NOT THAT we need grape-eaters to blaze our trails, but it’s looking like the U.S. Supreme Court’s pro-winery ruling last week could foam over into the beer world.
The court, in a 5-4 decision, ordered Michigan and New York to stop discriminating against out-of-state wineries in favor of their own because it’s a violation of interstate commerce rules. Though the court upheld the right of states to regulate booze, some experts believe the ruling is an opening shot at those arcane state regs that have controlled beer sales nationwide since the Prohibition.
And that’s good news – or bad news – depending on who’s holding the crystal ball.
The battleground here is the so-called “three-tier” system of distribution, which holds that brewers cannot distribute their products directly to consumers. It’s a vestige of the days when Al Capone and the Mob controlled liquor and cheated government out of its alcohol taxes. The middle tier – wholesale distributors – ensures those taxes are collected.
The U.S. Supreme Court ruled that Michigan and New York unfairly favored their in-state wineries by allowing them to sell directly to consumers. Some liquor industry people believe that opens the door to mail-order sales via the Internet.
States presumably could fix that by requiring everyone to go through a distributor (as New Jersey has), but let’s just pretend that won’t happen, if only because it would screw struggling local wineries, some of whom are already supported by the taxpayers.
First, about those mail-order sales.
Currently, Pennsylvania doesn’t allow breweries to send their beer through the mail.
But it does allow consumers to mail-order wine from in-state wineries. And it’s OK to buy wine from out of state over the Internet as long as the bottles are delivered first to a state liquor store. It’s a nice, if clunky, arrangement for wine fans.
Here’s my question: How is it not a violation of interstate commerce rules to prohibit, say, some California microbrewery from making a similar mail-order delivery deal in Pennsylvania? If it’s OK for wine, if it’s OK to buy a pinot grigio from Napa on the Internet, howcum I can’t click on Firestone Walker Brewing’s Web site and order a case of Double Barrel Ale?
But hold on – some small brewers aren’t so sure they’re ready for mail-order beer.
Dan Weirback of Weyerbacher Brewing in Easton noted that any brewer looking to get into Internet sales should be ready to face a gantlet of state fees for label registration. In Pennsylvania, it costs breweries $75 a year for every flavor, from pale ale to double bock; in New York, it’s $150. In Michigan, it costs $1,000 just to start doing business.
“The laws are so convoluted and every state is different,” Weirback said.
The brewers speak
Greg Koch of Stone Brewing in San Diego said in an e-mail exchange that, though he supports the idea, his brewery has no plans to get into direct shipping.
“Currently,” he wrote, “we are brewing 24/7 and not able to brew enough to meet demand, so additional ways to sell a few cases are not really on the radar for us . . . building our new brewery is. “
And Bill Covaleski of Victory Brewing in Downingtown doesn’t see much of a market for it, either.
“It makes no sense to package up a $26 case of beer and send it to Erie, Pa., or Wichita Falls, Kan.,” Covaleski said. “It’s a different story for a $140 case of wine. “
The issue, though, is not just about making it easier for wired beer fans to procure obscure flavors. The battle here is over that entire middle tier. As one Wisconsin microbrewer told the Milwaukee Journal Sentinel last week, “If it becomes legal to ship beer, then it’s legal for Anheuser-Busch to ship [directly] to Wal-Mart. “
No surprise, beer wholesalers are unanimously freaked by the idea that breweries and consumers might someday bypass the middleman. Imagine spending all that dough to promote and sell someone else’s product (not to mention the thousands in licensing fees), only to have the high court declare your piece of the action null and void.
Most beer-drinkers, I suspect, aren’t going to shed many tears over the demise of wholesalers, not if deregulation means a 30-pack of Bud Light drops below 10 bucks.
But there’s some belief in the industry that this whole trend is bad news for small brewers.
For one thing, by licensing (and limiting) the number of beer wholesalers, the state levels the playing field between micros and megabrewers, giving them an equal shot at all consumers. Without those controls, a small brewer like Weyerbacher would find itself spit out of luck in the shelf space race at your neighborhood CVS.
Moreover, a good wholesaler is a craft brewer’s best friend. Victory or Stone don’t have Anheuser-Busch’s advertising dough, but they do have a sound network of distributors who market and retail their product.
“You can bet if my wholesaler in Minnesota is negated by the absence of three-tier system, I’m sure as hell not going to drive trucks out to Minneapolis and distribute beer myself,” Covaleski said. “Direct shipping from breweries is unnecessary and counterproductive. The distribution system is working. “
I’m not so sure change is all that bad, though.
Small brewers faced bigger challenges 20 years ago when they created an entire segment of the beer industry out of nothing. Today, there are too many consumers who enjoy craft beer.
Someone will sell it.
In my last column, I mentioned that Stone Brewing’s latest specialty beer, known as a “vertical epic,” is Belgian brown ale. Wrong.
I’ll let the brewery’s Greg Koch explain:
“Our Stone Vertical Epic Ales are ‘Belgian’ in the same way that our Stone Ruination IPA is ‘British. ‘ Yes, if you look past the cacophony of our love for loud beers, you can hear the musical roots of Belgium or England, respectively, but our beers are our own take on those countries’ traditions . . . especially if the word ‘take’ is thought of in the context of ‘taking liberties’!
“Yes, the Stone 05.05.05 Vertical Epic Ale is brown. Yes, we used a Belgian yeast strain. However, it is unquestionably as much or more a Stone beer [i.e., nontraditional] as it is a Belgian-styled beer. “
Meanwhile, the beer news at Weyerbacher is equally inspired. To mark its 10th anniversary this summer, Weyerbacher is releasing its biggest beer yet. It’s Decadence (get it?), an amber-colored strong ale flavored with honey, spices and an unnamed botanical ingredient. It’ll ring in at 13 percent alcohol when it’s released in July.
Joe Sixpack, by Staff Writer Don Russell, was written this week with a bottle of S’muttonator Doppelbock.