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Road to “Beer”-dom

I’m a beer drinker. No, I take that back. I’m a BEER drinker. I believe there’s nothing more enjoyable than knocking back a cold sudsy pint of beer after a long, hard day of work. Forget tea. Beer is as American as hot dogs and baseball. Coincidentally, also well enjoyed while eating hot dogs and watching baseball.

But during the next couple of weeks, it’s likely that some of you will be reaching for a beer that really should not be considered beer at all. What is it? It’s the American-style lager, a watery ‘LITE’ type liquid that not only tastes terrible, but directly demonstrates how dreadful the American beer industry has become.

In 2011, the American beer industry was dominated by two non-American owned companies that owned ~90% of the market share: AB InBev and MillerCoors. Over the years, these companies have turned away from selling higher quality beer by automating the manufacturing of beer, cutting costs and switching to rice and corn supplements. Nowadays, both ABI and MillerCoors spend around $1.5 billion/year on commercials and gimmicks to convince Americans to drink their crappy beer instead of that other crappy beer and it works! The reason that ABI and Millers Coors have been so successful at this strategy revolves around the beer industry’s competitive market structure. Actually, the answer is probably not so surprising to an astute limited government thinker. It’s government regulations.

Wind back the clock to 1933 when the 21st Amendment to the US Constitution was ratified and ended the decade and a half Prohibition on alcoholic beverages. In order to enable fair regulation of alcohol, states established a “three-tiered” distribution system. This system made it illegal for brewers to sell directly to retailers (grocery stores, bars and restaurants) and instead required brewers only distribute through gov’t certified wholesalers. This was an accountable, competitive and fair system that brought integrity to an otherwise social evil.

Fast forward several decades. Brewers became larger and more profitable. As they grew in market share, they gained leverage and began forming exclusive relationships with distributors. Distributors in return were able to lord their gov’t backed power over brewers to maintain comfortable profit margins. By 2008, the vast majority of US markets only had two or three distributors: one for each of Anheuser Busch, Miller and Coors, or a shared Miller/Coors distributor. Any brewery that did not suck up to AB, Miller or Coors was shown the door to bankruptcy. Thus, America formed the oligarchic trio that squished, sued, bullied, outmaneuvered, bought out and barred distribution access to America’s taste buds for independent brewers for half a century.

But there’s another side to this story. It’s the craft beer movement. With its beginnings in the 1980s, these are the independent and locally owned microbreweries that are fighting giants ABI and MillerCoors tooth and nail for equal distribution, for shelf space, for the weakening of the gov’t regulated “three-tiered” system and for the recognition and appreciation of the American beer drinker. These are the small guys. These are the brewers that – quite frankly – are able to brew less beer than the beer Anheuser Busch spills daily on its filling lines.

So where does the American conservative stand on this? One might argue that there’s no need to even take a stance on this. What about alcohol politics and the three-tiered distribution system? Last June for example, Wisconsin legislators successfully included a provision in the State Budget that strengthened the three-tiered system, restricting the smallest local Wisconsin microbreweries from self-distribution.

Does the American conservative cheer this action or shake his head? Scott Walker sided with MillerCoors who was lobbying for the restriction, while champion conservative Sen. Glenn Grothman did not. Do you grab the corporate beer – a (not-really) American success story of profitable companies sustaining jobs, rewarding investors and watering America? Or does he stand with the independent and small brewers who you can find just down the street? It’s a good question, but this beer drinker certainly has an opinion.

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