Writer’s Note: This is the first of a two-part series on Georgia’s craft brewing industry and the state laws that regulate it. Part Two will compare and contrast Georgia’s craft brewing laws with those of neighboring North Carolina, where the laws are less stringent.
Georgia’s craft brewing industry is so important to the Georgia Department of Economic Development that it occupies an entire section of exploregeorgia.org.
The state’s intent, of course, is to market craft brewers to people who live elsewhere. Georgia wants to use this industry to attract more tourists and more economic development prospects.
With that said, some Georgia craft brewers say their line of work doesn’t live up to its fullest potential. So who or what do they believe holds them back?
The answer they give is ironic.
While the state government brags about Georgia’s craft brewing industry, people believe the same state government limits it with regulations that date back to Prohibition.
As a consequence, they say Georgia has fewer tourists, fewer jobs and fewer opportunities to prosper than it would otherwise have. States that have less restrictive laws, especially neighboring North Carolina, benefit the most.
For Georgia, what are the consequences?
“[Out of 171 craft brewers in Georgia], I can tell you there have probably been 15 closures over the past year,” said Georgia Craft Brewers Guild Executive Director Joseph Cortes.
In 2022, Cortes said that “the biggest threat [to craft brewers] in Georgia is actually [government] policy.”
One of the founders of the now closed Second Self Beer Company, Chris Doyle, warned in 2023 that Georgia’s current laws will force more breweries to fail. Second Self was located in Atlanta’s Upper West Side, an area known for its affluence.
Members of the Georgia Beer Wholesalers Association said they prefer the laws as they are… and for good reason.
But don’t expect a vigorous debate on the matter anytime soon.
At the Georgia General Assembly, a bill that would have modernized, perhaps even overhauled, some of these bygone laws wasn’t exactly something that legislators found intoxicating.
“The wholesalers have a vice grip, it seems, on any progress at the General Assembly,” Cortes said.
CAN I INTEREST YOU IN A FROSTY ONE?
As part of the 1933 repeal of Prohibition, states were empowered to create their own alcohol policies, with regulations differing greatly between individual states. Some of Georgia’s most onerous alcohol laws remain unchanged after nearly 100 years.
But there are exceptions.
The Beer Jobs Bill, which passed in 2015, allowed customers to purchase around two pints of beer for on-site consumption. They could also take home up to 64 ounces of beer in a single container, such as a growler. But there was a catch: business owners had to also charge customers to tour their brewery. Customers could take their drink home as a sample or souvenir.
In 2015, the year the “Beer Jobs Bill” passed, Georgia had only 45 craft breweries.
In 2017, state legislators passed Senate Bill 85. That 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.
Cortes previously said SB 85 “was a huge step forward,” and helped the state’s craft breweries stay afloat. The law, however, did not clear up all of the craft brewers’ problems.
What remains in Georgia is what brewers refer to as a franchise or three-tiered distribution system. Production facilities, like breweries and wineries and distilleries, fill one tier. The next tier is a wholesaler distributor. The third tier is the retailer.
Craft brewers must sell their product to wholesalers, who then sell those products to retailers, like restaurants, package stores, or grocery stores. Before some regulations were reformed, a brewery couldn’t offer samples of its product and also sell six-packs to go.
In 2022, craft industry consultant Crawford Moran said these laws grant all the power not to breweries or retailers but instead to wholesalers. Cortes, this year, called it “a huge imbalance of power.”
THE WHOLESALERS’ REBUTTAL
Craft brewers may analogize themselves as David and the wholesalers as Goliath. Georgia Beer Wholesalers Executive Director Martin Smith, though, said that to portray them that way is inaccurate.
“When we talk about franchises, in the alcohol world, that means the area in which the distribution is. Some of these guys are small and have five or six counties that they cover. Some are statewide. Some are a little bit bigger than five or six counties,” Smith said.
“It’s a puzzle piece across the state, representing all of the brands and working in a puzzle across the state, competing with one another to get their brands that they are working for on the shelves. It is made up of a conglomerate of multiple family-owned small businesses.”
Smith, citing data from 29 different wholesalers since 2014, says brewers have moved from one wholesaler to another exactly 135 times.
“We go into agreements with brewers to grow their brand, invest in them, and we want them to succeed,” Smith said.
“Sometimes that brewer outgrows or changes or does different things or just the market changes and it may be a better fit for them with a different distributor. We don’t want to hold them back from that. The story told over and over again of a lifetime agreement that you can’t get out of is factually incorrect. The numbers show it.”
THE F.O.A.M. ACT
At the Georgia General Assembly, SB 163, also known as the Fair and Open Access to Market (F.O.A.M.) Act, did not make it to the Senate floor. In fact, it did not even make its way out of the Senate Regulated Industries and Utilities Committee.
“It would have provided [brewers the right to] self-distribute 3,000 barrels of their product or products, pretty much locally, which is what the need is,” said Cortes.
“In the current distribution model in Georgia, and with the strict restrictions placed on breweries, that is the biggest challenge, being able to build your brand locally.”
Cortes said the proposed law would have reformed Georgia’s contentious franchise law.
“There would be some sort of agreement between the wholesaler and the brewer on costs. The brewery would have to pay to make the distributor whole, so to speak,” Cortes said, adding it brought fairness to an unfair system.
“If they didn’t come to an agreement within 30 days then it would go to remediation with the Department of Revenue. They would be the third party that would help settle and make sure it was a fair exit for folks involved.”
Another part of the bill would have raised the daily to-go or off-premise limit, which, per person, is currently 288 ounces, or equivalent to one six-pack case of 12-ounce beers, Cortes said
“Except for South Carolina, that is the lowest in the Southeast,” Cortes said.
“Alabama recently tripled theirs to three cases.”
So why didn’t SB 163 find favor with state legislators?
“With wholesalers opposing this so stiffly that makes it harder. I think there are a lot of people who don’t want to take a position because they, quite frankly, have received a lot of support from a lot of wholesalers through the years,” Cortes said.
“They don’t want to take a vote that would be against the wholesalers because [those wholesalers] are lobbying them very hard. At this point, most of these folks have breweries in their districts. They don’t want to go on the record [with a vote] and make it seem like they are opposing their local small breweries.”
Senate Regulated Industries Chair Bill Cowsert, R-Athens, ultimately decides whether a committee vote takes place. He did not return requests for comment.
Other committee members also did not respond. State Sen. and Committee Vice Chair Carden Summers, R-Cordele, however, was the exception.
“[The bill] didn’t get out of committee because we had so many people on both sides of it, and we were trying to have enough hearings to work to the middle to try come up with a compromise and probably never got there,” Summers said, adding he prefers compromises.
“We only have about 65 other bills we are dealing with, and when you get to where they’re just dragging and fighting about it, you just put it on the backburner and go on to the next one.”
Summers said he sought a resolution.
“I was trying to come up with a way to help small breweries to be able to get out of contracts with the large distributors by paying the large distributors every dime they’ve put into the small breweries plus 10 percent,” Summers said.
“I am not an expert in the field, but I would say let the brewers expand their sales and allow breweries to get out with a reasonable time and definition to get out and not just be trapped. Make sure the distributors are made whole with everything that they put into it.”
‘NOT JUST ANY OTHER COMMODITY’
In Georgia, craft brewing is big business.
According to literature distributed by the Georgia Craft Brewers Guild, Georgia’s beer, wine and spirits industry creates more than 5,000 jobs. The state receives more than $537 million in state tax revenue from alcohol sales.
That’s nothing to scoff at. The movers and the shakers at GDEcD wouldn’t have invested their time and money to market craft brewers if they didn’t expect big returns.
Alcohol, nevertheless, is a more heavily regulated product for a reason, Smith said.
“It is not just the health and safety and the taxes, which are all very important. Alcohol is not just any other commodity,” Smith said.
“It is a product that, unfortunately, can be abused. It can be dangerous. So there are restrictions.”
Cortes, not unexpectedly, has a different take.
“The wholesalers will get folks in front of the committee to talk about health, safety, and protecting youth, but you could pull up to a package store right now and fill your cart up with a pallet of vodka, which, obviously, is much higher proof,” Cortes said.
“Our breweries know how to keep people safe.”
A TIME TO CHILL
The 2024 legislative session is over.
What happens next?
Summers said he’s confident that legislators will take up this bill in a future session.
“It’ll be a new bill. It will probably be tweaked very well. [All the parties] can all sit down, maybe have committee get-togethers and talk,” Summers said.
“They’ll tweak each other and come together and hopefully they will have a game plan whether everybody can get on the same sheet of music.”
Cortes, meanwhile, said the Georgia Craft Brewers Guild needs more political allies. He said he will continue to tell the brewers’ stories and stress how urgent it is to reform the state’s laws.
“We have gained a lot of attention the past year or two, but that has not translated into folks willing to do their jobs and act on this,” Cortes said.
“This is an existential issue for our industry and our breweries. We will double down on our efforts over the coming months. We don’t have the power of a mountain of cash to give in campaign contributions. We have small businesses that operate on very slim margins…in a system that is not built for them.”
