach State were able to raise its per capita breweries number up to the national average (currently, Georgia’s 48th out of 50), that uptick in new businesses would result in a projected 1,459 jobs and a $375 million economic impact. The GCBG thinks improving Georgia's laws is the way to create those jobs. And indeed, if we know anything about the “own-premise” revolution, it’s that progressive beer laws have a huge impact on a state’s economy.

It’s not like Georgia isn’t trying. Or that Georgians don’t love beer. Metro Atlanta also has loads of beer festivals—too many, some have argued. If you’re looking for the Big Names Of Craft, from Dogfish Head to Allagash, Boulevard to Founders, Bell’s to Sierra Nevada, Atlanta’s got them all. Our bars—led by Brick Store Pub and The Porter Beer Bar—are some of the best in the world. We’ve got fully stocked bottle shops all over the place. But it's up to local brewers, distributors, and lawmakers to decide whether these people will get to enjoy Georgia craft beer.

The GCBG argues that allowing direct sales for Peach State breweries would help all that. Currently, production breweries can’t sell directly to customers. No draft in-house, and no growlers, six packs, or bombers to go. No anything.

The GCBG worked with lawmakers to introduce bills that were tabled in 2013 and 2014. Eventually, they found some success when the Georgia legislature passed Senate Bill 63 in 2015, which granted Peach State breweries the privilege to sell tours at different price levels, including different amounts of “souvenir” take-home beer. But even that was thwarted by a thoroughly dubious Department of Revenue policy bulletin, the consequences of which took months to eventually sort out, brewers essentially having to fight for clarification to sell tours (not beer, of course), the right for which was granted by Georgia law just three months previous. If your head is spinning after reading those sentences, imagine the confusion of the average consumer who walks into a brewery in Georgia. Unlike the vast majority of the rest of the country, we’re required to jump through a profoundly complex set of hoops if we want to acquire a beer directly from its producer. After a year spent regrouping in 2016, including another stifled bill in the Georgia legislature, the GCBG is back and hoping to allay some of that confusion.

Production breweries in Georgia can’t sell directly to customers. No draft in-house, and no growlers, six packs, or bombers to go. No anything.

Meanwhile, a surprise victory came in March 2016. Savannah’s Moon River Brewing Company became the first Georgia brewpub to sell a growler of beer to-go.

“I heard that Georgia Department of Revenue Commissioner Lynne Riley was now interpreting the existing law as allowing growlers for a brewpub, and that the DOR would defer to local governments to decide for their own communities,” Moon River owner John Pinkerton told me at the time. “We have a good relationship with the city of Savannah. When we met with them recently, they essentially said there was nothing preventing us from selling growlers. I’m a naturally suspicious person, so I was still feeling pretty insecure about moving forward. But on that morning, Commissioner Riley called me personally in response to an email inquiry I’d sent her. At that moment, I decided to pull the trigger.”

Savannah led the way, and Alpharetta, Forsyth County, City of Atlanta, and other municipalities followed suit. How did this happen so quickly amidst years of unrelated legislative frustrations for Georgia beer makers? The short answer is that it's kind of been legal ever since Georgia first got growlers in 2010, but the problem has been getting the DOR to sign off on a regulatory interpretation.

Lawyer Taylor Harper picked up the cause in the fall of 2015. He explains that the DOR has always considered growlers an on-premise sale in that the package (in this case, a keg) is broken (read: tapped) in order for a growler to be filled. Although brewpubs—which are restaurants and breweries combined—are forbidden by their brewpub licenses to make direct off-premise sales (though they can sell their beers in retail outlets through a wholesaler, of course), they all have on-premise licenses for the beer they sell in their establishments. TL;DR—the DOR decided it wasn’t interested in regulating growlers, so once Georgia’s brewers got that in writing, it was up to municipalities to make the call.

Once again, we’re left with a small step in the right direction that necessitates a convoluted paragraph to explain it. Welcome to Georgia, y’all.

The Georgia Beer Wholesalers Association is the sole opponent to the bills that have been presented in recent years. The wholesalers do things like take Georgia’s governor to breakfast and shovel money at political heavyweights like the Lieutenant Governor in order to get what they want year after year.

Aside from the fact that owning and operating a monopsony is a profitable way to do business, why Georgia beer wholesalers insist on the status quo is a bit of a mystery. After all, a more lenient system works just fine in 48 other states, most of which have more breweries and many of which make more beer than Georgia. (According to the GCBG’s latest data, Georgia ranks 48th in breweries per capita, 41st in economic impact per capita, and 17th in overall craft beer production.) If there was more beer in Georgia, there would be more beer distributed in Georgia, which would put more money into the pockets of the people who are trying to stop this potential growth. The whole thing is extremely thinking face emoji.

If there was more beer in Georgia, there would be more beer distributed in Georgia, which would put more money into the pockets of the people who are trying to stop this potential growth.

To play devil’s advocate, though, would allowing Peach State breweries to sell some of their product directly to consumers affect the wholesalers’ revenue? Possibly, yes. It’s possible that some of the beer that consumers would buy when they’re at a brewery could affect the amount of beer they buy when they’re at bars, restaurants, gas stations, grocery stores, bottle shops, butchers, convenience marts, candy stores, and all the other myriad Georgia businesses that sell beer. But the average consumer doesn’t go to a brewery to make their average beer purchases. They go to a brewery for special occasions—a bottle release, a friend’s birthday, an event (comedy, music, etc.), because it’s a way to kill some time, etc. When the average consumer wants to go beer shopping, choice is king. You don’t get that breadth of choice at a brewery.

It’s also worth noting that, in Georgia, it’s practically impossible to run a production brewery that makes less than a few thousand barrels of beer annually. Small-but-much-loved operations like Side Project Brewing in Missouri, Sante Adairius in California, De Garde Brewing in Oregon, Casey Brewing and Blending in Colorado, and Jester King Brewery in Texas couldn’t make enough money at that scale in Georgia once a distributor has taken its cut. And that takes a toll on a beer culture when you can’t have those exciting, small-batch, weirdo innovators that create hype and drive tourism dollars. Instead, you get a bunch of beer makers who are trying to grow as quickly as possible to make ends meet, which leads to scaling too quickly, spreading the business thin, and sometimes even putting bad beer into market because they can’t afford to dump it. None of that does anyone—brewers or distributors or consumers—any good.

They’re not dumb, they knew a model like this would mean more breweries and ultimately more growth.
— Tim Dennis

If allowing some flexibility in the market would help everyone, why do the wholesalers insist on owning the marketplace? After writing about Georgia beer and its curious laws for six years now, I honestly don’t know. Ask one of the lower-level employees from one of Georgia’s handful of big name distributors, and the dudes—99% of the time, they’re dudes—on the street schlepping beer from bar to bar to shop to shop will tell you that, a) yes, of course it makes sense for human beings to sell the beer they brewed directly to other human beings, and b) it’s silly that their bosses care about such things at all, and c) it’s gonna happen anyway one of these days, so whatever. Of course, those dudes won’t say that on the record. And they don’t think it’s funny when you joke that you just tweeted what they said.

Truly, I feel for the wholesalers. They seem to think it’s their job not just to distribute the beer that Georgia’s breweries and brewpubs make, but to defend to the death the fact that they’re the only ones who can do that. And since it’s such an illogical position, especially in the face of ever-continuous craft growth both in Georgia and beyond, the arguments they’re forced to make sound a little more preposterous every year. Here are a few from GBWA Assistant Director and official mouthpiece, Martin Smith:

* In November 2014, Smith told The Atlanta Journal-Constitution that “what (craft brewers) aren’t telling you is that any changes to the current system could negatively impact the state economy, result in higher-priced beer at fewer outlets across the state and create less regulation for what is considered a controlled substance.”

* “If you want to be specific about these other states,” he said at a Georgia Senate hearing in February 2015, referring to the fact that Georgia makes more beer than most of its bordering neighbors, “it’s not just that states that touch us have different rules. They should be looking at us and saying, ‘Why aren’t we more like Georgia?’” (This one got a big laugh from the assembled brewers at the hearing.)

* In March 2015, he really went for it, implying that Georgia’s beer scene could rival Mexico’s if breweries sold some of their beer directly to customers: “When you allow producers to have access and allow retail, you allow that slide into what happens in the rest of the world where large producers own everything. In Mexico, 90% of the market is controlled by one entity. It allows the manufacturer to own the retail.”

All of which is to say: Georgia breweries only have one customer (their distributor), they’re completely at that customer's mercy, and that customer is not interested in them having other customers. Thanks to onerous franchise laws, if a Georgia distributor is doing a bad job (which is extremely difficult to prove objectively in a court of law), the brewery’s only recourse is to pull out of distribution for four years before signing with a new one. When you can’t sell your own beer, it’s not a viable business option to stop distributing it for four years, which means a Georgia brewery’s deal with a distributor is a deal for life. And that’s a pretty sweet deal for distributors.

Then again, maybe they’re just waiting for the right compromise. When Smith sat down for lunch recently with local beer advocate/Reddit fiend/radio host Tim Dennis, he was talking in terms he hasn’t before.

“He said the wholesalers were not opposed to reasonable change,” Dennis wrote recently. “They're not dumb, they knew a model like this would mean more breweries and ultimately more growth. Of course, in the long run that means more beer to the distributors. The way he put it to me is that when/if it happened, he wanted to ‘do it the right way.’ He mentioned other states had changed the laws in ways that hurt the wholesalers, and some others had changed and set limits too low and they had to keep going back and fighting via legislation.”

That word “reasonable” really puts Georgia's new beer bill into perspective.

On Jan. 26, Senate Bill 85 was submitted by State Sen. Rick Jeffares (R-McDonough) to the Georgia legislature. With language backed by both brewers and wholesalers, the bill would allow breweries to sell up to 3,000 barrels of beer a year to visiting consumers, enabling drinkers to enjoy beer by the glass on-premise and buy up to one case’s worth (288 ounces) of beer to go. Further, the proposed legislation would allow for visitors to purchase food without paying for a tour package. The bill also includes a provision freeing up brewpub to-go sales.

Georgia is currently one of only two states that allows no form of direct sales. Mississippi is the other, and while early signs pointed to them updating their laws this year as well, according to a recent Facebook post from the Mississippi Brewers Guild, they may not get the change they’re looking for in 2017 after all. Which means Georgia might not be racing for the bottom any more.

If passed, the bill will change Georgia’s beer scene in a historic way. After all, Proof’s Byron Burroughs isn’t an anomaly. Brewers have avoided or fled the state in droves for years. Cigar City’s Joey Redner specifically called out Georgia as an unviable option for his brewery’s next location. Following Terrapin Beer Company’s sale to MillerCoors in mid-2016, Terrapin co-founder John Cochran left the state for nearby Asheville, NC where he bought Altamont Brewing and started converting it into his own vision under the name Up Country Brewing Co. More than that, a handful of established Georgia brewers have threatened leaving the state in recent years.

But it feels like momentum is slowly tilting, and SB 85—not to mention its swift passage through the Georgia Senate Regulated Industries Committee on Jan. 30—is only adding to that forward trajectory. And wouldn’t you know it, some breweries are changing their tune, choosing to lead Georgia rather than abandon it. It’s the kind of thing that happens when there’s about to be a turning point, when a state’s finding its voice and looking with optimistic eyes toward the future.

“We’d rather dig our heels in and help change the laws,” Creature Comforts Brewing Co. CEO Chris Herron told GBH recently, as it announced its massive expansion into a second facility in Georgia. “As opposed to kind of running away from them."

Words by Austin L. Ray
Graphics by Mike Duesenberg

Austin L. Ray

Austin lives in Atlanta with his wife and two dogs, working for MailChimp by day and other folks by night and weekend. He writes The Georgia Brewsletter, likes weird beer, black t-shirts with white print, stand-up comedy, pit bulls, fancy socks, and nice people.

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