Brewing reforms now less stale, but state should open taps
By AUSTIN BERG
Illinois brewing is as old as the state itself. We’re good at it. Three key ingredients – a major population center, access to gobs of fresh water, and world-class agricultural aptitude – position the Land of Lincoln as a potential powerhouse in the industry.
That potential is bearing fruit from little Ava, Illinois, where in the shadow of Shawnee National Forest, Scratch Brewing Company is making some of the most interesting beer in the country with prairie plants foraged on their property, to Chicago’s Band of Bohemia, the world’s first Michelin-starred brewpub.
But our laws, sadly, don’t reflect that ingenuity.
Too many rules governing how to make a living in Illinois beer hearken back to Prohibition panic.
The good news: Those laws are getting better. The chaser: There’s much more to be done. Illinois can be a true craft beer beacon if the state got smarter about this still-booming industry that’s starting to mature.
Two reforms signed into law by Gov. Bruce Rauner this summer are examples of being smart. Or stopping stupidity, at least.
The first reform fixed a byzantine process often necessary to serve booze. If you wanted an exemption from the Prohibition-era state law banning businesses within 100 feet of a school, church or hospital from obtaining a liquor license, you needed approval from the entire General Assembly in Springfield. Rauner rightly railed against this and stopped signing bills granting those exemptions. Now the process is driven by local governments rather than the state.
The second reform ended a backward ban on what taprooms could sell. Most brewpubs were not allowed to serve beers or ciders from other breweries, even if they collaborated with them to make the product. Now they can. The new law also allows for breweries to more easily store some of their product off-site.
These are simple, necessary changes. But they’re not enough.
What still needs fixing lies within the politically clouted world of beer distributors, a protected industry made much too powerful entirely through state law, at the expense of brewers and consumers.
Imagine if Illinois passed a law tomorrow saying you couldn’t buy a winter coat directly from your favorite brand. Instead, the law created a new class of coat “distributors” that got a cut of the business. The coat company would be forced to contract with an exclusive distributor, and the distributor would drop off the coat at their favored stores.
Sound silly? That’s how most of the beer business has functioned since the 1930s. Illinois is no different. And the 100-or-so licensed beer distributors in the state have a major stake in making sure that remains the case. This set-up is called the “three-tier system.” The producer is the first tier, the distributor is the second tier, and the final point of sale is the third tier. There are a bundle of special laws ensuring the tiers shall not cross.
It’s no surprise that the most important change allowing craft beer to sprout up at all in Illinois came through subverting this archaic model. A self-distribution law lawmakers passed in 2011 meant little brewers didn’t have to hire a middleman to deliver their goods.
“It really allowed smaller brewers to interact directly with consumers and retail,” said Illinois Craft Brewers Guild Executive Director Danielle D’Alessandro. “That has led to tremendous growth.”
Illinois had about 40 craft breweries in 2010 and is now home to more than 200, according to the guild. But out of the top 50 craft breweries in the U.S. in terms of sales, just one calls Illinois home, according to the Brewers Association: Revolution Brewing in Chicago.
Imagine what entrepreneurs could do if Illinois gave every brewery complete control over their own distribution.
Beyond the whole three-tier system being a drag, Illinois has other provisions making things worse for brewers to the benefit of distributors, who have spent millions of dollars on state politics over the years.
Due to provisions in Illinois’ “franchise law,” for example, a distributor can drop a brewer as a customer or sell the rights to distribute their product at any time. But once a brewery sells its beer to that distributor, it can be extremely difficult for the producer to break off the contract. It’s not a level playing field.
A 1999 law extending this franchise-style privilege to wine and spirits distributors was a case study in how powerful political interests can hold small businesses over a barrel. A blitz of money from liquor lobbyists led to the passage of the Wine and Spirits Fair Dealing Act, also known as the “Wirtz law,” (named for late Illinois distributor William Wirtz). It was later struck down by a federal district court for violating the commerce clause.
But the franchise law remains for beer brewers.
In fact, a dispute arising from the franchise law led one of the Midwest’s most beloved breweries, New Glarus Brewing in Wisconsin, to pull out of Illinois altogether in 2002, never to return.
State lawmakers should seize the momentum in Illinois. Let your people brew. And transport. And sell.
Berg is a writer for the Illinois Policy Institute. He wrote this column for the Illinois News Network. He can be reached at firstname.lastname@example.org.