By Stephan Gohmann
There is a beer war underway in our state and the people of Kentucky are losing. Many states, including Kentucky, are suffering from an archaic post-prohibition law that limits the variety of beers, raises the price and reduces economic activity. The force holding back growth of the brewing industry is the three-tier system.
The three-tier system requires brewers to sell their beers to distributors who then sell it to liquor stores, bars, restaurants and other stores where consumers buy it.
This government-created middleman limits competition and makes it difficult for craft breweries to get their beers out to the public. The result is less choice, higher prices and less economic activity, including job opportunities.
Breaking down the barriers of the three-tiered system and allowing anyone, including breweries, to distribute their beer would be a win for brewers and customers alike.
The issue of the three-tiered system has become important in Kentucky because Anheuser-Busch recently won a court case to buy an Owensboro distributorship.
Craft breweries fear that a mega-brewer owning a distributorship will further hamper their ability to get their product to retailers since Anheuser-Busch has little incentive to sell a competitor's beer.
Understandably, craft brewers already worry that distributors of national brand beers place a low priority on selling small craft beers since the national brand beers account for a bigger market share.
This often leaves craft beer producers at the mercy of independent distributors: If their beer is not picked up by one of these distributors, they're out of luck and so are we — consumers miss out on buying some great Kentucky beers unless they visit the brewery.
Furthermore, the current monopoly power of the distributor allows it to set prices for the brewery's beer. If the price is set too high, the brewery's beer may be priced out of the market. With self-distribution, the brewery can set its own prices or negotiate the sale price.
Instead of opposing Anheuser-Busch, the craft brewers should support self-distribution and distribution by anyone who chooses to be in the business. In this case, breweries can sell their beers directly to bars and stores, eliminating the powerful middleman.
Freeing up the sales process would unleash an industry poised for tremendous growth, if we would only let it. Using data from the Brewer's Almanac, I find that states that allow self-distribution have over 100 percent more breweries per capita than states like Kentucky that do not.
For example, Indiana, which allows for self-distribution has one brewery for every 100,000 people while Kentucky has only half as many.
Furthermore, the Brewers Association estimates that the craft brewing industry contributed $33.9 billion to the economy in 2012 and provided more than 360,000 jobs.
Given Kentucky's 6 percent unemployment rate, more job opportunities is certainly something we should support.
Eliminating the three-tier system and allowing anyone to distribute beer will lead to an increase in the number of breweries in Kentucky, resulting in more jobs, greater varieties of beer, lower beer prices, and a more vibrant Kentucky economy. The people of Kentucky will win on many fronts.