On the Record: Beer wholesaling

(The following column is based on reporting by AJC staffers Aaron Gould Sheinin and Kristina Torres.)

Georgia is one of the few states in the nation where it is still illegal for drinkers to buy beer at a brewery for on-site consumption or to take home. Every state bordering Georgia allows both.

Those prohibitions are protected by the state’s three-tier system of alcohol sales. Manufacturers can sell only to wholesalers or distributors, and they in turn can sell only to retailers. When Senate Bill 63 was introduced this past legislative session, it would have ended the prohibition on direct sales to consumers, but the powerful wholesaler lobby shot the bill down.

The three-tier system came into play as Georgia and the nation emerged from Prohibition in the early part of the last century. It aimed to prevent monopolies by national beer manufacturers. The rules, in essence, prevented them from doing it all: making the beer, selling it and delivering it.

Wholesalers essentially are middlemen in the state’s regulatory system. Martin Smith of the Georgia Beer Wholesalers Association told the AJC in January that any change in the law would be “a clear deviation from a regulatory system which works.”

“Incremental changes will only weaken the system to a point of total failure,” Smith said, leading to a loss of market access and limiting growth. “The demand for Georgia beer is strong, and because of this demand and the state’s distribution system, 100 percent of the beer produced in Georgia reaches the consumer.”

Georgia is the fifth-largest beer producer in the country and ranks 18th in craft beer production. But, brewers note, there’s a catch: Only about 2.2 million of the 6.2 million cases of craft beer Georgians drink each year are actually made by Georgia craft brewers.

Legislative changes in the past few years relaxed state regulations on wine sales — promoted at the time as an agricultural initiative, since grapes are grown at local vineyards — and allowing Sunday alcohol sales.

But the Beer Wholesalers’ Smith countered, “We must remember that at the time of the farm winery exemption, these producers were unable to reach the consumer for lack of demand and market access. … The state has a responsibility to ensure producers can reach the consumer and determined this could be done by allowing direct sales and distribution.”