HB 1283: A Wholesaler’s Perspective
Editor’s Note: This piece was not written by me, nor is it the result of an interview I conducted. Instead, this is an editorial that was independently submitted to me from someone on the wholesaler’s side of what is currently happening in Maryland. They have requested to remain anonymous, and I will honor that request, without exception.
What follows are their words.
The three-tier system of alcohol distribution has had many consequences throughout the years, both intended and not. In the craft beer community, we usually discuss the unintended kind and the complex web of lateral relations between the tiers.
Unfortunately for Maryland brewers, what’s going on at the State House right now is exactly what the federal laws enacted at the end of prohibition were designed to do: create a division between producers and sellers.
A Quick Primer on the 3-Tier System
When prohibition ended, the federal government began mandating that alcohol be sold to retailers via an independent distributor. That means if you make alcohol in this country (with a few exceptions), you cannot sell it directly to a store or restaurant.
The reasoning for this has to do with the prohibitionist’s original mission.
If you’ll recall your eighth-grade history class, one of the main arms of the temperance movement was called the Anti-Saloon League. At the time, saloons weren’t just a place to get beer; instead they were basically clearinghouses for all of our society’s dirtiest habits. They were often a place to get a hooker or opium or a game of cards.
So, the temperance movement wasn’t strictly anti-alcohol, so much as it was a rebuke of the “saloon culture” as a whole. They felt those who operated places to purchase alcohol came by it too cheaply; that it was too easy of a business to trade in vice.
This is particularly true because of the tied-house system – in which you received significant discounts to only sell one brand. In obstructing the growth of saloon culture, post-prohibition campaigns were aided by separating the alcohol producer from the alcohol purveyor, in conjunction with an additional system of heavy regulations and taxes.
As a result, newly-legal (again) alcohol did become harder to get, less profitable for sellers, and more expensive for buyers, than it was before prohibition. Anyone in the industry will tell you, these provisions mostly do not create a significant barrier in supplier/retailer relations.
Except right now, politically, in our fair state of Maryland.
What’s Happening in Maryland Right Now
Lobbying in America has become a zero sum game on most issues. If your interest receives a benefit, somebody else’s is harmed. While directly that is often indisputable, with many issues an in-depth analysis of the data will paint a much less black and white picture.
MSLBA represents retailers, and they want brewery taproom hours to be shorter. If brewery taprooms are open later, there are more competitors for the alcohol dollars. That’s the black-and-white version. But the question on a deeper dive becomes:
Is the success of craft beer in this state, as fueled by profitable taprooms, a rising tide that lifts all boats – if you’ll excuse the geographically perfect pun?
Without wielding a stack of graphs, I will confidently say that the answer is a resounding YES.
I would like to yell it from the rooftop, but I can’t. The reason I can’t publicly preach the “craft growth” is “foundational economic growth” gospel is simple: I work for a wholesaler – and the lobbying group that my employer is a part of is in support of the MSLBA bill.
I believe this to be black and white thinking at its worst. It’s also shortsighted, one-dimensional and cowardly.
As Wholesalers, We Aren’t Being Good Partners to Our Brewers
You see, we claim to be “partners” with our suppliers; but that word is used so much in this industry it has lost all meaning. If they are our partners, why would we so easily abandon their economic interests?
A couple hundred barrels of beer annually out of a taproom does not hurt our bottom line. If anything, the trial opportunities created when a consumer visits a brewery are such an exceptional form of marketing that they should be sending us a bill. The truth is that the dollars only flow in one direction through the tiers, and the largest gross tally is from the millions that go from retailers to wholesalers.
So we have to side with our customers, right? Wrong, and I’ll tell you why.
Brewery Taproom Success Isn’t a Threat to the Market
First and foremost, where is the economic evidence that brewery taprooms are hurting retail sales? If that simple question goes unanswered, it is evident that this is unequivocally zero-sum lobbying strategy, with no substance.
Really, it’s no better than prohibitionists forcing the simplistic math of price up = consumption down. It’s also illogical, in that claims that there is a finite pool of dollars from which both entities are drawing.
Think about that. It’s not the same experience.
They are basically attempting to say that the consumer looking for a brewery visit experience at Union Brewing Company in Baltimore is the same person who would be at Chief’s Bar, if there was no competition.
Second, it gives no regard to industry trends. With beer’s share of national alcohol dollars consistently shrinking, while LOCAL beer’s share of overall beer dollars constantly growing, our entire future appears to be tied to the success of our local breweries.
Finally, we should have some spine. Our local breweries truly act as partners to us, despite the cliché, from which that phrase is derived.
They are infinitely helpful in growing our profitability with their sales presence, their marketing efforts, their SUPERIOR BEER and their ceaseless hard work. Don’t get me wrong, I love our retailers; some of my best friends are retailers.
However, with the carefully-protected control market we have in Maryland, a retailer going out of business does not hurt the overall economy of the region. A new retailer will spring up in its place, or those dollars will simply strengthen the business of a nearby competitor. The market as a whole will not lose value.
It’s Time for Beer Wholesalers to Speak Up and Protect Breweries
If a brewery’s growth is hobbled, that harms the overall pie, because there are a limited number of local breweries, and they are not easily replaced.
In addition, those more tourism-focused taproom occasions, if reduced, WILL harm the total value of the market, because going to the neighborhood pub is not the same experience. The occasion doesn’t transfer; it just goes away.
Rule number one of economic growth? Try not make things go away.
Beer wholesalers of Maryland should have the courage to stand up to the powerful MSLBA lobby, and say, “We will not let our thriving local beer scene go away!” Yell it from the rooftop.
If you are interested in supporting local Maryland craft brewers, please contact your senators today and ask them to amend HB 1283 to restore operating hours to Class 5 breweries, as well as their ability to brew beer for others and pour its own beer at other Maryland breweries.