Georgia Will Soon Join the Rest of the U.S. By Allowing Producers to Sell On Premises

On September 1, 2017, lovers of craft beer and spirits in Georgia will have something to toast. That’s the day that SB 85 will go into effect, permitting licensed breweries and distilleries in the state to sell to consumers directly from their premises.

Under the soon-to-be-implemented rules (details from the state can be found here), licensed beer and spirit manufacturers with a Georgia-based facility will be allowed to sell their products for on-site consumption without having the customers first go through a tour of the facility (as Georgia’s laws previously required). Further, these licensed manufacturers will also be able to sell their products for off-site consumption without having to go through the three-tier system (that is, sell first to a distributor, and then buy back their goods before selling to a consumer).

Breweries will be limited to selling only 3,000 barrels (31g/BBL) of beer they produce per year, and only a case (288mL) of beer per day per customer. Distillers are limited to selling only 500 barrels (53g/BBL) of spirits they produce per year, and only 2.25 L per person per day.

Georgia Becomes Like Everywhere Else
Every other state in the U.S. already has some sort of provision allowing manufacturers to sell their products directly from their production facilities. While the details of these provisions vary state to state (as do pretty much all rules concerning the beverage alcohol industry), there are common themes.

Generally, these rules give a preference to small, craft producers. Production caps may limit the right to only small-scale producers. Restrictive sales caps are also common (Georgia’s new rules has these). Often only certain licensees (say a “craft distillery” or a “farm brewery”) are permitted to sell. And frequently they can only sell beverages they produce themselves.

Georgia is also not alone in working on their rules on how and when producers can self-sell. Even states with well-established craft markets continue to develop them. A bill was recently filed in the Wisconsin legislature that would extend existing self-distribution rights for certain producers.

Craft distilleries would gain the right to directly sell and distribute their spirits, and be able to sell other beer and wine products. And the annual production caps for breweries and wineries who can self-distribute and sell onsite would rise to 20,000 barrels of beer and 50,000 gallons of wine, respectively.

These permissions are not without controversy. (The Wisconsin bill is being vociferously opposed by the Wisconsin Tavern League, for one.) These rules are exceptions to the standard three-tier model of beverage alcohol sales, and parties with ingrained interests in the three-tier system will argue against any stretching of the existing fabric. Distributors and both off-sale and on-sale retailers complain of the increased competition and the assault on their established place in the three-tier system.

There is some merit to these complaints. The value of the three-tier system is well established (even those who argue to disestablish the three-tier system ultimately come down on the side of fixing problems they see, not blowing up the whole thing). Any changes to the three-tier system should be made with proper care and consideration, and not merely because they’re in vogue.

But there is also obvious merit to permitting at least some right to self-sell for manufacturers. After all, why else would every state have some kind of allowance?

Supporting local manufacturers — and especially small businesses, like craft producers and brewpubs — has enormous benefit to local economies. According to the Brewer’s Association, craft beer contributed $55.7 billion to the U.S. economy in 2014, with states with well-developed craft markets, like Colorado and Oregon, benefiting the most (particularly on a per-capita basis). The success of most wineries is largely dependent on being able to sell directly from their production facilities. After all, that’s exactly what we all look for in a wine-country vacation, whether it’s in Napa, the Willamette Valley, or up-state New York.

The licensees who most benefit from these self-sale privileges are those who have the most trouble getting the attention of distributors and retail stores. If some larger producers also can take advantage of selling some of their goods directly from their facilities, that may be a worthwhile cost in order to benefit the smaller producers.

Those large producers will also still need to work in the three-tier system for the vast majority of their sales; after all not everyone who enjoys a Bud Light will suddenly only buy it from an Anheuser-Busch plant.

Often arguments against expanding self-sale privileges tend to rely on hyperbolic warnings on how these allowances will ruin the existing beverage alcohol market. These fears need to be couched in the fact that, despite the growth of the craft industry, it’s still a fraction of the overall market.

The vast majority of beer is still sold by the big producers through the standard three-tier model. Reportedly, somewhere around 3 out of 4 beer drinkers still have not tried a craft beer. Reports that craft has killed the larger beer market are definitely premature.

 

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