It seems like nowadays everyone has a connection to someone who brews their own beer. Grand Rapids recently was named Beer City because of its lively microbrewery scene so this is especially true here. While this hobby can be very enjoyable and refreshing be aware that taking your hobby to the next step could be more difficult than you would imagine. Recent regulations have made it harder than ever for new craft beers to enter into the consumer market.
Entrepreneurs are the building blocks of all economies. Every company must come from somewhere to create what they are today. This can easily be seen by looking at any company from Apple all the way to Nike. The problem is that many large companies are now being protected from competition from small businesses by unnecessary regulations.
In recent years the beer market has consolidated drastically, especially between the big three: Anheuser-Busch, Coors, and Miller. And even though the domestic beer market has contracted by nearly 2 percent over the last decade, the craft beer share of this market has increased by nearly 8 percent. Clearly, consumer preferences are driving this market and spurring new entrepreneurial startups in the craft beer segment.
As noted by U.S. News and World Report, new brewers could have to go through approximately 12 separate steps until they can legally sell their beer to consumers. Many of these regulations in place have seen strong support from the bigger brewers, like Budweiser, which currently controls about 21 percent of the beer market. Just in order to start the companies entrepreneurs must invest substantial sums to simply apply for permits —with no guarantee these will be granted. Many of the regulations that the FDA has in place for this industry were designed for large breweries and were never intended to be used to regulate micro-breweries. Art DeCelle, an attorney speaking at the national Craft Brewers Conference believes that, many times the FDA inspectors come into a micro-brewery expecting to find an establishment similar to Budweiser, which is very rarely the case. Instead the micro-breweries are being unnecessarily burdened by FDA regulators who are not always sure what they should be looking for in the breweries. Many times these regulations are held in place, because large breweries have the ability to create a crony capitalist system through their sway on the legislatures of states.
Recently The Essential Bean, located in suburban Grand Rapids, has become the first coffee shop-brewpub in the state after almost a year of planning. At first the plan was stopped due to regulations on the funding by the Michigan Liquor Control Board. The owner, Justin Nichols, attempted to use a Kickstarter campaign to raise money through crowdfunding, but the commission said that because every cent going into a brewery must be verified they would need to file a tax return for every 9 dollars the campaign garnered. This created extra strain on the owner and his family, but eventually the coffee shop was able to achieve their goal without using the Kickstarter campaign. However, should it really be that difficult to start a company simply because of how you are raising money? Put simply, the answer is no. Throughout history the free market has consistently proven that it is the most efficient and qualified way to determine which products are the best. In the case of craft beer the consumer will know fairly quickly after drinking the beer if they actually enjoy it. If the market wants more, and the increased market share for craft beers shows people do want more, then should it not be able to get more?
Individuals who feel compelled to work towards brewing and selling craft beer should not be pushed away simply because of the regulatory burdens artificially placed upon them. The best way to fix the situation that was created by regulations is not to impose more of them. Father Robert Sirico, president and co-founder of the Acton Institute, once stated, “Whether they win or lose, by putting themselves and their property on the line, entrepreneurs make the future a little more secure for the rest of us.”
Currently some states have been attempting to subsidize or give tax credits to new craft breweries. Unfortunately this is not doing much to help the problem. Implementing more policies to fix an already flawed policy does nothing but add red tape to the matter. A recent publication by Mercatus outlines that many times these policies are ineffective at achieving their stated goals. This was also addressed by Father Sirico when he stated, “legitimate causes do not impede the market or push for more ill-conceived governmental action to solve social problems.” The best way to show any type of improvement in the market would be to allow for the big beer companies and craft breweries to work on a level playing field.