Today, January 1st, Colorado will become the first state in the nation to move forward with recreational marijuana sales. This has required a lot of work on the part of the State of Colorado in order to look at the industry, assess its structure, and make a set of rules that balance the needs of society, consumers, and markets.
So what does this have to do with beer? The typical commentary has suggested that marijuana regulators can learn a lot from the regulation of beer (with excise taxes, protections against selling to minors, etc.). But what would happen if you flipped this around? What if we adopted the same novel mindset as rule-makers in Colorado and created a new set of regulations for beer from scratch?
Looking again at marijuana laws, Colorado regulators have taken into account the fact that most producers are small, deciding that the most important part of new regulation is controlling and tracking marijuana as it moves through the distribution system. This had led to rules that require retailers to work heavily with a single supplier. For those who have studied the history of beer, this sounds like a requirement to form tied houses (note: Washington State is taking an entirely different approach).
So one factor to look at would be the size of the businesses being regulated. The vast majority of beer regulations were formed with either the problems of pre-prohibition alcohol distribution and/or the heavily concentrated (and further concentrating) beer industry of the post-war period as context. In other words, the rules were created with the idea that most breweries were big and regional/national, and most wholesalers were small and local. With breweries now outnumbering wholesalers – and the concentration of those two industries going in opposite directions – might some of these rules be due for a re-think?
What does this mean for beer? The current three-tier system of beer distribution has been a boon for the market access for all brewers, but like all regulatory systems, should evolve with the industry and with market structures. As small breweries have emerged and proliferated, lawmakers have increasingly taken this size of new breweries into account, and supported self-distribution and brewpub laws that are often essential elements in providing small brewers access to market and increasing consumer choice.
A newer change comes from New York, with its recent franchise law “carve out” law, allowing small brewers to more easily move from one distributor to another. As we’ve seen with medical marijuana rules, the “carve out exception” is likely going to be an idea that spreads, as Massachusetts is now considering a similar law for small brewers. Both ideas – small brewer carve outs and medicinal marijuana – demonstrate the amazing ability of US states to act as policy laboratories, where successful experiments spread state-to-state. As the beer industry moves forward, lawmakers, regulators, and citizens (24 states + DC have some form of citizen’s initiative) would be wise to take a page from marijuana and use other states’ experiences in tackling the issue of regulating an industry to continuously re-think the way the marketplace provides beer choice and access to consumers. How beer will be regulated for the benefit of society, market, and consumer must be reexamined, before it is too late.
January 1, 2014