[caption id=”attachment_110452″ align=”aligncenter” width=”3002″] (AP Photo/Charles Krupa)
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A Cincinnati brewery starting trucking its product a short drive into Kentucky, and all was well for a few months. Until alcohol distributors in Kentucky persuaded the legislator to declare the action illegal.
According to Time, Rhinegeist Brewery faced a politically powerful opposition in alcohol distributors that mark up prices and stymie the growth of craft breweries. The distributors, wholesalers protected from competition by various laws, struggle against small craft brewers and multinational brewers such as Anheuser-Busch InBev.
Distributors donate millions of dollars to local and state politicians. The sheer number of distributors make them present throughout congressional and state districts, and give them considerable political power when they organize.
In some states, breweries cannot obtain licenses to distribute their beer. So they go through wholesalers, rising costs for the brewery and consumer. If the wholesaler doesn’t agree to distribute the beer, breweries can’t grow and reach new markets.
As covered previously, industry groups such as beer distributors don’t concern themselves with a robust, competitive market. The goal is to limit entry into the market, prevent alternatives from developing, and keep prices high.
New breweries and consumers lose because the benefits of a freer market for consumers are dispersed, and new competitors don’t have the political or economic power to fight back. The beer distributors win because of their political clout and the concentrated benefits of a closed market. They can donate to some politicians and run an ad campaign, then get a high return on these initial investments.
When the public goes out this weekend, they should remember that, if it weren’t for licensing and state alcohol regulation, they might be drinking more, and better, beer.
