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Toward a brewer-friendly Maryland

The fight this over Maryland's beer laws during the 2017 General Assembly session wasn't a new one. Craft brewers have been chafing for years against a post-Prohibition regulatory scheme that restricts their ability to set up and expand their businesses while putting them at the mercy of more established (and more politically connected) players in the wholesale and retail sectors. The only difference this year was the presence of alcohol industry giant Diageo, which found common cause with the little guys over its plans to create a Guinness-themed taproom at an old spirits plant in Relay. If not for that, the brewers' complaints would likely have fallen on deaf ears yet again; instead, the legislature eventually agreed to legislation that expands the amount of beer Guinness and the craft brewers alike can sell in their taprooms.

And even so, the process was messy and revealed the extent to which Maryland's liquor laws are not designed to protect the public, much less to foster the growth of a potentially beneficial new industry, but to protect the economic interests of existing wholesalers and retailers. To wit: If Guinness or any of the craft brewers serve more than 2,000 barrels in their taprooms in a year, they can sell up to 1,000 more but only if they first sell them to wholesalers and buy them back at a higher price — not to mention pay to have them transported to a warehouse, unloaded, reloaded and transported back. Any new taprooms will have to close nightly by 10 p.m., a protection for bar owners who fear competition.

In response, Comptroller Peter Franchot has announced the creation of a task force to re-examine the state's beer laws with the aim to make them more craft brewer-friendly. It's an effort that is long overdue.

Though there have been recent signs that the craft brewing industry nationally isn't growing at the breakneck pace it once did, it is clearly faring better than traditional big brewers. According to the national Brewers Association, craft brews' market share has doubled by volume since 2011, and retail sales are up 10 percent in the last year. That's at a time when overall beer sales are stagnant. In Maryland, the industry is growing, too, but its economic impact of $652 million a year isn't close to what it could be. That ranks 47th per capita.

The issues of operating hours and barrel limits for taprooms are important to the beer industry, but they probably aren't the most significant ways state laws make business more difficult for small brewers. Maryland's franchise agreement laws, which govern the relationship between brewers and wholesalers, are probably more important and should be a focus of Mr. Franchot's task force.

Even if we accept the rationale that laid out in Maryland law that state enforcement of exclusive manufacturer-distributor contracts will "promote temperance in the consumption of beer" and "respect for and obedience to the laws that control the distribution and sale of beer," the rules are clearly written for a world in which wholesalers need to be protected from big brewers, not one in which craft brewers are dependent on wholesalers. Among other things, state law prohibits beer manufacturers from terminating or even failing to renew a distributorship agreement except for cause, and even then it mandates 180 days of notice.

We would also encourage Mr. Franchot, who has pledged to include all voices in the process, including wholesalers and retailers, to consider the perspective of consumers. Is the public really served, for example, by a prohibition on sales of beer at grocery stores? Or is that simply a case of state law protecting an industry from competition?

If we find fault with Mr. Franchot's effort it is only that his aim isn't to scrap Maryland's liquor laws altogether and start from scratch. The patchwork of laws that govern alcohol sales in Maryland isn't only anti-competitive, it is prone to corruption. But even transforming the limited review Mr. Franchot is attempting into action is going to be a heavy lift. The wholesalers and retailers are generous campaign contributors and wield substantial clout in the General Assembly. But it's a conversation Maryland needs to have.

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