Atlanta’s Second Self Beer Company is closing after nine years, partly due to century-old Georgia laws.
Industry insiders have long said those laws deprive the Peach State of new jobs and new economic development prospects.
Many believe they also rob entrepreneurs of their lifelong dreams.
Second Self Beer Company founders Jason Santamaria and Chris Doyle said they aspired to open their own brewery for many years.
“Jason and I moved in together in Decatur. We just kept moving it forward,” Doyle said.
“We dedicated five or six years to developing this whole idea well before it even got started in 2014. We basically shifted our entire post-college lives to dedicate to this dream.”
The brewery opened in a favorable location in Atlanta’s Upper West Side.
“There were two other breweries around there,” Santamaria said.
“We thought a third wouldn’t hurt and that it might bring more attention to the area. People could go from brewery to brewery.”
At its peak, Santamaria said Second Self Beer had 22 employees. During its overall nine-year run, the business employed about 100 people.
“Some of our employees want to start their own breweries,” Doyle said.
“We told them to hold off.”
In Georgia, operating such a business is unusually difficult.
PROHIBITION-ERA BEER LAWS
Certain Georgia Prohibition-era laws heavily regulate the state’s alcohol industry. In recent years, Georgia legislators reformed a few of them — but not all.
What remains is a system that separates Georgia’s alcohol industry into three tiers. Production facilities — like breweries, wineries and distilleries — fill one tier. The next tier consists of wholesaler distributors. The third tier is retailers.
Craft brewers must sell their products to wholesalers. Wholesalers then sell to retailers, like restaurants, package stores or grocery stores.
In 2017, state legislators passed Senate Bill 85. The new law permitted breweries to sell directly to consumers in their taprooms. They could sell 3,000 barrels of beer per year directly to customers.
In other states, however, deregulation has allowed craft brewers to make a healthy profit and contribute to their state’s economies. One such state is North Carolina.
Last year, Eventide Brewing co-founder Nathan Cowan was asked to explain Georgia’s current craft brewing laws. He asked readers to imagine they were business owners.
“Imagine that business sells a thing. You have one sales rep. You cannot fire that sales rep. They get to tell you what their commission is going to be,” Cowan said.
“And if you don’t like it then that is OK [with them] because they sell your competition’s product. And that is the situation that we have in the state of Georgia. Those are the franchise laws.”
These laws, brewery owners said, deprive Georgians of more choices and force customers to pay higher prices.
In 2019, Second Self Beer’s sales — through the brewery’s distributor — were on the decline, Santamaria said.
“[We thought] if we couldn’t sell enough of our beer to make money, then let’s make other people’s products. That is when we changed the model of the company,” Santamaria said.
“We had millions of dollars of contracts lined up, and with celebrity brands we were going to make non-alcoholic beverages. All of them were canceled in 2020, and then the tasting room took a huge hit. That January and February was our best January and February ever. We were looking forward to a great 2020, tasting room-wise.”
That year, Doyle and Santamaria asked to leave their distributor arrangement so they could switch to another distributor altogether. The original distributor at first refused, but then said yes.
Santamaria and Doyle, however, still owed that distributor money.
Then COVID-19 hit.
“They [the distributor] asked for money. We came to a number and got that agreement from our investors. We went back to them. They doubled that [original] number and then they doubled that number again. It kept going up,” Santamaria said.
“We couldn’t get out. They wanted us gone. We wanted to be gone. They wouldn’t let us go. Since then, we saw our sales just die. We did $1,000 worth of business last month with them. That number used to be $65,000 to $70,000 a month, pre-COVID. When you must go through a distributor, not being able to go anywhere and not having a partner that won’t work with you is very hard.”
MORE BREWERIES WILL FAIL
Santamaria said Georgia’s laws “are not 100% why we closed.”
“The main driver of us closing was that we were a contract manufacturer. Four of our biggest contracts closed or ran out of money,” Santamaria said.
“Had we had more advantageous laws we would have more flexibility to grow organically and have multiple revenue streams to stay afloat.”
Doyle, meanwhile, said he expects more Georgia breweries will fail, given the state’s current laws.
Other Peach State breweries are indeed closing, said Georgia Craft Brewers Guild Executive Director Joseph Cortes. As examples, Cortes cited Atlanta’s Orpheus Brewing and Burnt Hickory Brewery.
“Truth be told, there is not one reason a brewery closes. It is a variety of things, but there is undoubtedly a tough climate in Georgia for small breweries given the regulations and laws,” Cortes said.
“If breweries in Georgia had additional flexibility, as is the case in many other states, I think it would make a difference in how they would respond to other challenges. I cannot say if that would save them or close them, but it would make a difference if they had flexibility from an outdated system that really penalizes them for being a small brewery.”
‘THE TERRIBLE LAWS IN THIS STATE’
When Doyle and Santamaria decided to close Second Self Beer, they announced the news on their business’ Facebook page.
“If we want to see the current breweries survive, we need to support them,” the Facebook post read.
“So, tell a brewer you love them, buy beer from the brewery, support the @georgiacraftbrewersguild, and try to change some of the terrible laws in this state so they have a better chance of survival.”
In the Georgia General Assembly, neither bill has gained much traction.
Santamaria said he testified at the state capitol to change Georgia’s beverage laws. Now, he’s going back to his old job — in corporate America.
“I don’t plan on coming back,” Santamaria said.
“I don’t think there is an easy way for anyone to make money, at least in the beer space.”
Doyle said he’s looking for another job.
As for Cortes, he said Georgians who patronize breweries must know that such establishments “are in peril.”
“We will continue to press on self-distribution and franchise reform at the state capitol with the bills we introduced where it’s still possible to get hearings and move forward,” Cortes said.
“There is a sense of urgency now. I think with all the economic headwinds and pressures, it sure does make it a lot harder to survive when you have the weight of government regulations preventing you from getting more product out. We have a distributor tier with a lot of power and influence preventing you from getting more products out.”