Craft brewers face regulatory challenges in Illinois
Much to the delight of many Chicago beer enthusiasts, the city’s craft beer market has grown in recent years. New Chicago breweries such as Revolution Brewing, Half Acre Beer Company and PipeWorks Brewing are making inroads on traditional brewers. The craft beer revolution is taking root throughout the rest of the state as well. Rolling Meadows Brewery in Springfield and Destihl Brewery in Bloomington...
Much to the delight of many Chicago beer enthusiasts, the city’s craft beer market has grown in recent years.
New Chicago breweries such as Revolution Brewing, Half Acre Beer Company and PipeWorks Brewing are making inroads on traditional brewers.
The craft beer revolution is taking root throughout the rest of the state as well. Rolling Meadows Brewery in Springfield and Destihl Brewery in Bloomington are also attracting attention.
The craft beer industry is thriving nationally, but the industry’s potential in Illinois is being shackled by the state’s arbitrary and anti-growth policies, from limits on barrel production to controls on self-distribution.
The U.S. craft beer market has seen massive growth in recent years, increasing to more than 2,500 breweries as of June 2013, with 1,559 more in the planning stages. Craft beer has rapidly been acquiring a larger chunk of the $99 billion U.S. beer market and now makes up more than 10 percent of the total.
The expanding market has also meant more jobs. According to a study done on the Texas beer industry, craft breweries there accounted for more than 50 percent of the job creation in the state’s beer market.
Despite those growing trends, Illinois ranks 34th nationally in number of breweries per every 500,000 people, and 26th in actual barrels of craft beer produced.
That’s a direct result of Illinois’ arbitrary production limits and distribution restrictions, some of which mandate how and to what companies the craft beer producers must sell to. The three-tier licensing systemthat generally requires alcohol producers to sell to distributors that then sell products to retailers is a relic of immediate post-prohibition America – and an irrational one at that.
Laws that force producers to sell to a middleman impede the growth of the craft beer industry and give more power to the large distributors that control the market. They also force small beer producers to curry favor with politicians in Springfield in exchange for minimal improvements in distribution laws.
It’s time for Illinois to progress beyond anticompetitive regulatory regimes and start removing barriers to small business growth.
In a small concession, Gov. Pat Quinn last week signed into law House Bill 1573, which amends the Liquor Control Act to allow craft brewers to manufacture and sell up to 30,000 barrels of beer, up from the previous 15,000 barrel limit.
This might be a positive change, but it’s small. The National Brewer’s Association defines a craft brewer as any brewery producing fewer than 6 million barrels a year. Illinois law legally allows craft breweries to produce only 30,000 barrels, which is 5 percent of 6 million. It doesn’t go nearly far enough, and the law leaves out other alcohol producers, such as wineries and distilleries that, just as much as brewers, stand to benefit from greater economic freedom as well.
Soon after the passage of HB 1573, American Beverage Distributors of Illinois President Bill Olson commented that even though craft brewers sought a substantially higher production cap, “it’s important to maintain the three-tier regulatory system,” apparently unaware of the irony of defending a government-mandated oligopoly to protect freedom of choice. However, a Crain’s Chicago Business investigation in 2010 uncovered evidence that Illinois distributors frequently engage in pay-to-play deals with retailers to place their products and keep out competition, undermining distributors’ claims that they encourage either diversity of products or consumer choice in the beer market.
Craft beer is the next big thing when it comes to emerging U.S. markets, and it will be important for Illinois to position itself correctly. Reforming regulations and abandoning anti-growth policies is the only way Illinois can guarantee its share of a $10 billion industry. With the state having billions in unpaid bills, massive deficits and an unemployment rate well above the national average, there is no better time to change the status quo.