Craft brewers’ recent success runs into old way of doing things in Lansing

Beer -- the brewing of it, shipping, selling and quaffing of suds -- is, by one measure, a nearly $6.1 billion industry in Michigan. And it’s an industry in change, too, with the craft brewing sector growing faster in Michigan than it is nationwide.

Craft brewers say they could do even more – with some regulatory changes at the State Capitol.

But in Lansing, so far, craft brewers are not big political players. And their efforts to push legislation to loosen regulations could run into some folks who are -- the Michigan Beer and Wine Wholesalers, which has been overseeing the state’s laws on beer and the lawmakers who make them for years.

Looking just at amount of money craft brewers have put into the system, it comes to about $8,000 over the last several years. In less than a decade, by contrast, the wholesalers have dispensed more than $3 million to political recipients.

There are some common issues the wholesalers group and the craft brewers share (some of the larger craft brewers are members of the wholesalers association), but there are also some tension points. Essentially, the wholesalers want to ensure Michigan’s three-tiered system of liquor distribution – manufacturer, wholesaler and retailer – is not turned over. The craft brewers want more overall access to the market.

And there is an issue that the craft brewers and wholesalers have a difference on, an issue wholesalers worry could put the state in a position of being accused of unfair competition.

Michigan is a thirsty place

Beer_Pacs_revisedFirst, drink up some numbers.  According to the national Beer Institute, Michigan residents drink an average of 29 gallons per capita, per year. In total, the beer industry in Michigan is a nearly $6.1 billion industry that has some 64,500 people working – which includes servers at restaurants and bars where beer is served. The Institute said there are some 261 brewers and wholesalers in the state.

There are now more than 100 brewers, many of them in brewpubs, all across the state according to the Brewers Guild.

While craft brewers are small, one thing they want to be is bigger.

And efforts to accommodate that desire are under way, at a time when Michigan’s overall liquor control system has been undergoing examination and potential change. The Legislature has been working on legislation to change the time frame the Liquor Control Commission can process and approve licenses, legislation on allowing wineries to offer samples at farmers markets, and legislation dealing with craft brewers.

Already through the legislative pipe is Senate Bill 27 – notably favored by both the craft brewers and the beer wholesalers --  which would allow brewpubs to fill “growlers,” jugs that can hold up to a gallon of beer. Currently, just brewers can fill the jugs.

The change has been sent to Gov. Rick Snyder, who is reportedly more of a wine man.

Marc Wolbert, general manager at the Midtown Beer Company in Lansing said that SB 27 alone is a huge step for the industry.

Huge, but perhaps not as consequential as a trio of bills (House Bills 4709-11) with bipartisan sponsorship still awaiting a committee hearing at the State Capitol.

If approved, the measures could allow craft brewers to expand to twice their individual sizes.  HB 4709, for example, changes the definition of micro-brewer from one who brews 30,000 barrels a year to 60,000 barrels.

HB 4710 would allow business persons with interests in brew-pubs to have interests in up to five pubs from the two they can own now, and go from producing 5,000 barrels a year to 18,000 barrels.

And HB 4711 doubles the number of places a brewer can sell beer for on-premise consumption.

Scott Graham, executive director of the Brewers Guild, said current laws were put in place before anyone had any dreams that craft brewing would become a serious industry.

“We’re hoping to see some sensible changes,” he said, letting his members be free to grow.

The craft brewers want the ability to distribute to retail establishments or to consumers directly.

But the question of “self-distribution” has wholesalers a bit worried.

The wholesalers worry about the effect that could have on the three-tier system, though they have not taken an official position on the three House bills.

But they also worry it would begin to lead Michigan to a point where it could face legal issues.  They base that on the 2005 U.S. Supreme Court ruling that held the state could not discriminate on shipping wine directly to consumers between in-state and out-of-state producers.

Expanding the self-distribution system to promote Michigan brewers could run afoul of those requirements, and so far it is one issue the craft brewers have not seen put up in bill form.

It could be one issue lawmakers and industry officials argue over, presumably over a beer.

Editor's note: This story was produced in a collaboration between Bridge Magazine and the Gongwer News Service.

John Lindstrom is publisher of Gongwer News Service Michigan, a subscription service that covers daily activities at the Capitol and in state government. Lindstrom is a graduate of Michigan State University and has worked in Michigan journalism for more than three decades.

Ashley Weigel of Gongwer contributed to this report.

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Thu, 06/27/2013 - 10:26am
Ahhhhh Michigan ....... with the appearance of the best legislature that lobbyists can buy. When will we ever prohibit lobbyists?
Mike R
Thu, 06/27/2013 - 11:25am
The current three-tiered system was originally intended as anti-monopolistic, similar to the refiner-distributor-retailer gas station system or the manufacturer-dealer automobile sales system. But over the years it has become precisely the opposite: an anti-competitive monopoly by the distributors. The system adds a completely unnecessary middleman to the pricing structure, resulting in higher prices to consumers while squelching competition from small operations. Unless brew pubs and microbreweries are allowed to distribute their products directly, the large distributors will continue their stranglehold on the industry in Michigan. As a consumer of Michigan craft beer almost exclusively, I resent the state's interference in efforts by the many fine brewing establishments to reach their full growth potential. But God forbid we should take money OUT of our legislators' pockets!